Natural disasters can currently cause significant financial problems for companies.
(Photo: dpa)
Frankfurt A major fire broke out in Hamburg-Bahrenfeld a few days ago. Various stacks of wooden pallets were initially on fire on a factory site. Then the fire spread to an adjacent warehouse complex. There were no injuries and the extent of the damage was not immediately known.
Natural disasters and fires like this can currently cause significant financial problems for companies. Because since the corona crisis, companies have had problems with their supply chains, which are being exacerbated by the war in Ukraine.
Philip Beblo, global property insurance expert at Allianz Global Corporate & Specialty (AGCS), knows that if a warehouse catches fire or is flooded, reconstruction currently costs significantly more. “We are currently observing significantly higher claims than last year.”
The result: Many companies that have been confronted with increases in premiums and worsening insurance conditions in property insurance for years are likely to face further burdens.
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According to Beblo, the importance of the Ukraine as a supplier market for German companies, for example in the automotive and chip industries, should not be underestimated. Some raw materials or supplier parts are currently difficult or impossible to obtain. When they are available, they have often become very expensive. And: Because of the sanctions, there are also no imports from Russia, such as iron and steel.
Underinsurance could become a problem
Under normal circumstances, companies can bear the bottlenecks for a while. However, a major loss could have dramatic consequences. “The reconstruction of steel structures, for example many warehouses, is currently about 50 percent more expensive than it was a year ago,” says Beblo. If, in addition, stored goods are damaged or destroyed, and their prices have risen enormously, the amount of damage could even be several hundred percent higher than in the previous year.
Rebuilding warehouses has become even more expensive this year.
(Photo: dpa)
Business interruptions in the event of damage therefore often last considerably longer today and are therefore more expensive than in the past. Already at the turn of the year, risk management experts that AGCS had surveyed in the German market described business interruptions as the greatest business risk in the current year.
Companies can insure themselves against damage caused by fire, flood and storm as well as against natural hazards. The insurer also covers the loss of earnings if the company has the corresponding policy. However, long-term sales losses due to a loss of reputation as a result of bottlenecks, for example, cannot be insured.
Due to the sharply rising prices for many goods, the expert from the Allianz subsidiary also expects that numerous companies could be underinsured. “Companies should check whether the sums insured for their inventory are still sufficient in the current situation.”
Insurers had to pay for higher losses
Many insurance contracts already contain corresponding adjustment mechanisms. Thomas Bischof, head of Gothaer Allgemeine Versicherung, said during the balance sheet press conference: “Many policies are equipped with an index adjustment. With the current high level of inflation, insurance sums and premiums then automatically increase.” While AGCS specializes in major customers with sales of 500 million euros or more, Gothaer sees medium-sized companies as the most important target group.
>>> Read here: Allianz could face Russia write-offs
Many companies are aware of increases in premiums in property insurance. Premiums have been rising for years, partly because insurers are offering less insurance cover. At the same time, they have recently had to bear a lot of high losses from natural disasters, for example after the flood disaster in the Ahr Valley.
In the insurance conditions, pandemic and cyber exclusions in property insurance are now the order of the day, observes Stefan Rosenowski, Managing Director of the General Association of Policyholders (GVNW). In the end, policyholders would be left with less material insurance protection, despite higher prices.
According to Beblo, companies therefore often accept higher deductibles in order to avoid even more significant price increases. Larger companies are also increasingly using so-called captives, i.e. their own insurers who hold risk capital themselves. Insurers like AGCS work with the captives and then step in only in extreme cases.
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