• Global spending on data centres is expected to reach several trillion US dollars by 2030 with the US and China as main drivers of growth.
• Rapid expansion is heightening exposures and introducing new risks for companies and insurers.

The unseen forces of AI and cloud computing are never out of the news, yet behind the headlines lies a story of growth and innovation as tangible as bricks and mortar.

The heavy computing power required by AI workloads, and the growing global demand for AI technologies, has seen a building boom take place around the world as developers scramble to build the facilities required to meet these needs.

According to market research, up to $7 trillion will be spent on data centres by 2030 – a huge sum driven largely by technology companies in the US and China, while Europe lags a few paces behind.

The tech industry’s big three, Amazon, Microsoft and Google Cloud, accounted for almost two-thirds of global cloud revenue in Q2 2025.

Combined with Chinese companies such as Alibaba and Tencent, their capital expenditure budgets for 2025 reach hundreds of billions of US dollars, much of it geared towards the industrial scale infrastructure and dependable energy sources that high-performance AI and cloud computing now demands.

The latest Allianz Commercial report, The Data Centre Construction Boom, explores the extent of this global buildout and also questions whether the building bonanza can last. Despite the ongoing expansion, several factors could limit future growth, including the surging costs of construction.

These have escalated dramatically from $200-$300 million, to projects exceeding $20 billion.

According to Allianz Commercial construction experts, average-sized facilities now cost between $500 million and $2 billion.

Along with higher construction prices, the complex nature of data centre construction and operation requires specialized insurance coverage for risks such as power supply concerns, faulty workmanship, fire or natural catastrophes.

“Construction projects as complex and extensive as data centres require significant time and resources. Typically, they require project-specific policies given their size and their unique risk profile that demands specialized insurance,” says Darren Tasker, head of Construction, Americas, at Allianz Commercial.

Data centres are fueling the construction industry

A global buildout is underway to construct the infrastructure needed to support the digital economy.

The US will be the largest market for data centers, covering about two thirds of the total global data centre power demand with 81 gigawatts (GW) by 2028, while China’s data centre market is building out equally aggressively. Greater Beijing alone now accounts for roughly 10% of global hyperscale capacity.

Europe is trailing behind the two superpowers but is experiencing a 43% annual increase in pipeline activity, with London and Dublin as the largest markets (each with over 1GW capacity), followed by Amsterdam, Frankfurt, Paris, and Milan.

“The bigger data centres have a huge footprint. The scale of a $20bn+ facility can involve tens of thousands of workers on site at peak times, with significant equipment and building supplies moving in and out,” says Chris Fancher, US head of Construction Property at Allianz Commercial. “Timings can be tight. This requires expert coordination, as any missteps or faulty workmanship can lead to potential losses or costly delays.”

Data centres combine great processing power with unique risk profile

Building a data centres is a complex, multi-disciplinary undertaking, which presents a multitude of risks.

One of the main issues is the soaring power demand that threatens to outpace grid capacity and infrastructure. The electricity demand from data centres worldwide is set to more than double by 2030, to around 945Twh.

This is slightly more than the consumption of the whole of Japan today, with its population of 124 million.

To avoid power issues, which are the main source of impactful outages with 45%, data centre operators are increasingly seeking to reduce their reliance on the grid by generating their own power on site, including renewables, gas, and even potentially small nuclear reactors.

Fire, heat and water are also significant risks for data centres, potentially leading to severe property damage or business interruption losses. Lithium-ion batteries are increasingly being used in server racks in data halls.

The fire risk associated with these batteries is well documented, particularly in relation to electric vehicles and charging infrastructure.

Large data centres can consume up to 19 million liters of water a day, equivalent to the water use of a town with a population of up to 50,000.

Increasing cooling requirements will drive up water and electricity demand, while rising global temperatures pose a growing risk to the resilience of over half the world’s top data centre hubs.

This has altered the risk profile of data centres and contributed to the increase in construction and insurance costs.

Clients need to work with an experienced team of underwriters who know the business and can support the project from beginning to end, including multi-year coverage and policy extensions as needed.

“Currently, there are no clear signs the growth in data centres has reached its peak, but there could be a check on the industry’s upward trajectory. Future demand for AI is difficult to gauge, due to rapid technological advances and various barriers to widescale roll-out. This has led some commentators to voice fears about a bubble, over-investment, and the prospect of stranded assets,” says Darren Tasker.

• Increasing global insolvency levels heighten risks for executives.
• The febrile geopolitical landscape poses liability challenges for global corporations caught up in world events.
• “AI washing” is an emerging risk trend, leading to securities class action lawsuits.
• D&O market remains competitive but a step up in scrutiny of corporate conduct around the globe means loss potential is still high.

