Ukraine and cyber create new claims challenges

Insurance claims from companies have become more severe over the past five years, with emerging risks such as cyber and COVID key factors, according to Allianz Global Corporate & Specialty (AGCS).

Other significant elements affecting claims have been changing asset values, more complex supply chains and the growing concentration of exposures in one location, such as in natural catastrophe-prone areas, according to AGCS chief claims officer and Board Member Thomas Sepp. “

“The future does not look brighter anytime soon,” he added. “Companies and their insurers have shown resilience to weather the loss impact of the pandemic, but the ongoing war in Ukraine, a spike in the cost and frequency of business interruption losses and the sustained elevated level of cyber claims are creating new challenges.”

“At the same time, the top two causes of claims, fires and natural hazards, remain significant loss drivers for companies. Last but not least, the impact of soaring inflation around the world will bring further pressure on claims costs.”

While not appearing in the top 10 causes of loss, AGCS said that the number of cyber claims has significantly increased over the past few years, driven by the rise of threats such as ransomware attacks, but also reflecting the growth of cyber insurance. AGCS has been involved in more than 1,000 cyber claims in both 2020 and 2021, compared with fewer than 100 in 2016. Claims frequency has begun to stabilize however, albeit at elevated levels.

The report also investigates the insurance impact of recent specific claims events such as the pandemic and the Ukraine crisis. Insured losses from COVID 19 are in excess of $40bn according to industry estimates, with the bulk of claims coming from event cancellation insurance and BI claims from companies affected by lockdowns. The pandemic has also had knock-on effects such as stressed supply chains, heightened inflation, and financial insolvencies.

Meanwhile, Russia’s invasion of Ukraine is likely to result in a significant, yet manageable, loss for the global insurance industry. Insurers exposure to the conflict are limited by war exclusions, which are standard in most property/casualty insurance contracts. Expected insured losses from the war in Ukraine are comparable with a mid-sized natural catastrophe, according to AGCS, but specialist markets like aviation insurance could yet suffer disproportionately.

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