ALLIANZ RISK BAROMETER - industrial insurance …

1 ALLIANZ GLOBAL CORPORATE & SPECIALTY. ALLIANZ RISK BAROMETER . TOP BUSINESS risks FOR 2018. The most important corporate perils for the year ahead and beyond, based on the insight of more than 1,900 risk management experts from 80 countries ALLIANZ Risk BAROMETER 2018 Contents SNAPSHOT: TOP BUSINESS risks AROUND THE WORLD IN 2018 View all country, regional and industry risk data here CONTENTS. UK Germany 04. Canada = Cyber incidents Business interruption 1 1 . The Top 10 global business risks 1 = Business interruption France 2 Changes in legislation and regulation 2 Cyber incidents Cyber incidents 06. 2 . 1 = Business interruption 3 Business interruption 3 Natural catastrophes 2 Natural catastrophes 2 = Cyber incidents Executive summary and methodology With an increase both in the demand for our cyber risk The new gold of the digital economy is Business interruption (BI) can be 3 Fire, explosion products and in volume of claims, it's no surprise to see intangible assets such as data, platforms, a consequence of many of the other risks identified in the Risk BAROMETER .

2 Whether it stems from In the Industry era, as businesses rely more and more cyber as the top risk again. Meanwhile, the challenging macro-economic environment, threat of terrorism, and uncertainty around Brexit will continue to drive up networks or the company's reputation. As a result of this shift, their protection is becoming more important in Germany. Business and 08 1: Business interruption a natural catastrophe or a cyber- on digitalization to manage their volatility. We need to adapt to the evolving landscape supply chain disruptions, as well as cyber attack, it is a daily concern for businesses.. ULRICH KADOW, CEO, AGCS CANADA. supply chains, they face the new issue of cyber-driven BI.. CORINNE CIPI RE, CEO, AGCS FRANCE. to help our clients understand, manage and protect against these complex risks in 2018.. BRIAN KIRWAN, CEO, AGCS UK. threats, are among the greatest risks today.. ANDREAS BERGER, AGCS BOARD MEMBER AND. CEO, CENTRAL AND EASTERN EUROPE. 10 2: Cyber incidents Japan 12 3: Natural catastrophes 1.

3 2.. Business interruption Cyber incidents 14 Business risk risers and fallers: 4-10. 16. Spain Italy 3 New technologies Top risks for small- and mid-sized 1 = Business interruption 1 = Business interruption companies (SMEs). China US 2 Natural catastrophes 2 Cyber incidents 1 Cyber incidents Business interruption 3 Fire, explosion 3 = Natural catastrophes 1. 2.. Business interruption Cyber incidents 18 Future long-term risks 2 Spanish companies were especially Underestimated for a long time, cyber New technologies 20. 3 . 3 = Natural catastrophes impacted by the earthquakes, hurricanes risk is an increasing concern for Italian and storms of 2017, ensuring natural companies moving up to second Contacts Cyber is a 24/7 365-day-a- catastrophes made a significant move in in the Risk BAROMETER , while loss of Australia year risk that is evolving at a this year's Risk BAROMETER . reputation is also a rising threat.. rapid pace. Cyber losses can JUAN MANUEL NEGRO, CEO, AGCS SPAIN NICOLA MANCINO, CEO, AGCS ITALY 1 Cyber incidents span many risk areas, such 2 Business interruption as loss of reputation, BI and 3 Changes in legislation and new technology.

4 In addition, regulation it is not limited to being an external risk exposure, as the 2017 was the costliest natural actions of employees can catastrophe year ever for insured impact a company's risk of losses. Despite most catastrophes data breaches or other forms occurring in North America and of cyber incidents.. Nigeria South Africa Mexico, they still impact Asia, as BILL SCALDAFERRI, AGCS BOARD. 50% of claims by value are from MEMBER AND CEO, NORTH. Theft, fraud and corruption = Cyber incidents subsidiaries of multi-national AMERICA 1 1. companies located outside of 2 = Market developments 2 = Business interruption the disaster zones. This reflects 3 = Changes in legislation and regulation 3 Changes in legislation and regulation the need for companies to adopt a global approach to KEY Businesses in Africa are deeply concerned about the impact of business interruption, risk exposures and insurance which is largely attributed to fire incidents, especially in developing markets.

5 Political coverage. As manufacturing Risk higher than in 2017. risks and violence; theft, fraud and corruption; and market developments are also a shifts east, Asia is increasingly Risk lower than in 2017 rising concern across the region. Cyber incidents feature prominently in South Africa and exposed to such disasters.. Morocco. This is not surprising as both countries are strong insurance markets. MARK MITCHELL, CEO AGCS ASIA. No change in 2017. THUSANG MAHLANGU, CEO, AGCS AFRICA. View Africa & Middle East country risk data here This risk map shows the top three risks for businesses in selected countries. Source: ALLIANZ Global Corporate & Specialty ALLIANZ Risk BAROMETER 2018 Top 10 Global Business risks for 2018. ALLIANZ RISK. Source: ALLIANZ Global Corporate & Specialty. Figures represent the number of risks selected as a 1 percentage of all survey responses (2,376). The 1,911. respondents could provide answers for up to two industries and up to three risks per industry.