Directors and Officers (D&Os) have been operating in a highly complex environment throughout 2024, and further volatility can be expected during 2025.

Executives face multiple exposures in an increasingly interconnected business world, confronted with risks arising from business insolvencies, geopolitical upheaval, climate change, digital transformation, economic uncertainty, shifts in public opinion, and an evolving legal landscape.

These are the latest key risk trends in the D&O insurance space, as identified by Allianz Commercial’s annual Directors and Officers Insurance Insights report.

“The D&O insurance market has remained competitive for buyers over the past year, but loss potential is still high,” says Vanessa Maxwell, chief underwriting officer, Allianz Commercial. “The global rise in business insolvencies is a particular focus of concern, with companies and leaders exposed to potential claims from lenders seeking to recover funds, or from shareholders who allege breach of fiduciary duty. At the same time, the litigation landscape and enforcement are increasingly stringent, and we are seeing regulatory bodies across the globe step up scrutiny of corporate conduct, making D&Os more vulnerable to investigations, penalties and lawsuits.”

Insolvencies as an emerging D&O risk

Global business insolvencies for 2024 are expected to rise by +11%, and countries accounting for more than half of global GDP will be hit by double-digit insolvency increases in 2024, according to Allianz Trade.

Major insolvencies already increased by +26% year-on-year for the first three quarters of 2024 (344 cases).

Western Europe leads the global count with 195 cases, a reflection of the region’s current economic instability, followed by Asia-Pacific (67 cases) and North America (66 cases).

Rising bankruptcies typically lead to an increase in D&O claims, so this trend is a reminder to business leaders of the need to respond and adapt to the challenging environment.

“Many companies have faced higher interest expenses, inflationary pressures, and macro- and microeconomic headwinds that have impacted their business and resulted in a struggle to service their debt load,” says Dan Holloway, head of Global Management Liability Commercial at Allianz Commercial. “Some sectors are particularly exposed, including real estate, construction, hospitality, tourism, and businesses in ‘consumer discretionary’, or non-essential purchases.”

Turbulent geopolitical environment and stringent litigation landscape

With war in Ukraine and the Middle East, the geopolitical landscape presents liability challenges to businesses as they find themselves caught up in world events with potentially significant consequences for their operations.

Upheaval can lead to supply chain disruption, business interruption, and legal and regulatory scrutiny.

Companies can face scrutiny for non-compliance with international sanctions, or for failing to adequately manage risks related to politically unstable regions.

D&Os can be held accountable for misjudging the impact of geopolitical developments on their company’s operations, leading to shareholder lawsuits or regulatory penalties.

At the same time, the litigation landscape and enforcement are increasingly stringent, with securities class actions proliferating not only in the US, but also in Europe (+10% year-on-year) and Australia (+43%).

“D&Os need to update their knowledge around geopolitical and regulatory changes more regularly than ever before,” says Jarrod Schlesinger, global head of Financial Lines and Cyber at Allianz Commercial. “A once-a-year review is no longer sufficient in the volatile era businesses are now operating in. These trends are driving the need for D&O policies that are responsive to multi-jurisdictional risks and can provide local coverage for legal defense costs, settlements and other liabilities.”

“AI washing” – the new “greenwashing”?

The transformative potential of artificial intelligence (AI) is huge, but it also means companies must adapt quickly to potential exposures around disclosure, regulation, shareholder scrutiny and litigation.

AI-related litigation is increasing and exaggerated claims about firms’ technological capabilities – a trend known as “AI washing” – could lead to securities class action lawsuits and enforcement actions.

Class action lawsuits have already been filed in the US, but the risk extends beyond North America, as any company that has its stock listed on a US exchange is subject to US securities law.

Third-party litigation funding a growing exposure
The global litigation funding industry is projected to grow rapidly in the coming years –by almost 10% CAGR up to 2028 – widening access to justice, but also potentially driving up the number of class actions and settlement costs and damages, as also highlighted in Allianz Commercial’s Five Liability Loss Trends To Watch report. And it is not only confined to the US – third-party litigation funding is also established in the UK, Netherlands, Germany, and Australia.

“D&Os will face increasing scrutiny from third parties ready to jump on cases and fund them. Claims are likely to become more complex because of funders’ aggressive litigation strategies and the experts they can afford to hire,” says Schlesinger. “Plaintiffs with little to lose financially could be tempted to make baseless claims. Even if the case doesn’t have legs, directors still have to defend it.”

In her presentation, titled “Risk Transfer as a Tool in Cyber Risk Mitigation: Cushioning the Blow through Cyber Insurance,” Masiza addressed the rising trends in cyber claims and effective strategies for mitigating cyber risks.

