In the latest edition of the Allianz Risk Barometer, there is a clear sign of the increasing concern among business leaders over rising impacts from natural catastrophe events and climate change, with both of these threats climbing the rankings for 2022.
With extreme weather events increasingly visible and impactful, while transition risks related to climate are seen to be growing, it’s no surprise these are seen as rising threats among businesses around the world.
The Allianz Global Corporate & Specialty (AGCS) survey features the views of 2,650 experts in 89 countries and territories, including CEOs, risk managers, brokers and insurance experts
Cyber risks are ranked number one for 2022 by 44% of respondents, followed by business interruption which has dropped into second voted for by 42%.
Natural catastrophes is now in third, rising from sixth and voted for by 25% of respondents to Allianz’s survey, while climate change is now in sixth, its highest ever ranking with 17% voting for this risk.
Pandemic risk has actually fallen slightly, to fourth this year.
“’Business interrupted’ will likely remain the key underlying risk theme in 2022,” AGCS CEO Joachim Mueller commented on the broad themes. “For most companies the biggest fear is not being able to produce their products or deliver their services. 2021 saw unprecedented levels of disruption, caused by various triggers. Crippling cyber-attacks, the supply chain impact from many climate change-related weather events, as well as pandemic-related manufacturing problems and transport bottlenecks wreaked havoc. This year only promises a gradual easing of the situation, although further Covid-19-related problems cannot be ruled out. Building resilience against the many causes of business interruption is increasingly becoming a competitive advantage for companies.”
There are, of course, links between the different risks as well, with natural catastrophes seen as a key trigger for business interruption, in the view of survey respondents.
The upward trends in natural catastrophe and climate risk are closely related, Allianz believes, as “Recent years have shown the frequency and severity of weather events are increasing due to global warming.”
On the climate change side, the main concerns are actually related to climate-change related weather events and their potential to grow in frequency and severity.
Respondents ranked their concerns as climate change related weather events causing damage to corporate property (57%), followed by BI and supply chain impact (41%), while managing the business risks related to the climate transition was ranked lower at 36%.
As a result, Allianz highlights the importance of climate risk mitigation, and shoring up resilience to extreme weather events such as hurricanes and floods, as well as use of insurance and reinsurance protection.
“Previous once-in-a-century-events may well occur more frequently in future and also in regions which were considered ‘safe’ in the past. Both buildings and business continuity planning need to become more robust in response,” said Maarten van der Zwaag, Global Head of Property Risk Consulting at AGCS.
It’s telling the importance being placed on catastrophes and climate risks, which have become major drivers of economic and business impact all over the world.
A recent WEF report cited extreme weather as the major perceived global threat of the moment, with climate risks dominating concerns, which aligns with the views expressed in Allianz’s report.
These surveys highlight the important role of insurance, reinsurance and of course insurance-linked securities (ILS), as with perception of these catastrophe, weather and climate threats rising, there could be an increasing urgency to better manage, mitigate, financially protect against and respond to them as well.