Terry Campbell, vice president/regional claims head – Americas for AGCS says since the company has monitored their claims globally for many years, there were no major surprises. "The report provides the industry and our clients with a better understanding of the top causes of losses and other trends across a number of different business sectors. The analysis has enabled us to identify a number of emerging risks that will impact global businesses and the insurance claims landscape in the future."

Aviation

So far in 2014, 80% of the major reported losses involved aviation (two Malaysian Airlines flights, one Air Algeria flight that crashed, and aircraft damaged in fighting at the Tripoli Airport) or fire in the oil and gas sector. A fire in a power station in the U.K. caused $230 million in damage, a refinery fire in Argentina cause $180 million in damage, and the largest fire involved a fire at a Siberian refinery valued at approximately $800 million.

While aviation improvements are resulting in fewer catastrophic losses, the cost of these claims is increasing and becoming far more complex. Plane crashes generated 23% of the claims filed and accounted for 37% of the value, while incidents on the ground accounted for 18% of the claims and 15% of the value. In the U.S., damages involving bird strikes averaged $22.8 million per year across 27 airlines. Zebras in Africa and cows in Asia and Latin America also caused aviation losses when the animals were on the runways during takeoffs and landings.

Liability and product defects

Liability claims grew around the globe as more countries followed the U.S. example of compensation and litigation. Personal injury and wrongful death claims captured more than 40% of the claims costs. Automotive recalls increased in frequency and cost, as did product liability cases involving consumer protection.

"The trend for globalisation will not stop and awareness of consumer protection and a culture of compensation will grow in emerging markets," explained Peter Oenning, liability claims specialist, AGCS. "Even though the largest claims are still from the U.S., we have seen a gradual trend towards more significant claims from other countries."

Some involved claims against an Australian manufacturer for defective ear implants, others were wrongful death suits due to pulmonary diseases caused by a sterilizer for a humidifying device in South Korea, and another involved metal earmarks in pig ears coming from China.

While the majority of these claims still originate in the U.S., countries such as China, Germany and New Zealand are seeing more consumers seeking compensation.  Also, a growing number of countries like Italy and the Netherlands are passing action laws.

Pharmaceutical claims and automotive cases involving product liability and personal injury claims are becoming more complex and expensive.  "Trends like globalisation and consolidation of industries means that claims are getting bigger, spanning different lawyers, jurisdictions and legal systems," said Larry Crotser, liability claims specialist, AGCS. "This is making claims much more complex, requiring legal expertise and knowledge of requirements in multiple countries."

Property claims

Natural hazards accounted for three of the top five property losses with fire as the top cause in 26% of the claims. Large commercial property and engineering claims also demonstrated the interconnectedness of the global economy. Because supply chains are becoming leaner and more global, a disruption in China can disrupt business for distributors in multiple countries, leading to more business interruption (BI) and contingent business interruption (CBI) claims across a variety of business sectors.

"Business interruption claims are not new but they are becoming a bigger proportion of property claims," said Raymond Hogendoorn, AGCS property claims specialist. "As businesses become more and more connected, the impact of an event like a fire or a flood can be much wider and more costly. An incident at one company in one part of the world can have a knock-on effect and generate BI claims for many other companies in other countries, as the Tohoku earthquake and tsunami in Japan, and wide-scale flooding in Thailand, in 2011 demonstrated."

Personal negligence and human error were major factors in a number of the losses cited in the report, but there are actions insurers can take to reduce their occurrence. "Insurers need to continue to invest capital into loss control and training," said Campbell. "Both concepts create closer partnerships with clients wherein investments are made from both a capital and training perspective. Allianz Global Corporate & Safety's seminars on safety in our Aviation and Marine sectors have resulted in significant mitigation of losses. Our clients see these as differentiators wherein the outcome results in less claims, which ultimately leads to better account performance."

Emerging risks

The AGCS report also identifies emerging risks that will impact how claims are handled going forward. A number of risks involve new technology, economic growth, climate and societal changes, which will impact already complex claims. Cyber risk is one area that will continue to evolve and impact BI and CBI. "Cyber connects so many types of risk, touching on private individuals, infrastructure, companies and public bodies," explained Michael Bruch, emerging risks specialist, AGCS.

Campbell identified the "volatile climate and the complexity and interconnectivity of our exposures" as the two emerging risks most likely to have a significant impact over the next two years. "Both issues are certainly inter-related and could prove very costly to the market if the 'perfect storm/catastrophe' hits an urban area. In addition, CBI losses can prove catastrophic as they have in the past due to event such as the Thailand flood and the Japan earthquake."