According to the Allianz Commercial Cyber Security Resilience Report for 2024, there has been a significant increase in both the frequency and severity of cyber claims.

Large cyber claims, defined as those over €1 million, surged by 14% in the first half of 2024, while their severity escalated by 17%.

Proactive Measures for Cyber Risk Mitigation

Masiza emphasized the importance of proactive measures such as early detection, swift action, and risk transfer solutions.

“Early detection minimizes financial and reputational impact by allowing for quicker isolation of impacted systems and data,” she noted. “Detection tools automate and expedite tasks such as forensics and notification, improving the overall crisis management process.”

Allianz Commercial’s findings indicate that organizations deploying cybersecurity AI and automation reduced the cost of a data breach by around $2 million on average.

Swift Action and Preparedness

Highlighting the role of swift action, Masiza recommended, “Robust incident response plans and regular drills ensure that teams are prepared. Swift action following early detection can stop a cyber incident from escalating, facilitating faster recovery and restoration of normal operations.”

The Role of Cyber Insurance

Masiza underscored the importance of cyber insurance, stating, “Cyber insurance provides financial coverage for various costs associated with data breaches, including IT forensic investigations, data recovery, and system restoration. Apart from the benefits of the cover provided, insurers can also offer valuable advice on loss prevention and mitigation, along with access to expert consultants and response teams.”

Support and Coverage

She further highlighted the comprehensive support provided when an insured reports a cyber breach. “Upon reporting a new incident, the Allianz Commercial claims team swiftly engages with the affected company to assess the situation and implement containment measures. They coordinate with incident response teams, including IT forensic experts, attorneys, and PR specialists as needed, to conduct thorough investigations and provide the necessary support.”

Underwriting Considerations

Masiza provided an overview of underwriting considerations, advising that factors such as the company’s industry, size, risk profile, and existing cybersecurity measures are evaluated during the underwriting process.

Important considerations include data governance standards, transparency regarding the use of consumer data, and cybersecurity measures within the supply chain.

Guidance for Securing Cyber Insurance

She also offered guidance on securing cyber-related cover, emphasizing the role of experienced brokers. “Brokers play a vital role in explaining complex insurance terms, assessing specific business needs, tailoring policies, and conducting thorough risk assessments to identify potential vulnerabilities and recommend mitigation strategies. Companies looking to secure cyber cover should enlist the services of an experienced broker with a history of placing this type of cover, as it is quite specialized.”

Protecting Business Dreams

“Allianz Commercial understands that insurance is designed to protect the dreams of business owners and the families dependent on the salaries earned by the employees of such entities. A huge part of our role is to protect those dreams by ensuring that our Insured is up and running as soon as possible,” Masiza concluded.

Join the Allianz Commercial Webinar on Cyber Security Resilience

To further share how companies can best prepare and respond to cyber-attacks, Allianz Commercial is hosting its Cyber Security Resilience 2024 webinar on November 5, 2024, from 4 – 5 pm CET. During this 1-hour session, Allianz Commercial leading experts will discuss the latest cyber claims trends, loss drivers, and provide insights on how companies can best prepare and respond to these developments.

Speakers include Marek Stanislawski, Allianz Commercial Global Cyber Underwriting Lead; Michael Daum, Allianz Commercial Global Head of Cyber Claims; Sabrina Sexton, Allianz Commercial Cyber Underwriting Lead SME and MidCorp; Tresa Stephens, Allianz Commercial Regional Head of Cyber North America; and Rishi Baviskar, Allianz Commercial Global Head of Cyber Risk Consulting.

This is an excellent opportunity for to gain deeper insights and practical guidance.

To sign up for the webinar, please register at the following link: Webinar Registration.

Mr. Lillelund will also assume leadership of Allianz Commercial, Allianz Group’s integrated global model for serving the Commercial Property & Casualty insurance segment (Mid Corporate, Large Corporate and Specialty customers).

A Danish citizen with broad international experience, Mr. Lillelund is a global leader with a career of more than 25 years in the insurance industry. Prior to his current role as CEO of AIG Europe, Middle East and Africa, he has lived and worked in Europe, the UK, Singapore, South Africa, Hong-Kong and the United States for Aspen Re, Gen Re, and Swiss Re. He earned a bachelor’s degree in economics from The College of William & Mary (Virginia, U.S.A.) and a master’s degree in business administration from Western University (Toronto, Canada).

Chris Townsend comments: “I’m delighted to welcome Thomas to Allianz. He is known for driving profitable growth, for building cultures focused on clients and underwriting integrity, and for developing high-performing teams. I’m looking forward to working with him and the talented team at Allianz Commercial to further drive our integrated approach for large corporate, mid corporate, and specialty customers worldwide.”

