Tag Archives: Allianz

Safeguard your business from wildfires: Allianz and Triple-I team up on mitigation

With business owners facing the ‘new normal’ of a seven-month wildfire season, compounded by rising temperatures, public safety power shutoffs, COVID-19 and civil unrest – wildfire preparation will be more critical than ever this year.

As outlined in a new Allianz report “Future Fires: Weathering the Fire Storm”, 2019 was a catastrophic year with 46,786 wildfires burning more than 4.6 million acres, leading to the evacuation of over 200,000 people, sustained blackouts, and the declaration of a state of emergency in California. And this year wildfires are already blazing across drought-ridden Western states while the risk of coronavirus has reduced the number of firefighters available in California and is likely to remain well into the fall.  

To meet the myriad of challenges, Allianz Global Corporate & Specialty (AGCS) has teamed up with the Insurance Information Institute (Triple-I) to provide businesses with some of the most stringent risk mitigation practices for safeguarding their establishments.

According to Allianz and the Triple-I, business owners should take the following steps to safeguard employees and property from wildfire:

1. Create defensible space around your building or structures

2. Create a Vegetation Maintenance Plan (VMP) to reduce sources of ignition

3. Use noncombustible materials for building signage, avoiding wood, plastic, and vinyl

4. Select exterior wall cladding made of noncombustible siding materials such as concrete and brick

5. Select dual-paned windows with tempered glass, kept closed when wildfire threatens

6. Use noncombustible material when replacing roofs. Homes with wood or shingle roofs are at high risk of being destroyed during a wildfire

7. Inspect vents and clear debris from roofs. Roofs and gutters are particularly vulnerable surfaces, as embers can lodge here and start a fire. Regularly clearing your roof and gutters of debris, installing gutter guards or screens, and blocking off any points of entry on your roof will all help safeguard your home 

Finally, don’t forget to update your inventory, business continuity, evacuation, and safety plans.

Business owners should further discuss with their insurance professionals the risks their business’s face as it pertains to wildfire and the need for:

  • Property Insurance (including the differences between replacement vs. cash value)
  • Business Interruption (also known as business income) and extra expense insurance 
  • Mitigation solutions and fire protection services available
  • Precautionary measures that can be taken today to prevent loss tomorrow

“Preparedness is as vital to an organization as business resilience planning,” said Janet Ruiz, Director of Strategic Communications for the Insurance Information Institute. “We recommend business owners review their insurance coverage to ensure they can adequately rebuild their properties as well as protect their business against major disruptions such as wildfire.” 

“Future Fires” highlights how a number of innovative technologies are stepping up to meet the challenge of the prevalence of wildfires and the prolonged duration of the wildfire season. One application of fire protection that is currently in use is an environmentally safe biodegradable fire-fighting foam used for pretreatment and suppression around property and building perimeters. When fire is imminent, foam is applied from private fire trucks appointed with state-of-the-art equipment.

The report also cites a Silicon Valley artificial intelligence company that has developed a system that analyzes satellite images every 10 minutes to identify where new wildfires may have broken out. This technology is trained to spot the likely signs of wildfires, and then alert firefighting agencies, who can verify if indeed a fire has broken out. The company hopes to have the system in place by next year’s wildfire season.

“Allianz is committed to helping businesses mitigate extreme catastrophes like wildfires with the most advanced techniques and solutions available,” says Scott H. Steinmetz, P.E., Regional Head of MidCorp at Allianz Risk Consulting. “The 2020 fire season presents unique challenges and complexities that will inherently put our skills to their utmost test. I feel confident, however, that businesses can greatly minimize their losses with advance planning and close communication with their insurance carrier before, and in the unfortunate event that it occurs, during and after a wildfire.”

Trip Coverage: It’s Not Just About Cancellations

As I’ve written previously, many who travel for pleasure think little, if at all, about the risks associated with their destinations and plans. Travel insurance, such folks believe, is to cover the cost and inconvenience of trip cancellations and lost luggage.

Who wants to think about illness, accidents, and – you know, the other thing – when going on holiday?

You don’t buy travel insurance for the best-case scenario. It’s when the worst happens you will likely regret not having it.

Industry numbers seem to bear this out. A recent report by the U.S. Travel Insurance Association (USTIA) found Americans spent nearly $3.8 billion on travel insurance in 2018, up nearly 41 percent from 2016.  However, trip cancellation/interruption coverage accounted for nearly 90 percent of the benefits purchased. Medical and medical evacuation benefits accounted for just over 6 percent.

Most common claim, but…

Indeed, trip cancellation is the most common claim paid on travel policies (or so I’m told – insurers hold their claims data close to the vest). Assuming this is the case, one might be tempted to roll the dice when it comes to occurrences that seem less likely – say, an automobile accident, a bad fall, or a heart attack or stroke.

