Financial lines and liability claims in the Asia Pacific region are increasing in size and frequency as regulators step up their activities, introduce tougher environmental and consumer protection regulation and with growing public awareness of rights to compensation, according to Allianz Global Corporate & Specialty (AGCS).
"For D&O and professional indemnity insurance across the region, we see more intense regulatory enforcements in Asia markets that do not always follow US or European understanding of law. Australia, in particular has experienced a sharp rise in D&O activity in recent years, caused by more litigation. Class action lawsuits and more litigation funders have made Australia one of the most litigious countries outside the US," said Mr Stephan Kammertoens, financial lines claims specialist at AGCS.
The frequency of liability claims in Asia has also been increasing in Asia. "During 1Q2017, AGCS had some 800 pending liability claims in Asia, which has risen to 1,300 by 2Q2018," said Mr Peter Oenning, liability claims specialist at AGCS. "We are also seeing much larger claims in Asia than previously. Once 9 out of 10 large claims globally AGCS would have seen would have come from the US. Now it's more like 7 in 10, reflecting greater activity in Asia. As companies have become more global and more Asian companies operate in the US, the chances of being involved in litigation have increased."
Top causes of claims
In its latest Global Claims Review, AGCS reveals the top causes of claims in the corporate insurance segment based on an analysis of 470,000 claims from over 200 countries over the past five years (July 2013 to July 2018) with an approximate value of EUR58bn ($66.5bn).
Asia Pacific accounts for 17% of total value of claims globally at almost EUR10bn ($11.4bn), and 6% of total claims by number globally over the period.
The largest financial losses come from fires/explosions, aviation incidents, faulty workmanship/maintenance incidents and storms, which collectively account for over 50% of all claims by total value. Over 75% of financial losses globally arise from 10 major causes of loss.
Over the past five years, fire and explosion incidents have caused in excess of EUR14bn worth of losses and are responsible for more than half (11) of the 20 largest non-natural catastrophe events analysed. The average claim is almost EUR1.5m.
"In general, property insurance claims are higher with inflation and greater concentration in value as a result of globalisation and more integrated supply chains," explained Mr Raymond Hogendoorn, property and engineering claims specialist at AGCS. "As manufacturers have become more efficient, the values per sq m have risen exponentially. Fire and flood claims are much more expensive per sq m than a decade ago."
Costs associated with the impact of business interruption (BI) can significantly add to the final loss total from fire and explosion incidents, as well as many of the other major causes of loss identified in the report. Almost all large property insurance claims now include a major BI element: The average BI property insurance claim now totals EUR3.1m, around 39% higher than the corresponding average direct property loss (EUR2.2m).
Despite recent record-breaking natural catastrophe loss activity around the world, storm is the only natural catastrophe event to appear in the top 10 causes of loss. Analysis shows corporate insurance claims typically originate from technical or human factors—or non-natural catastrophe events—accounting for 87% of all claims by value.
The global aviation industry recently experienced its safest year ever but claims activity shows no sign of abating. Aviation collision/crash incidents—both ground and air—are the second major cause of losses globally and is the the top cause of loss in Australia accounting for almost a third of value of claims.