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Global Claims Review: The Top Causes of Corporate Insurance Losses

Businesses have to navigate an increasingly complex risk landscape. As well as combatting the threat posed by a host of natural and man-made hazards, companies also have to deal with the demands of a less forgiving regulatory and legal environment and emerging risks posed by our growing reliance on technology. All of these factors can combine to impair successful running of operations and insurers have a vital role to play in ensuring any disruption following a loss event is minimized.


This report examines global developments in corporate insurance claims, highlighting the top causes of loss, and other trends. It also examines a number of industry-specific trends that will impact the claims landscape in future.

 

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> Download the Executive Summary here

Top 10 causes of loss

The report highlights the increasingly high values at risk in corporate insurance claims. AGCS has identified the top causes of loss and emerging trends from more than 470,000 insurance industry claims in over 200 countries and territories with which it has been involved between 2013 and 2018[1]. These claims have an approximate value of €58.1bn (US$66.5bn).

The analysis shows that over 75% of financial losses arise from 10 causes of loss, with the largest single identified cause being fire/explosion, which account for almost a quarter (24%) of the value of all claims. In the past five years, fire and explosion incidents have caused in excess of €14bn worth of insurance losses from over 9,500 claims and are responsible for more than half (11) of the 20 largest nonnatural catastrophe loss events analyzed. Even the average claim from such an incident totals almost €1.5mn at €1.47mn. Aviation collision/crash incidents (14%) rank as the second top cause of losses globally according to value of claims. Faulty workmanship/maintenance (8%) is third.

Global Claims Trends

Despite recent record-breaking recent activity in the US and elsewhere around the world, storm is the only natural catastrophe event to appear in the top 10 causes of loss. Analysis of claims shows the vast majority of losses are caused by technical or human factors. In total, non-natural hazard events accounts for 87% of the total value of all claims and 95% of claims by number.

Claims payments vary enormously in scale reflecting the diverse nature of the risk landscape. Significant corporate insurance losses (>€100mn), such as those arising from fires, aviation crashes or shipping incidents for example, account for less than 1% of claims by number but a third of the total value of all losses analyzed, equating to €18.9bn. Conversely, around 90% of losses are valued at or below €50,000, accounting for just 4% of total value.

Claims involving damaged goods, which can result from a number of different causes including storage, handling, loading and unloading issues – or when in transit – constitute the most frequent losses for insurers, accounting for 11% of all claims by number around the world. However, such claims only equate to 5% by value.

The claims analysis also highlights the growing relevance of business interruption (BI) as a consequence of losses in property insurance, heightened by today’s increasingly interconnected and globalized business environment. Almost all large property insurance claims now include a major BI element, which typically accounts for the majority of the loss when previously the split might have been nearer to 50:50. The average business interruption property insurance claim now totals over €3mn at €3.1mn. This is around 39% higher than the corresponding average direct property damage loss (€2.2mn)[2] or a split of 58:42.

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[1] Claims analysis is for the period July 1, 2013 to July 1, 2018. The values of the claims analyzed in this report also include the share of other insurance companies in addition to AGCS who have participated on the same risks.

[2] Based on analysis of 1,175 corporate insurance claims which have both a property damage and business interruption loss component.