6 42% BAROMETER . View the full Risk BAROMETER 2018 rankings here TOP 10 GLOBAL BUSINESS risks FOR 2018. 2 3 4 5. 40% 30% 22% 21%. = 2017: 37% (1) 2017: 30% (3) 2017: 24% (4) 2017: 31% (2) = 2017: 24% (5). Business interruption Cyber incidents Natural catastrophes Market developments Changes in legislation (incl. supply chain disruption) ( cyber crime, IT failure, data breaches) ( storm, flood, earthquake) ( volatility, intensified competition /. new entrants, M&A, market stagnation, and regulation ( government change, economic sanctions, market fluctuation). protectionism, Brexit, Euro-zone disintegration). 6 7 8 9 10. 20% 15% 13% 11% 10%. KEY. Risk higher than in 2017. Risk lower than in 2017. 2017: 16% (7) 2017: 12% (10) 2017: 13% (9) 2017: 14% (8) NEW. = No change in 2017. (1) 2017 risk ranking Fire, explosion New technologies Loss of reputation or Political risks Climate change/. ( impact of increasing interconnectivity, nanotechnology, artificial intelligence, brand value and violence increasing volatility ( war, terrorism, civil commotion).)

7 3D printing, drones) of weather 4 5. ALLIANZ Risk BAROMETER 2018 Executive Summary EXECUTIVE Businesses are less concerned about ALLIANZ RISK. BAROMETER . SUMMARY METHODOLOGY. market developments (4th 22%) than 12 months ago. Risk perception of changes in legislation and regulation (5th 21%) remains the same, despite a The seventh ALLIANZ Risk BAROMETER is the reduction in the number of protectionist biggest yet, incorporating the views of a record measures. Concerns about fire, 1,911 respondents from 80 countries. The annual Business interruption and cyber explosion (6th 20%) are up claims corporate risk survey was conducted among analysis shows the average cost of a BI ALLIANZ customers (global businesses) and incidents interlink as the major threat loss from a large fire incident totals brokers. It also surveyed risk consultants, for companies through 2018 and $2m ( ) while loss of reputation underwriters, senior managers and claims or brand value (8th 13%) is also an experts in the corporate insurance segment of beyond, according to the insight of increasing worry in an age when a crisis both ALLIANZ Global Corporate & Specialty and 1,911 risk experts from 80 countries can spread globally within minutes.

8 Other ALLIANZ entities. Political risks and violence (9th 11%). in the ALLIANZ Risk BAROMETER 2018. is down year-on-year, although Respondents were questioned during October businesses are more worried about the and November 2017. The survey focused on impact of terrorism. A general trend of large and small- to mid-sized enterprises. increased political activism is Respondents were asked to select industries anticipated in 2018. Page 14 about which they were particularly knowledgeable and name up to three risks they The risk impact of new technologies believed to be of most importance. As multiple Business interruption (BI) ranks as disrupt large numbers of companies (7th 15%) is one of the big movers in answers for up to two industries were possible, the most important global risk for the through common internet the rankings year-on-year. It is also 2,376 responses and 6,472 risk answers were sixth year in a row (42% of responses), infrastructure dependencies, are the second top long-term risk after recorded.

9 Due to its tremendous effect on increasing. Meanwhile, the introduction cyber incidents, with which it is closely revenues. Companies face an of the General Data Protection interlinked. Vulnerability of machines Most answers were for large enterprises increasing number of scenarios from Regulation (GDPR) across Europe in to failure or malicious cyber acts will (> 500m annual revenue) [1,257 responses, traditional exposures, such as the May 2018, brings the prospect of more, increase in future, potentially causing 53%]. Mid-sized enterprises ( 250m to 500m physical damage impact of natural and larger, fines for businesses who significant disruption to critical revenue) contributed 516 responses (22%), while catastrophes and fires on facilities and don't comply. The way in which a infrastructure. Businesses also have to small enterprises (< 250m) produced 603. the supply chain to new triggers business manages a data breach has prepare for new liability scenarios, as responses (25%).

10 Risk experts from 22 industry stemming from digitalization and a direct impact on the final cost. This responsibility shifts from human to sectors were featured. interconnectedness that typically come will become even more the case under machine. Page 18. without physical damage, but high the GDPR. Reputational damage is Ranking changes in the ALLIANZ Risk BAROMETER financial loss. Cyber incidents is the irrevocably linked if the response to a New risks require new tools to help are determined by positions year-on-year, most feared BI trigger for the first time. cyber incident is inadequate. Page 10 manage and mitigate potential ahead of percentages. BI is also the main cause of economic Awareness of the cyber threat is impacts. The role of insurance is loss for businesses after a cyber soaring among small- to medium-sized evolving, whether it is through provision All currencies US$ unless stated. incident. Cyber BI incidents are businesses (SMEs) Page 16 of new coverages such as cyber BI.