Colsa Insurance Agency, Inc. Blog
A new survey has found that cyber risks have risen to become the number one concern among businesses, replacing the COVID-19 pandemic and business interruption as the top risks in 2022.
The second-most cited risk was business interruption and supply chain disruptions, followed by natural catastrophes, according to the "Allianz Risk Barometer 2022."
The rankings follow a year that saw an explosion in cyber attacks, massive business interruption and supply chain disruptions that have left factories idle and store shelves bare, and record damage caused by natural catastrophes.
This annual survey provides perspective on the number and variety of threats businesses face, and which ones are causing the biggest headaches.
Here are the rankings of the top eight risk cited by risk managers in the Allianz survey:
1. Cyber risks — Ransomware has become the number one cyber exposure for business, according to the barometer, just ahead of data breaches. Cyber criminals have refined their business models and tactics, which has made it easier for them to carry out ransomware attacks.
Hackers have also started targeting technology and software supply chains, physical critical infrastructure or digital single points of failure.
2. Business interruption — The COVID-19 pandemic has caused the greatest global supply chain disruption in history, which in turn can lead to business interruption, particularly for manufacturers unable to secure much-needed parts. The supply chain has been disrupted by a number of factors, including pandemic-induced port closures in China, port congestion and factory closures.
The biggest supply chain concern is cyber attacks on infrastructure and on supply chain and logistics technology.
3. Natural catastrophes — In 2021, the U.S. experienced 20 separate billion-dollar weather and climate disasters, putting it in second place for the most disasters in a calendar year, behind the record 22 billion-dollar events in 2020.
4. COVID-19 pandemic — Pandemic risk dropped from the number two spot in the 2021 rankings as businesses have become more confident in their contingency plans and safety protocols.
"Many companies are taking advantage of the increased awareness of business interruption, and we have seen more organizations investing in tools and systems to improve transparency of supply chains, work through scenarios and update their business continuity," said Philip Beblo, global property industry lead for Allianz.
5. Regulatory and legal changes — Under the Biden administration, there's been an uptick in regulatory activity, including workplace safety standards for protecting workers against COVID-19 infection. There are also new state laws and regulations that require businesses to make operational and organizational changes to comply.
6. Climate change — The U.S. continues to see increases in the frequency and intensity of storms, wildfires and tornadoes, which are causing more expensive property damage, business interruption and insured losses.
"The risks to businesses from global warming are being experienced with increasing force and immediacy — as direct damage after extreme weather events, but also leading to tightening regulation, and as threats to brand and reputation," said Line Hestvik, chief sustainability officer at Allianz.
7. Fires and explosions — Fires (excluding wildfires) and explosions caused in excess of $15 billion worth of damage globally between 2013 and 2018, according to an Allianz analysis of 470,000 insurance industry claims during the period.
Besides property damage, a major fire or explosion can prevent companies from operating for some time and such incidents are the most frequent drivers of business interruption insurance claims.
8. Shortage of skilled workers — Another issue that the pandemic has exacerbated is the skilled worker shortage. Nearly seven in 10 companies reported talent shortages — the highest in 15 years, according to a ManpowerGroup survey.
As the economy has reopened in the wake of business closures during the start of the pandemic, companies in most sectors have had trouble finding new staff and hanging on to valued employees as competition for talent is fierce.
COVID-19 is forcing businesses to face a number of risks, liability and insurance implications.
Companies could seek coverage for a variety of claims stemming from the outbreak, including workers' compensation, business interruption, liability and more.
And, now that it is a pandemic, the economic fallout may be expansive - hitting your company's operations in the form of lower sales or supply chain disruptions.
Now is a good time to understand which of your insurance policies could come into play.
Workers' compensation policies generally extend insurance benefits to employees for injuries and illnesses "arising out of or in the course of employment."
That wording makes it difficult for most workers to file a claim if they suspect that they got the coronavirus at work, presumably from another employee, customer or visitor to the workplace. But if an employer knows that the virus is in the workplace, coverage could apply.
Workers' compensation could come into play in the following instances:
However, workers' comp insurance would likely not cover employees who are working on assignment abroad for more than a short time.
One major fallout from the spread of COVID-19 is that it has cut into global supply chains, forcing manufacturers around the world to suspend production. This has been especially true for companies that rely on China for their parts and materials.
But now that the virus has exploded in a number of countries, the threat to supply chains will only increase. This has already started affecting companies in the United States. If your company's operations are affected or stopped due to the virus, you may be wondering if the business interruption coverage in your property policy or business owner policy may pay out.
Business interruption coverage replaces income that was lost due to a disaster, such as a fire on the premises of the company or one of its suppliers, or a hurricane that hinders a company from operating.
However, any hit to your income from coronavirus would not be physical damage, which is a prerequisite for this coverage. Viruses and disease are typically not an insured peril unless added by endorsement. In many cases, the policy may specifically exclude coverage for viruses and disease.
There is potential coverage through communicable disease coverage under proprietary insurance carrier forms if the insured is closed by a "public health authority" order for closure, decontamination, etc. But it's worth noting that these usually require the order to happen, so the insured cannot voluntarily decide to close and then claim coverage.
In terms of liability, a third party - customer, vendor or guest - could claim they were sickened on your property and sue your business for negligence for failing to provide a clean facility, which could trigger your commercial general liability policy.
Any company that deals with the public or customers, like a retailer, restaurant, hotel, daycare center or a gym, would be at greatest risk for this type of action.
While the chances of them winning such a case would be small, you could still face legal bills, which your CGL policy would typically cover. If there is coverage, it would come under the policy's "bodily injury" portion.
Some CGL policies exclude claims arising from a pandemic, virus or bacteria, so read your policy carefully. Many insurers also include broadly worded pollution exclusions that could preclude or limit coverage.
Business travel accident insurance
This insurance could cover employees who travel on business domestically or internationally, foreign employees of U.S.-based businesses and U.S. employees on offshore assignments. The insurance provides:
One of the keys to managing risks when you first start a business is getting the right insurance to cover your operations, property and potential liabilities.
Unfortunately, many business owners fail to update their policies and just renew them year after year even if the company has grown, expanded operations and facilities, and added new equipment and property. If this is the case, the old coverage would be insufficient.
Business owners should review their policies every year to catch any omissions and make sure they are not underinsured. It is common for smaller businesses to secure a basic business owner's policy (BOP) and workers' comp when they first get started. A BOP includes:
Outgrowing BOP coverage
As your business expands, you may outgrow the BOP and need additional coverage to manage your risks. Some examples include the following:
Depending on the business, some or most of these insurance options may be required for adequate protection. Annual reviews with us are ideal for discussing your options. Make sure these elements are considered: