Canadian Underwriter

Cyber, business interruption among top business risks in 2016 for Canadian respondents: Allianz

January 13, 2016   by Canadian Underwriter

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Pollution and macroeconomic developments were among the top 10 most important business risks for 2016 identified by Canadian experts surveyed, which did not make the top 10 in 2015.

Allianz Global Corporate & Specialty SE announced Wednesday its 5th annual Allianz risk barometer, which is based on a global survey conducted this past October and November. [click image below to enlarge]

Allianz Global Corporate & Specialty released its 5th annual Allianz risk barometer

“Participants were asked to name industries about which they are particularly knowledgeable and then name up to three risks they believe to be of most importance,” AGCS said in the report, which listed responses worldwide, by region and by country.

The most important business risk for Canadian respondents was cyber incidents, which was identified by 57% of respondents (up from 33% in the 2015 barometer).

The survey was conducted in 44 countries, and AGCS broke out results by region, country and industry.

In Canada, ranking second for 2016 was business interruption (37%), which ranked first in 2015 and ranked first worldwide this year.

“The primary driver behind increasing BI losses is that interconnectivity of risk is growing day-by-day, as technology, globalization and social change create a complex web of relationships and interdependencies with ‘just-in-time’ and ‘lean’ manufacturing now standard practices,” stated Hugh Burgess, global head of mid-corporate and head of corporate lines North America for AGCS. “It is also evidenced in the impact of financial crises, as well as in cyber space, with the rise of social networking and the so-called ‘Internet of Things.’”

Survey participants worldwide included business and risk consultants, underwriters, senior managers and claims experts in the corporate insurance segment of both AGCS and local Allianz entities.

Five of the Top 10 risks in Canada were new in 2016. Three — fire/explosion, macroeconomic developments and market developments — were tied in sixth place, with 20% of respondents identifying them as among the most important risks.

Environmental risks (pollution) and human error ranked ninth (17%) and 10th (10%) respectively, for Canada.

“Businesses are increasingly concerned about the impact of volatility, intensified competition and market stagnation,” Allianz said of market development risk in the report. “It is the first time market developments ranks as one of the top three global perils in the Risk Barometer, although this rise can be partly explained by the fact it is also the first year these risks have been included as one collective peril.”

Market developments ranked second (34%) worldwide in 2016. Also new in 2016, was macroeconomic developments, which ranked sixth (22%) worldwide this year.

One factor in macroeconomic developments is commodity prices, Allianz suggested.

“It is fascinating to see that, in many cases, the decline in oil and gas, iron ore and steel prices has stressed the supply chain more than it has benefited it,” stated Ludovic Subran, Chief Economist at Paris-based trade credit insurer Euler Hermes Group SA, in the report. “Sectors that you would expect to benefit from such a development, such as construction for example, have not done as well as anticipated because of structural difficulties. Further, some sectors, such as machinery and equipment, have been the collateral damage of plummeting investment in the oil and gas industry.”

In Canada, three risks were tied in third place, with 23% of respondents identifying the risk. They were: changes in legislation, which ranked seventh (17%) in 2015; loss of reputation or brand value, which ranked third (33%) in 2015; and natural catastrophes, which ranked fifth (17%) in 2015.

Cyber incidents, natural catastrophes and changes in legislation ranked third, fourth and fifth respectively worldwide.

For the Americas, the top business risk was business interruption, which also ranked first in 2015. Cyber incidents ranked second (46%) up from fourth (25%) in 2015. Natural catastrophes, market developments and chances in legislation and regulations ranked third, fourth and fifth respectively in the Americas.

Tied at sixth place (25% each), in the Americas, was loss of reputation or brand value and fire/explosion.