• Data breaches, attacks on critical infrastructure or physical assets and increased ransomware attacks keep cyber concerns at #1 with 67% of responses.
• Business interruption, Changes in legislation and regulation, Macroeconomic developments, and Natural catastrophes are joined second with 22% of responses.
• Businesses need robust, resilient operational processes to safeguard their supply chains and ensure business continuity.

Cyber incidents have emerged as the top risk faced by the hospitality, leisure, and tourism sector in 2024, according to the Allianz Risk Barometer.

The report, based on insights from over 3,000 risk management professionals and business leaders, emphasizes the critical need to address these risks to ensure business continuity and protect against potential disruptions.

With 36% of respondents expressing concern, cyber incidents have taken the lead as the most significant and new risk in the hospitality, leisure, and tourism sector.

The recent surge in ransomware attacks has resulted in a staggering 50% increase in insurance claims activity compared to 2022.

Hackers are now targeting both IT and physical supply chains, launching mass cyber-attacks, and devising new methods to extort money from businesses. Consequently, early detection and response capabilities and tools have become increasingly crucial.

“Cyber criminals are exploring ways to use new technologies such as generative artificial intelligence (AI) to automate and accelerate attacks, creating more effective malware and phishing. The growing number of incidents caused by poor cyber security, in mobile devices in particular, a shortage of millions of cyber security professionals, and the threat facing smaller companies because of their reliance on IT outsourcing are also expected to drive cyber activity in 2024,“ explains Santho Mohapeloa, Cyber Insurance Expert, Allianz Commercial.

Investment in detection, supported by artificial intelligence, is expected to enhance incident identification. Without effective early detection tools, companies may face prolonged unplanned downtime, increased costs, and a greater impact on customers, revenue, and reputation.

While cyber incidents take the top spot, business interruption, changes in legislation and regulation, macroeconomic developments, and natural catastrophes jointly rank as the second most concerning risks, each receiving 22% of responses.

Business interruption has moved down to the number two threat for the hospitality, leisure, and tourism industry.

The top two causes of business interruption, following cyber incidents, are natural catastrophes and fire, with machinery/equipment breakdown or failure following closely behind.

These findings highlight the interconnectedness and volatility of the global business environment, as well as the industry’s reliance on supply chains for critical products or services.

Consequently, improving business continuity management, identifying supply chain bottlenecks, and developing alternative suppliers remain key risk management priorities for companies in 2024.

Changes in legislation and regulation risks include increased compliance costs, uncertainty, competitive disadvantages, impacts on tourism demand, damage to reputation and image, operational disruptions, and broader economic repercussions.

To ensure long-term success and sustainability, it is crucial for businesses in the sector to understand and effectively manage regulatory risks.

Macroeconomic developments can also significantly impact the hospitality, tourism, and leisure industry, introducing risks such as fluctuations in consumer spending, changes in exchange rates affecting international travel demand, inflationary pressures impacting operating costs, and economic downturns leading to reduced travel budgets and discretionary spending.

These risks directly affect businesses’ revenue streams, profitability, and overall competitiveness within the industry.

Furthermore, natural catastrophes risks to the hospitality, tourism, and leisure industry include physical damage to infrastructure, disruption of transportation networks, safety concerns for travelers, and loss of revenue due to canceled bookings and reduced visitor numbers.

The recovery efforts following such events may require significant time and resources. The occurrence of natural disasters, such as floods, earthquakes, and wildfires, can result in billions of dollars in economic losses for tourism-dependent regions.

This highlights the urgent need for effective crisis preparedness measures and risk management strategies within the industry.

Risk mitigation: how to future-proof your operations

What these risks reveal is the extent to which risks are interrelated and aggregated in the networked world we live and work in.

Faced with loss scenarios that can fall like dominoes, businesses need robust, resilient operational processes to safeguard their supply chains and ensure business continuity.

Business continuity planning (BCP) reviews are essential and must be regularly updated.

Cyber protection should include regular backups, segmentation of data, the right end-point detection and multi-factor authentication.

Data is paramount. Insurers such as Allianz Commercial can leverage your company data to facilitate a tailored risk assessment and help draw up a personalized mitigation strategy.

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In his new role, he will be responsible for leading the aviation underwriting business in France, Italy, Benelux, Africa & Middle East, continuing to drive this key business forward.

Jérôme Notton takes over this role from Jean-Pascal Mouchette who had decided to step down from his role and leave Allianz.

