Climate change is a new entrant in the Allianz Risk Barometer at #10 in Africa and the Middle East, driven by risk management experts in Ghana, South Africa, Tanzania, and Cameroon. An increase in physical losses is the exposure businesses fear most (59% of responses) as rising seas, drier droughts, fiercer storms and massive flooding pose threats to factories and other corporate assets, as well as transport and energy links that tie supply chains together. Further, businesses are concerned about operational impacts (49%), such as relocation of facilities, and technological and market impacts (35% and 32%).
“There is a growing awareness among companies that the negative effects of global warming above two degrees Celsius will have a dramatic impact,” says Chris Bonnet, Head of ESG Business Services at AGCS. “Failure to take action will trigger regulatory action and influence decisions from customers, shareholders and business partners. Ignoring climate risk is more costly than grappling with it. Therefore, every company has to define its role, stance and pace for its climate change transition – and risk managers need to play a key role in this process alongside other functions.”
Critical infrastructure blackouts (21%) and Macroeconomic developments (25%) are new entrants to the top 10 as they are directly linked. Critical infrastructure blackouts features prominently in the region at #7, in Cameroon at #2, in Ghana at #4, in South Africa at #5 and in Tanzania #5. According to Africa Energy Outlook 2019, a typical Nigerian firm experienced more than 32 electrical outages in 2018. These outages can vary in duration from less than one hour to more than a day, and in some countries they cost firms as much as a quarter of potential annual turnover and up to 2% of annual GDP.
Fire, explosion moved up two places to at #5 with 23% (sixth globally) of responses while Political risks and violence moves down to ninth with 17% of responses. Fire, explosion is the number one cause of financial losses based on the results of insurance claims analysis by AGCS. Such events have caused in excess of €14bn ($15.7bn) worth of losses over a five-year period through 2018 – accounting for almost a quarter (24%) of the value of more than 470,000 claims examined by AGCS. This is significantly ahead of the second top cause of loss, aviation collision/crash incidents (14%). Even the average insurance claim from a fire totals almost €1.5mn ($1.65mn). Despite the downward trend in Political risks and violence from #2 to #9, it continues to be an ever-rising threat in the region sparking higher interest in the specialty insurance market among companies that are worried about its impact on their supply chains and the threat of business interruption. However take up is low exposing companies’ supply chain business interruption risk.