Last week’s story about a 22-year-old Briton fighting for his life after falling from a hotel balcony in Ibiza got me thinking about value of the “post-departure benefits” of travel insurance. According to the article, the young man had insurance, though it wasn’t clear what kind of coverage he’d bought. The article did say his parents are soliciting funds on line to help with expenses.

“Globally, an estimated 37 million unintentional falls requiring medical treatment occur each year” write researchers in the journal Injury Epidemiology, citing 2018 World Health Organization (WHO) data. Unsurprisingly, alcohol consumption was found to be a major risk factor in these falls.

During one three-month period in 2018, the BBC reported, citing the Association of British Travel Agents, “11 British holidaymakers have been reported as falling from a balcony – with eight of them in their teens or 20s.” In March 2019, a Missouri man fell from the balcony of a Florida hotel where he was vacationing. In the same month, a Michigan teen on vacation in Cancun fell to his death.

Think you’re too smart, careful, or abstemious to fall from a balcony? Well, the most common cause of injury and death on vacation isn’t falls. It is – you guessed it – automobile accidents. According to a WHO and World Bank report, “deaths from road traffic injuries account for around 25% of all deaths from injury”.

According to the Centers for Disease Control and Prevention (CDC) 1.3 million people are killed and 20-50 million injured in crashes worldwide annually. The CDC says 25,000 of those deaths involve tourists.

There are things you can’t predict

Or maybe you avoid a fall or a crash and wind up in a situation like New Yorker Steve Lapidus, who credits his $79 travel insurance policy with saving his life when he became seriously ill while on vacation in Italy. Steve was in a coma for several days with sepsis and pneumonia and given 50/50 odds of surviving. But, after six-and-a-half weeks of medical care, doctors cleared him to fly home.

Man who fell ill during overseas trip says Richmond travel insurance company saved his life

The problem was, he couldn’t walk and needed special care and a specially modified plane. Lufthansa built a special pod within one of its commercial flights.

That $79 policy covered the entire $70,000 bill.

Plan for the best – insure for the worst

No one wants to buy insurance. Who on Earth would choose to buy a product that, under the best possible circumstances, they never use?

But you don’t buy insurance for the best-case scenario. It’s when the worst happens that you will likely regret not having it.

 

 

 

Preparing For The Next Ground Stop To Your Business With Insurance

If you were flying United Airlines Sunday night, chances are you may have been delayed.

A computer outage grounded all of United’s domestic flights for more than two hours, according to this NBC report, though the glitch affected only aircraft on the ground and did not impact international flights.

The ground stop was issued after the Aircraft Communications Addressing and Reporting System, or ACARS, had issues with low bandwidth, NBC said.

This is not the first time that a computer glitch or system outage has affected United’s operations, or indeed those of other airlines.

Allianz warns that in today’s interconnected industrial world non-physical or non-damage causes of business interruption (BI) are becoming a much bigger issue.

Physical perils like fire and explosion and natural catastrophes are still the top causes of BI that businesses fear most, but preparing for non-damage perils is becoming increasingly critical.

This shift in BI risk means that intangible hazards, such as a cyber incident or interdependencies from global networks, can cause large revenue losses for companies without inflicting property damage.

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With this ever-expanding range of BI risks, it’s good to know insurers have you covered.

Several pertinent BI insurance coverages developed by insurers are outlined in the Allianz Risk Barometer 2017 report:

  • Non-Damage BI (NDBI) insuring loss of income and ongoing costs from interruption of business caused by situations where there is no physical damage to the insured, the supplier or customer and there is no BI claim to be made, this coverage indemnifies a business for lost revenue due to disruption
  • Data Driven (Cyber) BI insuring loss of income and ongoing costs from interruption of business due to unavailability of data and computer systems caused by hacking, technical failure or human error.

Additional resources on covering losses with business interruption insurance are available from the Insurance Information Institute here.

Another Day, Another Hack

As if we needed another reminder of the rising threat of cyber attacks, the estimated EUR 50 million ($55 million) loss arising from a cyber fraud incident targeting Austrian air parts supplier FACC AG made us sit up and take notice.

As Bloomberg reports here, if the damages do indeed amount to $55 million this would be one of the biggest hacking losses by size.

Bloomberg also points out that the incident is made more intriguing because FACC is 55 percent owned by China-based AVIC.

It will take time for the  details of this attack to emerge, but in a January 20 press release, FACC acknowledged that the target of the cyber fraud was the financial accounting department of FACC Operations GmbH.

The company also noted that its IT infrastructure, data security, IP rights and the group’s operational business are not affected by the criminal activities.

Further, FACC said the $55 million in damage was an outflow of “liquid funds”.

“The management board has taken immediate structural measures and is evaluating damages and insurance claims,” FACC added in its third quarter report.

