Home (re) Insurance Latin America Allianz Risk Barometer 2022

Allianz Risk Barometer 2022

16 min read

iNLIP is happy to lauch the latest Allianz Risk Barometer 2022: Cyber perils outrank Covid-19 and broken supply chains as top global business risk

 

  • 11th Allianz survey: Cyber, business interruption and natural disasters are the top three business risks globally in 2022.
  • Pandemic outbreak drops from second to fourth position as majority of companies are less concerned and feel adequately prepared for future outbreaks.
  • Natural catastrophes and Climate change rise significantly in the annual rankings as extreme weather events and transition risks mount
  • AGCS CEO Joachim Mueller: “’Business interrupted’ will likely remain the key underlying risk theme for this year. Building resilience is becoming a competitive advantage for companies.”

 

Cyber perils are the biggest concern for companies globally in 2022, according to the Allianz Risk Barometer. The threat of ransomware attacks, data breaches or major IT outages worries companies even more than business and supply chain disruption, natural disasters or the Covid-19 pandemic, all of which have heavily affected firms in the past year.

Cyber incidents tops the Allianz Risk Barometer for only the second time in the survey’s history (44% of responses), Business interruption drops to a close second (42%) and Natural catastrophes ranks third (25%), up from sixth in 2021. Climate change climbs to its highest-ever ranking of sixth (17%, up from ninth), while Pandemic outbreak drops to fourth (22%). The annual survey from Allianz Global Corporate & Specialty (AGCS) incorporates the views of 2,650 experts in 89 countries and territories, including CEOs, risk managers, brokers and insurance experts. View the full global and country risk rankings.

“’Business interrupted’ will likely remain the key underlying risk theme in 2022,” AGCS CEO Joachim Mueller summarizes. “For most companies the biggest fear is not being able to produce their products or deliver their services. 2021 saw unprecedented levels of disruption, caused by various triggers. Crippling cyber-attacks, the supply chain impact from many climate change-related weather events, as well as pandemic-related manufacturing problems and transport bottlenecks wreaked havoc. This year only promises a gradual easing of the situation, although further Covid-19-related problems cannot be ruled out. Building resilience against the many causes of business interruption is increasingly becoming a competitive advantage for companies.”

 

2022 Miami (re) Insurance Week

 

 

Latin America: ransomware and data breaches remain a concern in Brazil while companies in Argentina feel more vulnerable to business interruptions

Cyber incidents ranks as a top three peril in most countries surveyed. The main driver is the recent surge in ransomware attacks, which are confirmed as the top cyber threat for the year ahead by survey respondents (57%). According to a report by Brazilian cybersecurity company Apura, between January 2020 and July 2021, ransomware attacks were identified focusing 137 organizations in Latin America in the period. Of this total, 71 – or 51% – were in Brazil, where at least 17 ransomware groups were identified. Almost half of the attacks were concentrated in government, industry and healthcare companies.

“Last year we saw a very high number of malicious attacks, orchestrated by groups that exploited vulnerabilities in a wide variety of systems, attacking them in a systematic way. This trend should continue in 2022, especially with the growing specialization of cybercriminals and the amounts involved in their activities,” explains Gustavo Galrão, Regional Director of Financial Lines AGCS Ibero/Latam. The executive also comments that, in the case of Brazil, the LGPD is a stimulus for companies to invest in their cyber resilience and that, this year, the focus of criminals may be even greater on small and medium-sized companies.

Business interruption (BI) ranks as the second most concerning risk globally and the first in Argentina, where it had 58% of the answers. In a year marked by widespread disruption, the fragility of supply and production chains has become more obvious than ever. According to the survey, the most worrying BI cause is cyber incidents; reflecting the rise in ransomware attacks, but also the impact of companies’ increasing reliance on digitalization and the shift to remote working. Natural catastrophes and pandemic are the other two major triggers for business interruption in the view of those surveyed.

Last year, post-lockdown demand problems added up to disruptions in industrial production and logistics, as Covid-19 outbreaks in Asia shut down factories and caused record levels of congestion at container shipping ports. Pandemic-related delays have exacerbated other supply chain problems, such as the Suez Canal blockade or global semiconductor shortages after factories in Taiwan, Japan and Texas closed due to weather events and fires.

