Fire and explosion, natural catastrophes and faulty workmanship or maintenance have been the major causes of loss by value of insurance claims over the past five years, according to figures from the Global Claims Review 2022 by Allianz Global Corporate & Specialty.

Insurance claims from companies have become more severe during that period due to factors such as higher property and asset values, more complex supply chains and the growing concentration of exposures in one location, such as in natural catastrophe-prone areas, according to Thomas Sepp, AGCS chief claims officer and board member. He said: “The future does not look brighter anytime soon. 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.”

The report says that inflation is also bringing pressure on claims costs from multiple angles. Property and construction insurance claims, in particular, are exposed to higher inflation, as rebuilds and repairs are linked to the cost of materials and labour, while shortages and longer delivery times inflate business interruption values. Other lines of insurance, such as D&O, PI, and general liability, are also susceptible to inflationary pressures through rising legal defence costs and higher settlements.

Sepp added: “Replacement costs more and replacement takes longer, and this means both the property damage and the business interruption loss are likely to be significantly higher. Updating insured values for all new contracts is therefore a pressing concern for insurers, brokers and insureds. If this doesn’t happen, our clients run the risk of not being fully reimbursed in the event of a loss, while insurers run the risk of underpricing exposures.”

From assessing 530,000 insurance claims in over 200 countries and territories between 2017 and 2021, AGCS found that that almost 75% of financial losses arise from the top 10 causes of loss, while the top three causes account for close to half (45%) of the value. Despite improvements in risk management and fire prevention, fire/explosion (excluding wildfires) is the largest single identified cause of corporate insurance losses, accounting for 21% of the value of all claims. Fires have resulted in more than €18bn worth of insurance claims over five years, according to the analysis. Even the average claim totals around €1.5mn.

Natural catastrophe (15%) ranks as the second top cause of loss globally by value of claims. While not appearing in the top 10 causes of loss, 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 says it 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.

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