Allianz boss lifts lid on Risk Barometer

Insurance Business asked Mark Mitchell (pictured), regional managing director for Allianz Global Corporate & Specialty, Asia-Pacific, about the challenges compiling the Risk Barometer, especially with the increasing complexity and intersection of different risks.

“As an insurer we need to adopt a disciplined underwriting approach managing our global portfolio and addressing risk accumulation,” said Mitchell in response.

Read next: World Economic Forum reveals top risks of 2022

Mitchell said the way Allianz puts together its list is similar to how other insurers, brokers and organizations categorize risks, but no two carriers’ lists are the same.

“Respondents are asked to select the industry about which they are particularly knowledgeable and then can name up to three risks they believe to be most important from a list of 17 selected risk categories,” said Mitchell.

Respondents also have the option to choose an “Other” risk option as one of their top three risks.

The Allianz list is a ranking of risks from the perspective of businesses globally. Risk lists can look quite different when they are composed from the perspective of individuals, governments and businesses.

The Global Risks Report 2022 by the World Economic Forum (WEF) – with help from companies including Marsh McLennan and Zurich Insurance Group – was also released this month. Cyberattacks and business interruption don’t feature in the top 10. The top three risks in the WEF report are climate action failure, extreme weather and biodiversity loss.

However, for the Allianz list, interviews with more than 2,500 representatives of businesses, brokers and trade organizations from early 90 countries, appear to confirm that, even when other risk events are involved, its BI that is the core risk concern for businesses around the world.

“BI is synonymous with many of the top ranked risks in the survey,” said Mitchell.

The Allianz boss said this reflects its role, “as the most feared consequence of threats like cyber, pandemic outbreak and natural catastrophes in particular.”

“In Australia, BI topped the list and marked the fifth consecutive year it was among the top five rankings,” he added.

Cyber incidents shared the top spot.

“According to the survey, the most feared cause of BI is cyber incidents, reflecting the rise in ransomware attacks but also the impact of companies’ growing reliance on digitalisation and the shift to remote working,” said Mitchell.

The Allianz boss cited reports of a 13% jump in cybercrime in the past year.

“Businesses can be deeply affected due to the long recovery time and the high cost of recovery from a ransomware attack,” he said.

Mitchell said the average total cost of recovery and downtime from a ransomware attack had more than doubled over the past year. Average downtime following a ransomware attack, he said, is now 23 days.

Read next: Business interruption the “overarching umbrella” for top 10 business risks

“Weather impact and events such as the blocking of Suez Canal have also caused business interruption,” he said.

According to Mitchell, 45% of survey respondents said supply chain disruptions like this had a large impact on their company.

The pandemic as a BI concern is far from over, but seems to be fading.

“Many businesses feel they have adapted well to the pandemic,” said Mitchell. “One of the lessons from the pandemic has been the importance of the workforce for business continuity, as well as the broader societal environment in which business operates.”

Mitchell said businesses and insurers are increasingly seeing see the need to build resilience against the major causes of BI as a competitive advantage.

“The disruption of the past year means awareness of BI risk is moving beyond risk management departments and becoming an important issue across entire companies, triggering reviews of exposures, business resilience and critical supply chains,” he said.

However, he said, as awareness of BI risks grow, there is also a realization that not all BI risks are easy to insure.

“Capacity for large BI and contingent business interruption risks is currently limited, especially where there is a lack of transparency,” he said.

Mitchell added that better transparency and data allows insurers to provide “more meaningful capacity”.

He said it is critical for businesses and their risk advisers to understand the value chain and identify the critical exposures in order to mitigate the risks.