He is based in Paris and reports directly to Tom Fadden, Global Head of Aviation at Allianz Commercial, with a matrix report to Patrick Thiels, Regional Managing Director France & South Africa at Allianz Commercial.

Prior to this role, Jérôme Notton (42) was Global Aerospace Underwriting Product Leader at Allianz Commercial since 2021.

He originally joined Allianz Group in 2020 as a Senior Aviation Underwriter at Allianz Global Corporate & Specialty (AGCS).

Before joining Allianz, Jérôme Notton held various leadership and senior positions at AXA XL in 10 years including Reinsurance, Key Account and Aviation underwriting roles.

He holds a master’s degree in management sciences -with a major in finance- and a master’s degree in financial engineering.

• Rich Soja steps up from Regional Head of Marine in North America
• Soja joined Allianz Commercial in 2017 and has over 35 years of experience in Marine insurance
• Ulrich Kadow who previously led the Global Marine unit has moved to a new leadership role in Allianz Commercial

Allianz Commercial confirms a key appointment to its global Specialty leadership team taking effect immediately.

Rich Soja, currently Head of Inland Marine/Regional Head of Marine North America, is appointed as Global Head of Marine reporting to Gordon Browne, Global Head of Specialty.

Soja will continue to oversee his Regional North America and Inland Marine responsibilities until a successor is confirmed at a later date.

With over 35 years’ experience in Marine insurance, Rich Soja has been with Allianz Commercial in his current leadership role since 2017. Prior to joining Allianz Group, he was in increasingly senior Marine underwriting roles for Chubb, Aspen Insurance, and Tokio Marine.

Soja’s predecessor, Ulrich Kadow, moved to a new role in Allianz Commercial in December 2023 as Global Head of Product Management and Underwriting Transformation. He and his team are focusing on harnessing the potential of technology and digitalization for the benefit of Allianz Commercial, enabling underwriters to assess risks and service clients and brokers as effectively as possible.

Gordon Browne, global head of Specialty at Allianz Commercial, highlights the importance of the appointment:

“I am absolutely delighted to have Rich joining the leadership team for this key position. With his extensive knowledge of both our business and the Marine sector, he is perfectly placed to build on the excellent foundations that Ulrich Kadow established with the team and lead our Marine business in the future.”

Allianz Commercial has an extensive global Marine portfolio, covering Hull & Liability risks, Cargo, and (in North America) Inland Marine, and supporting customers from smaller businesses and private vessel owners up to the largest international blue-water fleets and logistics operators.

• Widening polarization expected in many elections, especially in the US and the EU where there is the potential for large insurance losses
• Terrorism, civil unrest, and environmental activism risks intensifying in volatile geopolitical environment
• Multinational businesses show an increasing interest in political violence insurance coverage to mitigate their risks
• Elections in Africa pose challenges and opportunities for political stability

With an unprecedented ‘super-cycle’ of elections in 2024, almost half the world’s populations will go to the polls before the year is out.

According to a new report from Allianz Commercial, security is a concern in many territories, not only from the threat of localized unrest but because of the wider-reaching consequences of electoral outcomes on foreign policy, trade relations, and supply chains.

The headline election will be in the US in November, when a narrow result could inflame existing tensions.

The European Parliament elections in June could also deepen divisions, if radical-right parties gain votes and seats.

As unrest can now spread more quickly and widely, thanks in part to social media, financial costs from such events for companies and insurers are mounting.

Economic and insured losses from just seven civil unrest incidents in recent years cost approximately US$13bn.

With the threat of terrorism also on the rise, and the prospect of greater disruption from environmental activists occurring, businesses will face even more challenges in the next few years and will need to anticipate as well as mitigate evolving risks with robust business continuity planning.

“So many elections in one year raise concerns about the fueling of polarization, with tensions potentially playing out in heightened civil unrest. Polarization and unrest within societies are fueled by fear. They undermine trust in institutions and challenge people’s sense of a common purpose built on shared values,” says Srdjan Todorovic, head of Political Violence and Hostile Environment Solutions at Allianz Commercial. “We also expect to see increased unrest around environmental issues in future, not only from activists, but from those who are pushing back against government climate mitigation policies.”

All eyes on elections in the US and the EU

The US presidential election in November is likely to be a close call, with the outcome depending on results in a handful of states.

A recent poll shows that more than one third of Americans believe President Biden’s election win in 2020 was not legitimate.

Widespread disaffection among voters could be exploited by misinformation created by artificial intelligence and spread via social media.

Deepfakes, disinformation and repurposed imagery, as well as customized messaging, could galvanize unrest or influence small but potentially decisive parts of electorates.

Many commentators have predicted that European Union elections in June could see a number of states politically shift to the right, with the potential for populist or far-right parties to gain votes and seats, building on a trend seen in 2023.

