Allianz global claims analysis: Fires and explosions cause largest losses for business

Cyber risks and the impact of new technologies will have an increasing influence on the corporate loss landscape in years to come. However, it is fire and explosion incidents that cause the largest claims for insurers and the businesses they cover, according to new research from Allianz Global Corporate & Specialty (AGCS). The vast majority of corporate insurance claims originate from technical or human factors despite natural catastrophes such as hurricanes, having caused devastating losses over the past two years.

In its latest Global Claims Review, AGCS reveals the top causes of claims in the corporate insurance segment based on an analysis of 470,000 claims from over 200 countries over the past five years (July 2013 to July 2018) with an approximate value of 58 billion euros ($66.5 billion).

The largest financial losses come from fires/explosions, aviation incidents, faulty workmanship/maintenance incidents and storms, which collectively account for over 50 percent of all claims by total value. Over 75 percent of financial losses globally arise from 10 major causes of loss.

“The report highlights the increasingly high values at risk for businesses and their insurers alike,” says Philipp Cremer, Global Head of Claims, AGCS. “In today’s interconnected and globalized business environment, financial losses are increasing due to geographical concentration of values - often in risk-exposed areas - and from the knock-on effects of global supply chains and networks. Looking to the future, new technologies bring business benefits but also risks and claims. However, they also provide an opportunity to prevent and mitigate losses and improve the claims settlement process for our customers.” 

More expensive fires and aviation repairs 

Over the past five years fire and explosion incidents have caused in excess of 14 billion euros worth of losses and are responsible for more than half  of the 20 largest non-natural catastrophe events analyzed. The average claim is almost 1.5 million euros.

“In general, property insurance claims are higher with inflation and greater concentration in value as a result of globalization and more integrated supply chains,” explains Raymond Hogendoorn, Property and Engineering Claims Specialist at AGCS. “As manufacturers have become more efficient, the values per square meter have risen exponentially. Fire and flood claims are much more expensive per square meter than a decade ago.”

Costs associated with the impact of business interruption (BI) can significantly add to the final loss total from fire and explosion incidents, as well as many of the other major causes of loss identified in the report. Almost all large property insurance claims now include a major BI element: The average BI property insurance claim now totals over 3 million euros (3.1 million euros). This is around 39 percent higher than the corresponding average direct property loss (2.2 million euros).

Despite recent record-breaking natural catastrophe loss activity in the U.S. and around the world, storm is the only natural catastrophe event to appear in the top 10 causes of loss. Analysis shows corporate insurance claims typically originate from technical or human factors – or non-natural catastrophe events – accounting for 87 percent of all claims by value.

The global aviation industry recently experienced its safest year ever but claims activity shows no sign of abating. Aviation collision/crash incidents – on the ground and in the air – are the second major cause of losses. Increasing repair costs from composite materials and more sophisticated higher value engines on aircrafts are also a factor.

Liability trends and insurtech improvements

Defective products and faulty workmanship incidents, which account for 14 percent of all claims by value, are the top cause of liability losses for businesses. Product liability claims are becoming larger and product recalls are increasing in size. Supply chains in industries like automotive manufacturing are now more complex. As companies restrict their number of worldwide suppliers, it increases product liability risks for these few suppliers exponentially.

It is estimated that around a third of large corporate liability claims involve litigation with third parties, compared with property insurance where less than 1 percent of claims do on average. The U.S. in particular, has seen a trend towards higher settlements and awards in personal injury cases with some facing high punitive damages as recent verdicts around the chemical glyphosate and talc products demonstrate.

“We are not seeing a rise in the frequency of liability claims but the value of claims has been rising with higher awards and rising legal costs,” says Peter Oenning, Liability Claims Specialist at AGCS. “We are also seeing much larger claims in Latin America and Asia than in the past. Once, nine out of 10 of our largest claims globally would have come from the U.S., now it is more like seven out of 10.”

Analysis also shows that insurers have paid on average 32 million euros a day over the past five years to cover losses – AGCS alone paid 4.8 billion euros to its insureds in 2017. Insurers are increasingly adopting innovative technologies to improve the claims handling process. Machine learning and robotics can speed up the claims process for low-value, high-frequency claims. To quickly assess wind or flood damage following natural catastrophes, AGCS utilizes satellite imagery and drones, providing faster loss estimates that enable better allocation of resources and earlier claims payments.

The report provides loss break-down statistics for 13 countries and analyzes claims patterns across various industries such as aviation, shipping and energy as well as insurance lines of businesses such as property, engineering, liability and financial lines

About Allianz Global Corporate & Specialty

Allianz Global Corporate & Specialty (AGCS) is a leading global corporate insurance carrier and a key business unit of Allianz Group. We provide risk consultancy, Property-Casualty insurance solutions and alternative risk transfer for a wide spectrum of commercial, corporate and specialty risks across 10 dedicated lines of business.

Our customers are as diverse as business can be, ranging from Fortune Global 500 companies to small businesses, and private individuals. Among them are not only the world’s largest consumer brands, tech companies and the global aviation and shipping industry, but also satellite operators or Hollywood film productions. They all look to AGCS for smart answers to their largest and most complex risks in a dynamic, multinational business environment and trust us to deliver an outstanding claims experience.

Worldwide, AGCS operates with its own teams in 31 countries and through the Allianz Group network and partners in over 200 countries and territories, employing around 4,400 people. As one of the largest Property-Casualty units of Allianz Group, we are backed by strong and stable financial ratings. In 2020, AGCS generated a total of 9.3 billion euros gross premium globally.

 

The Allianz Group is one of the world's leading insurers and asset managers with 126 million* private and corporate customers in more than 70 countries. Allianz customers benefit from a broad range of personal and corporate insurance services, ranging from property, life and health insurance to assistance services to credit insurance and global business insurance. Allianz is one of the world’s largest investors, managing around 716 billion euros** on behalf of its insurance customers. Furthermore, our asset managers PIMCO and Allianz Global Investors manage nearly 1.8 trillion euros** of third-party assets. Thanks to our systematic integration of ecological and social criteria in our business processes and investment decisions, we are among the leaders in the insurance  industry in the Dow Jones Sustainability Index. In 2021, over 155,000 employees achieved total revenues of 148.5 billion euros and an operating profit of 13.4 billion euros for the group.

These assessments are, as always, subject to the disclaimer provided below.

*Including non-consolidated entities with Allianz customers.
** As of June 30, 2022

Press contacts

Heidi Polke
Allianz Global Corporate & Specialty (Munich)
Michael Burns
Allianz Global Corporate & Specialty
Sabrina Glavan
Allianz Global Corporate & Specialty 
Wendy Koh
Allianz Global Corporate & Specialty
As with all content published on this site, these statements are subject to our cautionary note regarding forward-looking statements:

Further information

Allianz Direct launches partnership with CHECK24

Allianz Direct and CHECK24 are launching a strategic partnership in Germany and Spain: in future, consumers in both countries will be able to access Allianz Direct products on CHECK24's comparison portals. The first joint product launch will be in motor insurance in Germany.

Allianz X co-leads USD 250 million Series F investment round in cyber insurtech Coalition, Inc.

The funds raised in this investment round will be used to accelerate Coalition’s rapid growth, power its international expansion, and broaden the services Coalition offers to help organizations manage digital risk. Coalition is a leading provider of cyber insurance and security to Small and Medium Enterprises (SMEs).

Allianz enters multi-year partnership with cyber MGA Coalition

Allianz is providing Coalition with long-term committed capacity for its US cyber insurance programs and will lead Coalition’s UK cyber program when it launches later this year.