Allianz released its Top 10 Global Business Risks for 2017 (CLICK HERE), and it highlights an ongoing and powerful shift in the threats companies face. Many of these threats are emerging (new and developing more fully), imminent (due to active perpetrators), AND not adequately addressed by the commercial insurance market (because coverage is difficult to price and potential losses are staggering).
This list rivals Ready.Gov’s Risk Assessment (CLICK HERE) for providing compelling reasons why most small and mid-market businesses should own their own Captive Insurance Company (CIC) as part of a comprehensive Enterprise Risk Management (ERM) strategy.
The Top 10 Threats according to the Allianz survey of 1,200 experts across 55 countries are listed below.
1. Business Interruption
2. Market Developments
3. Cyber Incidents
4. Natural Catastrophes
5. Legislative & Regulatory Changes
6. Macroeconomic Developments
7. Fire & Explosion
8. Political Risks & Violence
9. Loss of Reputation
10. New Technologies
Many of these threats can be addressed with a well-structured Enterprise Risk Captive insurance program that blends commercial insurance with captive insurance to address key gaps in coverage. For example, the Allianz report lists the causes of economic loss from a cyber attack. While commercial insurance may address the direct losses caused by a cyber attack, it is often inadequate (or coverage is to expensive) to address all true losses caused by a cyber breach. These gaps are often best addressed by a captive insurance program largely because premiums paid to a captive are not a sunk cost. Sources of economic loss from a cyber attack ranked in order are:
- Business Interruption including Supply Chain
- Reputational Damage
- Data Restoration
In most cases, commercial cyber insurance policies only address numbers 3 and 4.
Our advice for successful small and mid-market businesses is simple. The risk landscape is only going to become more and more complex. The sooner your business develops and implements an ERM with a CIC strategy the better. It could be the difference between saving and losing the business you have worked so hard to build.