Any success for these parties across Europe could result in growing opposition to EU environmental, immigration and human rights policies.

“The impacts of a political shift to the right and subsequent policy changes endure long after a political party’s term in office,” Todorovic adds. “They fundamentally change societies and public attitudes and make the next electoral shift to the center or left seem drastic, creating the potential for schisms and potentially violent responses from those who feel underrepresented by a regime change.”

Elections in Africa pose challenges and opportunities for political stability

The African continent has also hit geopolitical risk headlines in recent years and 2023 was no different, with Niger and Gabon experiencing coups.

In Sudan, a civil war has led to the displacement of eight million people, including six million within the country – the largest internal displacement crisis in the world.

The year 2024 sees many African countries scheduled to have elections. The large scale of elections poses both challenges and opportunities for the continent’s political stability.

Most of the elections will be in Southern Africa including Botswana, Mauritius, Mozambique, Namibia, and South Africa.

West Africa will hold the second most in Burkina Faso, Ghana, Guinea Bissau, and Mali. In North Africa, Mauritania, Algeria, Libya, and Tunisia are set to host elections.

Ethiopia, Somalia, and South Sudan, Chad, and Rwanda in Central and Eastern Africa are scheduled to cast votes.

The South African elections in May are a potential flashpoint. Polls indicate votes for the ruling African National Congress (ANC) could dip below 50%, forcing it into a coalition – a first at the national level – after being in power for 30 years.

“South Africa suffers from high unemployment, particularly among the young, and significant wealth inequality,” says Etienne Cheret, regional practice group leader, Crisis Management France and Africa at Allianz Commercial. “Crime, corruption, and blackouts have caused widespread frustration. There is already a high level of disillusionment among the population, so we are watching the situation very closely.”

Environmental activism and terrorism threat expected to rise

Between 2022 and 2023, environmental activism incidents increased by around 120%. An impactful example was the arson attack on an electricity pylon in Germany by a left-wing extremist group.

This suspended production at a local Tesla plant in March 2024, leading to economic losses estimated in the hundreds of millions of euros, according to reports. In addition to high-profile protests, a trend towards using more targeted tactics, such as focusing on individuals or politicians, is evident. There is a chance that more environmental protests could escalate from acts of nuisance into larger criminal acts.

The number of deaths from terrorism increased by 22% in 2023 and is now at its highest level since 2017, although the number of incidents fell.

The major terror attack in Moscow in March has put the risk of politically or religiously motivated terrorism back on the global agenda with full force.

A primary driver is the radicalization of small parts of the population in certain regions, which is also fueled by the Israel-Hamas war leading to an increased risk in the US and Europe, as well as the exploitation of security vacuums in certain regions of Africa.

The epicenter of terrorism has moved from the Middle East and North Africa to Sub-Saharan Africa – the most affected region globally – and is largely concentrated on the Sahel region. Burkina Faso is the country most impacted by terrorism, with deaths increasing by 68% to almost 2,000 people – a quarter of all terrorist deaths globally.

“In Africa, peacekeeping forces have been withdrawing from the Democratic Republic of Congo and Somalia as well as from countries in the unstable Sahel region. This risks creating security vacuums, which could then be exploited by armed groups and militants,” adds Cheret.

Multinational companies show increasing demand for political violence insurance

Political violence activity can impact businesses in many ways. Those in the immediate vicinity of unrest can suffer material damage to property or assets and business interruption losses, while indirect damage can be inflicted on companies in the form of loss of attraction or denial of access to their premises.

“Businesses need to protect their people and property with forward planning, such as ensuring safe and robust business continuity planning is in place in event of an incident, increasing security, and reducing and relocating inventory if likely to be impacted by an event,” explains Todorovic. “Using scenario planning and tracking risks in areas key to their operations can raise businesses’ awareness of where political violence and civil unrest risks may be intensifying. Companies should also review whether their insurance policy covers the impact of risks such as strikes, riots, and civil commotion.”

The report notes that the recent history of losses from protests and civil unrest in countries such as Chile, South Africa, France, and the US means that interest for political violence insurance coverage continues to increase.

The greatest demand is from businesses with multi-country exposures rather than companies with smaller and simpler production and supply chains, although these can also be adversely impacted by such events.

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Allianz Commercial, a leading global corporate insurance carrier and a key business unit of Allianz Group, hosted the annual Allianz Cocktail on Wednesday, November 8, 2023, in Johannesburg.

The exclusive event aimed to express gratitude to the company’s valued business partners for their unwavering support throughout the year.

Since its inception in 2009, this high-end gathering has become a signature event within the insurance industry in South Africa.