“The pandemic brought to light issues such as the interconnectedness of today’s supply chains, in which unrelated events create widespread disruption. Cyber attacks, problems with parts availability, logistical delays, changing consumer habits, protests related to restrictive measures…these factors make any company more susceptible to an interruption in its operations,” comments Felipe Orsi, Director of Property AGCS Latin America.

According to the recent Euler Hermes Global Trade Report, the Covid-19 pandemic will likely drive high levels of supply chain disruption into the second half of 2022, although mismatches in global demand and supply and container shipping capacity are eventually predicted to ease, assuming no further unexpected developments.

Awareness of BI risks is becoming an important strategic issue across entire companies. “There is a growing willingness among top management to bring more transparency to supply chains with organizations investing in tools and working with data to better understand the risks and create inventories, redundancies and contingency plans for business continuity,” says Maarten van der Zwaag, Global Head of Property Risk Consulting at AGCS.

Pandemic preparations improve. Next up – making businesses more weatherproof

Pandemic outbreak remains a major concern for companies but drops from second to fourth position (although the survey predated the emergence of the Omicron variant). While the Covid-19 crisis continues to overshadow the economic outlook in many industries, encouragingly, businesses do feel they have adapted well. The majority of respondents (80%) think they are adequately or well-prepared for a future incident. Improving business continuity management is the main action companies are taking to make them more resilient.

The rise of natural catastrophes and climate change to third and sixth position respectively is telling, with both upwards trends closely related. Recent years have shown the frequency and severity of weather events are increasing due to global warming. For 2021, global insured catastrophe losses were well in excess of $100bn – the fourth highest year on record. Hurricane Ida in the US may have been the costliest event, but more than half of the losses came from so-called secondary perils such as floods, heavy rain, thunderstorms, tornados and even winter freezes, which can often be local but increasingly costly events. Examples included Winter Storm Uri in Texas, the low-pressure weather system Bernd, which triggered catastrophic flooding in Germany and Benelux countries, the heavy flooding in Zhengzhou, China, and heatwaves and bushfires in Canada and California.

Allianz Risk Barometer respondents are most concerned about climate-change related weather events causing damage to corporate property (57%), followed by BI and supply chain impact (41%). However, they are also worried about managing the transition of their businesses to a low-carbon economy (36%), fulfilling complex regulation and reporting requirements and avoiding potential litigation risks for not adequately taking action to address climate change (34%).

“The pressure on businesses to act on climate change has increased noticeably over the past year, with a growing focus on net-zero contributions,” observes Line Hestvik, Chief Sustainability Officer at Allianz SE. “There is a clear trend for companies towards reducing greenhouse gas emissions in operations or exploring business opportunities for climate-friendly technologies and sustainable products. In the coming years, many corporate decision-makers will be looking even more closely at the impact of climate risks in their value chain and taking appropriate precautions. Many companies are building up dedicated competencies around climate risk mitigation, bringing together both risk management and sustainability experts.”

Businesses also have to become more weatherproof against extreme events such as hurricanes or flooding. “Previous once-in-a-century-events may well occur more frequently in future and also in regions which were considered ‘safe’ in the past. Both buildings and business continuity planning need to become more robust in response,” says van der Zwaag.

Other risers and fallers in this year’s Allianz Risk Barometer:

  • Shortage of skilled workforce (13%) is a new entry in the top 10 risks at number nine. Attracting and retaining workers has rarely been more challenging. Respondents rank this as a top five risk in the engineering, construction, real estate, public service and healthcare sectors, and as the top risk for transportation.
  • Changes in legislation and regulation remains fifth (19%). Prominent regulatory initiatives on companies’ radars in 2022 include anti-competitive practices targeting big tech, as well as sustainability initiatives with the EU taxonomy scheme.
  • Fire and explosion (17%) is a perennial risk for companies, ranking seventh as in last year’s survey, while Market developments (15%) falls from fourth to eighth year-on-year and Macroeconomic developments (11%) falls from eighth to 10th.

 

Source: Allianz Global Corporate & Specialty

Load More Related Articles
Load More By iNLIP
Load More In (re) Insurance Latin America

Check Also

Webinar FIDES & Insuralex: Insurance regulatory update in Latin America, Spain and the USA

Insuralex and FIDES (Federación Interamericana de Empresas de Seguros) have launched a rep…