According to this report by ComputerWeekly.com, the fact that FACC’s financial accounting department was targeted in the fraud is prompting speculation that the company was likely the victim of a so-called whaling attack, also known as business email compromise (BEC) and CEO fraud.

These sophisticated phishing attacks are when cyber criminals send fake email messages from company CEOs, often when a CEO is known to be out of the office, asking company accountants to transfer funds to a supplier. In fact the funds go to a criminal account.

Last year, the Federal Bureau of Investigation (FBI) described BEC fraud as an emerging global threat.

Since the FBI’s Internet Crime Complaint Center (IC3) began tracking BEC scams in late 2013, more than 7,000 U.S. companies have been targeted by such attacks with total dollar losses exceeding $740 million. If you consider  non-U.S. victims  and unreported losses, that figure is  likely much  higher.

The rising incidence of BEC and CEO fraud and its intersection with cyber insurance will form the topic of a future blog post.

Both the WEF Global Risks Report 2016 and the Allianz Risk Barometer 2016 have identified cyber attacks and incidents among the top risks facing business.

Find out more about cyber risks and insurance in the I.I.I. white paper Cyber Risk: Threat and Opportunity.

Business Interruption: Risks and Losses On the Rise

Economic impact from business interruption (BI) is often much higher than the cost of physical damage in a disaster and is a growing risk to companies worldwide, according to a new report from Allianz Global Corporate & Specialty (AGCS).

Its analysis of more than 1,800 large BI claims from 68 countries between 2010 and 2014 found that business interruption now typically accounts for a much higher proportion of the overall loss than was the case 10 years ago.

Both severity and frequency of BI claims is increasing, AGCS warns.

The average large BI property insurance claim is now in excess of €2 million (€2.2 million: $2.4 million), some 36 percent higher than the corresponding average property damage claim of just over €1.6 million ($1.8 million), the global claims  review found.

The vast majority of BI losses are not caused by natural catastrophes, with non-natural hazard events such as human error or technical failure accounting for 88 percent of BI losses by value.

Reported loss estimates from the largest non-natural catastrophe BI events across the insurance industry during 2015 total more than $7 billion so far, with the Tianjin loss potentially accounting for almost half this total.

GlobalLossAtlas_471x150

Fire and explosion is the top cause of BI loss around the globe by value (2010-2014), with each incident analyzed averaging €1.7m ($1.9 million) in BI costs alone, but there are some major differences regionally.

Storm and flood related losses are notable in Asia, highlighting the region’s continuing economic development and increasing exposure to natural hazards.

Storm is also the top cause of BI loss in the Caribbean and Central America region, accounting for one-third of insurance claims by value.

As Chris Fischer Hirs, CEO of AGCS, says:

The growth in BI claims is fueled by increasing interdependencies between companies, the global supply chain and lean production processes.

Whereas in the past a large fire or explosion may have only affected one or two companies, today losses increasingly impact a number of companies and can even threaten whole sectors globally.”

Check out Insurance Information Institute resources on business interruption insurance here.

Cyber Business Interruption Risk Often Underestimated

Corporate data breaches and privacy concerns may dominate the headlines, but a new report by Allianz Global Corporate & Specialty makes the case that future cyber threats will come from business interruption (BI), intellectual property theft and cyber extortion.

The impact of BI from a cyber attack, or from operational or technical failure, is a risk that is often underestimated, according to Allianz.

It predicts that BI costs could be equal to–or even exceed–direct losses from a data breach, and says that business interruption exposures are particularly significant in sectors such as telecoms, manufacturing, transport, media and logistics.

Vulnerability of industrial control systems (ICS) to attack poses a significant threat, Allianz says.

To-date, there have been accounts of centrifuges and power plants being manipulated, such as the 2012 malware attack that disabled tens of thousands of computers at oil company Saudi Aramco, disrupting operations for a week.

However, the damage could be much higher from security sensitive facilities such as nuclear power plants, laboratories, water suppliers or large hospitals.

Business interruption can also be caused by technical failure or human error, Allianz notes.

For example, in July 2015, stocks worth $28 trillion were suspended for several hours on the New York Stock Exchange due to a computer glitch, and that same month 4,900 United Airlines flights were impacted by a network connectivity issue.

As a result, Allianz believes that within the next five to 10 years BI will be seen as a key risk and a major element of the cyber insurance landscape.

It points out that in the context of cyber and IT risks, BI cover can be very broad including business IT computer systems, but also extending to ICS used by energy companies or robots used in manufacturing.

Allianz currently estimates the cyber insurance market is worth around $2 billion in premium worldwide, with U.S. business accounting for around 90 percent of the market. However, the cyber market is expected to experience double-digit growth year-on-year and could reach in excess of $20 billion in the next 10 years.

The Allianz  Cyber Risk Guide  is available here.

Check out I.I.I. facts and statistics on cybercrime here.