This year’s Allianz Cocktail embraced the theme of the Olympic and Paralympic Movements Partnership. Allianz takes immense pride in being the ‘Worldwide Insurance Partner’ of the Olympic & Paralympic Movements.

The partnership, which officially commenced in 2021, builds upon Allianz’s collaboration with the Paralympic Movement since 2006.

“As the Worldwide Insurance Partner, Allianz remains committed to supporting the hopes, challenges, and needs of the athlete community through a range of insurance solutions and services, mentoring programs, career opportunities, and health initiatives. By championing the sports ecosystem and upholding shared core values of excellence, friendship, inclusion, and respect, Allianz is excited to contribute to the ambitions of athletes worldwide,” says Allianz Commercial South Africa CEO, Thusang Mahlangu.

After inspiring Olympic and Paralympic Games in Tokyo 2020 and Beijing 2022, Allianz continues to stand behind the Games in Paris 2024, Milano Cortina 2026, and LA2028. In South Africa, Allianz Commercial proudly partners with Team South Africa and is activating its TOP partnership with the South African Sports Confederation, Olympic and Paralympic Committee (SASCOC), the National Olympic Committee, and National Paralympic Committee for South Africa.

The TOP Programme constitutes the highest-level marketing programme of the Olympic and Paralympic Movements.

At the Allianz Cocktail, esteemed athletes from various disciplines graced the occasion.

Among them were Geronay Whitebooi, multiple judoka medallist; Akani Simbine, South African 100 meters record holder, Lythe Pillay, World Athletics U20 Championships 400m gold medallist, former captain of the South African Sevens Rugby team and Olympics medallist, Kyle Brown, Donald Ramphadi, the first black South African French Open winner and Caitlin Rooskrantz, artistic gymnast pictured with SASCOC CEO, Nozipho Jafta (far left) and Allianz Commercial South Africa CEO, Thusang Mahlangu (center).

Allianz Commercial proudly supports a community of over 150 athletes from around the world, not only in their sporting endeavours but also in preparing them for their careers beyond sports. The dedication and preparation of these athletes serve as an inspiration for Allianz to embrace all that life has to offer.

“We are proud to be part of Movements that celebrate the pursuit of excellence, the possibility of opportunities, and a vision for a better world. Through this partnership, Allianz reinforces its position as an inclusive brand that cares about society, while leading the way in empowering and uniting people across the globe,” adds Thusang.

• Ransomware incidents rising again as criminals use data exfiltration and supply chain attacks to maximize their leverage.
• Allianz Commercial analysis of large cyber losses shows the number of cases in which data is exfiltrated is soaring, as is the number of incidents becoming public.
• Cyber breaches that are not detected and contained early can be 1,000 times more expensive than those that are.
• Companies’ cyber security priorities should include bolstering their detection and response capabilities.

Following two years of high but stable loss activity, 2023 has seen a worrying resurgence in ransomware and extortion claims as the cyber threat landscape continues to evolve, Allianz Commercial warns in a new report.

Hackers are increasingly targeting IT and physical supply chains, launching mass cyber-attacks, and finding new ways to extort money from companies, large and small.

Most ransomware attacks now involve the theft of personal or sensitive commercial data for the purpose of extortion, increasing the cost and complexity of incidents, as well as bringing greater potential for reputational damage.

Allianz Commercial analysis of large cyber losses shows the number of cases in which data is exfiltrated is increasing every year – doubling from 40% in 2019 to almost 80% in 2022, with 2023 significantly higher.

“Cyber claims frequency has picked up again this year as ransomware groups continue to evolve their tactics,” says Scott Sayce, Global Head of the Cyber, Allianz Commercial. “Based on claims activity during the first half of 2023, we expect to see around a 25% increase in the number of claims annually by year-end. The attackers are back, and focused again on Western economies, with more powerful tools, enhanced processes, and attack mechanisms. Given this dynamic, a well-protected company is necessary to stand up to the threat and, increasingly, the most important element of this is developing strong detection and fast response capabilities.”

How is ransomware risk evolving?

According to the Allianz Commercial report, Cyber security trends 2023: The latest threats and risk mitigation best practice – before, during and after a hack, the frequency of cyber claims stabilized in 2022, reflecting improved cyber security and risk management actions among insured companies.

Law enforcement agencies targeting gangs, together with the Ukraine Russia conflict, also helped curtail ransomware activity.

However, ransomware activity alone was up 50% year-on-year during the first half of 2023. So-called Ransomware-as-a-Service (RaaS) kits, where prices start from as little as US$40, remain a key driver in the frequency of attacks.

