By Erin Ayers, Front Page News
Business interruption has steadily ranked as one of the top risks facing organizations all around the world for several years’ running, as tallied by Allianz Commercial’s annual Risk Barometer. From supply chain disruptions and cyber-related obstacles to natural catastrophes, the knock-on effects from nearly any peril can throw a wrench into a business’ daily operations. New research from Allianz offers real insight into why business interruption is so feared by executives
Business interruption claim severity rose sharply over the last two years, with the average claim cost jumping 30% annually despite frequency remaining fairly level. That brings the average BI claim to nearly $950,000, 70% higher than the average underlying property claim of nearly $560,000.
“Business interruption and supply chain risk remains elevated and volatile. The operating environment is challenging with geopolitical tensions, trade fragmentation, cyber-related incidents, and growing dependency on technology such as artificial intelligence (AI),” said Thomas Lillelund, CEO of Allianz Commercial, in a statement. “The scale of physical damage alone no longer determines the ultimate cost of a business interruption. Even a relatively contained incident can have consequences across production networks, customers and markets.”
Fire and explosion represent the largest single driver of business interruption losses, accounting for over 40% of the total value of nearly 8,000 claims analyzed by Allianz for this year’s report.
“While it is generally regarded as a mature and well-controlled risk, it continues to generate some of the most significant losses, with electrical faults featuring prominently among the causes of major events,” said Sarah Versavaud, chief claims officer and group leader of Allianz Commercial’s business interruption global practice, in the report. “The challenge is often not the fire itself, but the interruption of a critical activity on which the wider business depends.”
The insurer added that “even modest” fire protection efforts can make a big difference in reducing BI exposure.
Natural catastrophe-related BI losses rank as the second-costliest type of claim, accounting 34% of total value and the most frequent cause of loss at 26% of all claims analyzed.
“Climate-related business interruption exposures are no longer confined to headline events such as major hurricanes,” said Allianz. “Wildfires, severe convective storms, localized floods and hailstorms are also now contributing materially to loss activity.”
Allianz attributed much of the rising costs and longer settlement times for natural catastrophe BI claims to supply chain delays, labor shortages, and fluctuating material costs. Increasing reliance on a small number of production sites, suppliers, or geographic locations also contributes to the rising costs.
“A notable trend is the ‘long tail’ nature of some catastrophe claims. For example, many business interruption claims from Hurricane Helene (September 2024) remain unresolved almost two years later – not because of coverage disputes, but because some businesses have simply taken that long to recover,” the insurer observed.
Allianz evaluated claims from 2021 to 2025 for the report. Of those, a winter storm in the U.S. in February 2021 ranked as the most expensive natural disaster event for business interruption, accounting for 23% of losses. It was followed by 2021’s Hurricane Ida at 10% of natural catastrophe BI losses, a June 2022 hailstorm in France at 7%, and Hurricane Helene in the U.S. at 7%.
According to the insurer, businesses must understand “not only their own critical assets, but also those of the suppliers, technologies and infrastructure” their operations depend upon.
“Robust loss prevention measures, effective business continuity planning and proactive engagement with insurers on claims management are not optional extras – they are essential,” said Lillelund. “Even modest investments in fire protection, natural catastrophe prevention and supply chain management can materially reduce business interruption exposure and accelerate recovery.”
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