Cyber risk has risen to become the second largest concern for companies globally, up from 15th place five years ago according to respondents to the 2018 Allianz Risk Barometer survey.
The survey, which captured the views of 1,911 respondents from 80 countries, revealed that cyber risk was the top concern for eight countries, including the UK and US, with threats such as “cyber hurricanes”, increasing reputational risk and tougher data rules bringing cyber into the spotlight for businesses and risk experts.
Furthermore, 54 percent of Risk Barometer responses ranked cyber as the most underestimated business risk, with respondents increasingly worried about new perils such as cyber extortion and, particularly, business interruption (BI).
“Just like a natural disaster, a single cyber-attack can potentially impact hundreds of companies, leading to severe business interruption and loss of customers and reputation,” the report explained, adding that businesses are increasingly worried about the growing trend of broader accumulation events or “cyber hurricanes”, particularly following the WannaCry, Petya and Mirai hacks.
“Hackers can disrupt larger numbers of companies by targeting common internet infrastructure dependencies, for example – a trend that will likely continue through 2018,” Allianz said.
Meanwhile, at a global level, BI (including supply chain disruption) remained the number one risk for companies at a global level for the sixth year as 42 percent of respondents labelled it as their top concern. BI ranked top in 13 countries including China and Germany and in six sectors including aviation, food and beverage and manufacturing.
Allianz said that the average cost of a large BI property insurance claim is now in excess of $2mn. The average value of a BI claim was around $5.0mn where an energy platform incident was concerned, and $4.5mn when it stemmed from strike, riot or vandalism. Meanwhile, the average claim was $2.0mn when it resulted from fire or explosion, $1.4mn from flood-caused interruption and $900,000 where a storm was the cause.
The German carrier highlighted that as many businesses transition from being rich in physical assets to deriving more value from intangibles and services, increasingly, BI is being triggered by non-traditional risk exposures which don’t cause physical damage but result in lost income – often referred to an non-physical BI.
BI also ranked as the main cause of an economic loss following a cyber incident. Cyence Risk Analytics estimates that in the event of an outage at a cloud service provider lasting more than 12 hours, BI losses could total $850mn in North America and $700mn in Europe, based on 50,000 companies in three specific industry sectors (financial, healthcare and retail) being impacted by the outage in each region.
Natural catastrophes, market developments (e.g. volatility, intensified competition /new entrants, M&A, market stagnation, market fluctuation) and changes in legislation and regulation came in at third, fourth and fifth place of global business risks for 2018.
Meanwhile, one new cause of concern made it into the top 10 in the 2018 survey, with climate change and weather volatility coming in at number 10.
With cyber becoming an increasing focus for businesses, (re)insurers and brokers alike, Eames Partnership has recently completed an in-depth analysis of the talent landscape for both the London cyber insurance underwriting and broking markets.
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