21 December 2015
- Growth of accumulation risk in highly industrialised areas of Asia pose greatest supply chain risk for Australian businesses.
- Preventable non-natural hazard events account for 88% of business interruption events by value.
- Despite supply chain risks being rated by businesses as the most important on the Allianz Risk Barometer, contingent business interruption largely remains an uninsured risk.
- Business continuity management of contingent business interruption risks from supply chain remains a gap in many multinational companies.
The series of explosions that rocked the Chinese port city of Tianjin in August 2015 is expected to be the costliest manmade disaster in Asia’s history and the combined insured
and uninsured business interruption losses are likely to emerge as the major driver of total costs arising from this event.
Allianz Global Corporate & Specialty (AGCS) has released a report on global developments in business interruption related claims over the period 2010 to 2014 that is recommended reading for any business involved in international commerce.
As the Regional Claims Manager for the Pacific at AGCS, Joerg Ahrens, points out “most Australian and New Zealand businesses are now heavily reliant on global supply chains based in Asia where there appears to be an increasing exposure to natural hazards. The greater interconnectivity between businesses is manifesting itself into more complex business interruption exposures that are not often factored into current business continuity plans.”
Key findings of the report are:
- Despite lessons learned from the Japanese earthquake and Thailand floods, manufacturers and suppliers can still be caught out by the closure of critical suppliers.
- While modern supply chains may be more flexible and cost-efficient, they are also more vulnerable to disruptions.
- Interdependencies between various suppliers of a product can be a big unknown and many businesses still do not have alternate suppliers.
- Business continuity management remains a gap in many multinational companies’ supply chain risk management.
- Supply chain performance management analysis can assist in enabling early warning systems to be created.
- A detailed risk assessment of supply chain risks should be an integral part of any company’s procurement and selection process, and form a critical part of their overall business continuity plan.
The skills and expertise to deal with the growing complexity of business interruption claims makes it far more important for businesses to pay closer attention in selection of its insurance carrier to ensure the insurer’s claims department has the capabilities to deal with these more complex types of losses.
Pre-loss meetings between insurers and businesses that establish clear processes of what to do in the event of an incident and how and who to communicate are becoming increasingly more important.
The report contains information on lessons learned and recommendations for a business in managing its contingent business interruption exposure. It can be downloaded from the AGCS website at www.agcs.allianz.com
About Allianz Global Corporate & Specialty
Allianz Global Corporate & Specialty (AGCS) is the Allianz Group's dedicated carrier for corporate and specialty insurance business. AGCS provides insurance and risk consultancy across the whole spectrum of specialty, alternative risk transfer and corporate business: Marine, Aviation (incl. Space), Energy, Engineering, Entertainment, Financial Lines (incl. D&O), Liability, Mid-Corporate and Property insurance (incl. International Insurance Programs).
Worldwide, AGCS operates in 27 countries with own units and in more than 160 countries through the Allianz Group network and partners. In 2014 it employed more than 3,500 people and provided insurance solutions to more than half of the Fortune Global 500 companies, writing a total of €5,4 billion gross premium worldwide annually.
About Allianz Australia
General Insurance Company of the Year 2014, 2013, 2012, 2011, 2009*
Best General Insurance Company of the Year 2014, 2012, 2010, 2007, 2006**
Allianz Australia delivers a wide range of personal, commercial and corporate insurance products and services to more than 2.5 million policyholders. Over 50% of Australia's top 200 BRW-listed companies have some form of insurance cover with the group and the group provides workers compensation services to around one-fifth of Australian employees.
*Australia & New Zealand Insurance Industry Awards
**Australian Banking and Finance Insurance Awards