Ransomware gangs are also carrying out more attacks faster, with the average number of days taken to execute one falling from around 60 days in 2019 to four.

“Double and triple extortion incidents – using a combination of encryption, data exfiltration and Distributed Denial of Service attacks – to obtain money are not new but they are now more prevalent,“ says Michael Daum, Global Head of Cyber Claims, Allianz Commercial. “Several factors are combining to make data exfiltration more attractive for threat actors. The scope and amount of personal information being collected is increasing, while privacy and data breach regulations are tightening globally. At the same time, the trends towards outsourcing and remote access leads to more interfaces for threat actors to exploit.”

Data exfiltration can significantly add to the cost of a loss or cyber claim. Such incidents can take longer to resolve, while legal and IT forensics can be extremely expensive.

If data has been stolen, companies must know exactly what data has been exfiltrated and will likely have to notify customers, who could seek to claim compensation or threaten litigation.

This year has also seen several large mass ransomware attacks as threat actors used exploits in software and weaknesses in IT supply chains to target multiple companies.

For example, the MOVEit mass cyber-attack, which exploited a data transfer software product, impacting millions of individuals and thousands of companies, contributed to the increase in the frequency of claims in 2023 to date, affecting multiple policyholders simultaneously.

“More mass cyber-attacks can be expected in the future,” says Daum. “Companies and their insurers need to better understand the interconnectivity and dependencies that exist between organizations and within digital supply chains.”

Growing number of public cases

In the past the number of cyber incidents that became public knowledge was low. Today, it is a different story, as with data exfiltration, hackers threaten to publish stolen data online. Allianz Commercial analysis of large cyber losses (€1mn+) shows that the proportion of cases becoming public increased from around 60% in 2019 to 85% in 2022 with 2023 set to be even higher.

“Today, if you have data exfiltration it will likely go public, and every company needs to be prepared for this,” says Rishi Baviskar, Global Head of Cyber Risk Consulting, Allianz Commercial.

With potentially costly financial and reputational consequences, companies may feel under more pressure to pay ransoms where data has been stolen.

The number of companies paying a ransom has increased year-on-year – from just 10% in 2019 to 54% in 2022, again based on analysis of large losses only (€1mn+). Companies are two-and-a half times more likely to pay a ransom if data is exfiltrated, on top of the encryption.

However, paying a ransom for exfiltrated data does not necessarily resolve the issue. The company may still face third party litigation for the breach of data, especially in the US. Indeed, there are few cases where a company should believe that there is no other solution other than paying the ransom to be able to re-access its systems or data. Any impacted party should always inform and cooperate with the authorities.

The importance of early detection and fast response

Protecting an organization against intrusion remains a cat and mouse game, in which cyber criminals have the advantage. Allianz analysis of more than 3,000 cyber claims over the past five years shows that external manipulation of systems is the cause of more than 80% of all incidents.

Threat actors are now exploring ways to use artificial intelligence (AI) to automate and accelerate attacks, creating more effective AI-powered malware, phishing, and voice simulation.

Combined with the explosion in connected mobile devices – Allianz Commercial has seen a growing number of incidents caused by poor cyber security in this area – attack avenues only look likely to increase.

Preventing a cyber-attack is therefore becoming harder and the stakes higher. As a result, early detection and response capabilities and tools are becoming ever more important.

Around 90% of incidents are contained early. However, if an attack is not stopped in the early stages the chances of preventing it becoming something much more serious and costly greatly reduce.

“Traditional cyber security has focused on prevention with the goal of keeping attackers out of a network,” says Baviskar. “While investment in prevention reduces the number of successful cyber-attacks there will always be a ‘gap’ remaining that will enable attacks to get through. For example, it is not possible to stop all employees from clicking on increasingly sophisticated phishing emails.”

Companies should direct additional cyber security spend on detection and response, rather than just adding more layers to protection and prevention. Only one third of companies discover a data breach through their own security teams. However, early detection technology is readily available and effective.

“Detection systems are constantly improving and can save lots of pain, decreasing detection and response times. This is something we look for in our cyber risk assessments and underwriting,” adds Baviskar.

Cyber breaches that are not detected and contained early can be as much as 1,000 times more expensive than those that are, the report highlights, with Allianz Commercial analysis showing that early detection and response can stop a €20,000 loss turning into a €20mn one.

“Prevention drives frequency of attacks and response is responsible for how significant the loss will be – whether it is a minor IT incident or a corporate crisis,” says Daum. “We believe companies can meaningfully prepare and there is room for improvement in how they respond to these attacker threats. Ultimately, early detection and response capabilities will be key to mitigating the impact of cyber-attacks and ensuring a sustainable cyber insurance market going forward.”