The cost of business interruption is on the rise with the average cost of claims between 2010 and 2014 exceeding €1m, reports The Guardian.
Research by Allianz Global Corporate and Specialty states that the increase is due to the ever greater interconnectivity of the global economy. A fire or a flood in a factory in one region, for example, causes a knock-on business interruption elsewhere, not just for the company itself but also for other businesses unable to operate because of the effect on a supplier.
Analysis of a sample of more than 1,658 business interruption claims with a value of more than €20,000 found that the top cause worldwide was fire and explosion, accounting for almost 60% of such claims by value.
However, the research found the cause of claims varied depending on location. In Asia,storm and flood-related losses were more likely to cause business interruption than fire or explosions which, according to the report, reflects “the region’s continuing economic development increasing exposure to natural hazards”.
The top cause of business interruption in Asia in the 2010-14 period was strike action. Storms caused the most disruption to business in the Caribbean, accounting for a third of claims by value.
The report pointed to the potential knock-on effect of such events, such as the 2011 Japanese earthquake. The disaster triggered losses among European and US businesses which required vital components manufactured by Japanese suppliers, resulting in about 150 claim notifications to Allianz, mostly from companies based outside Japan.
