Annual report 2005

Munich Re FoundationFrom Knowledge to Action

2005 report

Introduction

Strategy

Research

Networking

Sensitisation

Action

From Knowledgeto Action

Essay

Launch

Investments

Contents

Review of 2005

First anniversary of the Munich Re Foundation

Putting people firstThe Munich Re Foundation’s strategy

Disasters hit the nerveFoundation Chair on Social Vulnerability

Young people create knowledgeSchools competition on energy efficiency

Poor and uninsuredInternational Microinsurance Conference

Risk awareness is the keySymposium on worldwide disaster prevention

Facets of a life elixirDialogue forums on water

Red flag signals dangerMozambique flood warning system

Water collectorsFog nets in Eritrea

Water filters for earthquake regionEmergency aid for Pakistan

InterviewDr. Hans-Jürgen Schinzler

Surviving with riskPatrick Illinger on the evolution of risk handling

The official ceremonyMunich Re Foundation begins its work

Sustainable and profitableThe Munich Re Foundation’s investment strategy

Board of Trustees

Team2006 overviewImprint

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Thomas Loster, Chairman of theMunich Re Foundation, reviewsthe first year of the foundation’s existence and describes its operating environment, objectivesand opportunities in the face of global challenges.

The foundation began its work justover a year ago on 7 April 2005, and we wanted to ensure that it had a clearand credible profile. Of course, thefoundation’s work would only be successful if closely bound up with the knowledge and competence of itsbenefactor. Munich Re has been oneof the world’s leading risk carriers formore than 125 years. It helps people,companies and politicians to deal withrisk situations and makes economicand technical development possibleby providing insurance solutions.Its success is driven by reliability andinnovation.

The foundation’s work puts peoplefirst. Our team looks at a wide varietyof risks and how they are networked.We seek to tap the knowledge accumulated by our benefactor andmake it accessible to others, as befitsour motto “From Knowledge to Action”.We want to prepare people to dealwith the risks and, where possible,improve their living conditions.

The issues set out in our Articles ofAssociation – water, climate change,disaster prevention and populationgrowth – are directly derived from ourbenefactor’s knowledge and our ownexpertise. These are areas where wecan be “movers and shakers”.

The foundation can draw on the expertise of its benefactor and on theresources of a broad international network. Knowledge can be con-sistently translated into social actionby combining these strengths.

To ensure our work is effective, theremust be a continuous, seamless flowof information between foundation,external experts and benefactor.Thanks to the encouragement andsupport we have received fromMunich Re staff on all hierarchicallevels, there is every prospect that we will live up to our claim to use our benefactor’s expertise for the common good, above and beyond any economic interests.

We are already witnessing first signs of further potential conflict and increased risk, for instance in disputes over water or climatechange. In 2005, nearly 900 new foundations were established in Germany alone, more than in any previous year. Their work is set tobecome increasingly important.However, a mere handful of them areconcerned with global challenges. The Munich Re Foundation may notbe able to move mountains but it canformulate effective and sustainablesolutions and thus play some smallpart in defusing the overall situation.

First anniversary of the Munich ReFoundation

Introduction

To ensure our work is effective, there must be a continuous, seamless flow of information between foundation, external experts and benefactor.

Thomas LosterChairman of the Munich Re Foundation

Munich Re Foundation/2005 report

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March April May June July August

1 JulyFirst project:Munich Re Foundation establishes theChair on Social Vulnerability at the UnitedNations Universityin Bonn.

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2 AugustWith the backingof the Munich ReFoundation, WasserStiftungEbenhauseninstalls fog netsproviding drinkingwater on Eritrea’sAsmara plateau.

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5 AugustWe support the“Mozambique floodwarning” project,designed to set up a simple buteffective earlywarning system onthe River Búzi.

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10 May–26 JulyWe organise aseries of lecturesand discussions to coincide withthe “Water in Myth and Nature”exhibition.

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7 March“Young people with boundlessenergy – Protectthe climate!” –Munich Re Foundation decidesto sponsor thenational schoolscompetition.

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7 AprilThe official ceremony celebrating Munich Re’s 125thanniversary signalsthe start of the foundation’s work.

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Review of2005

September October November December

18–20 OctoberIn cooperationwith the CGAP(ConsultativeGroup to Assistthe Poor) WorkingGroup on Micro-insurance, thefoundation invitesexperts to a conference onmicroinsurance.

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31 OctoberIn conjunction with the NationalResearch Centerfor Environment andHealth (GSF) westage the first in a series of eveningson “The risks ofliving in Munich –Perceived and actual”.

14 NovemberThe Munich ReFoundation donates wintertents for theearthquakevictims in Pakistanand launches a programme to provide emergencydrinking-waterkits.

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16–17 NovemberThe Munich ReFoundation organises aninternational symposium onworldwide disaster prevention, atwhich the Hohen-kammer Charter is adopted.

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Having a prominent benefactor, thefoundation is able to gather the relevantparties from political, economic andpublic life around one table to seeksolutions to the challenges of our time.The Munich Re Foundation acts as acatalyst in its dealings with its partners,providing new perspectives and thuscreating the conditions that enable it to establish itself in society by virtueof its competence and the quality of its work.

It pursues a strategy founded on fourpillars in order to provide effective aidfor the people at risk:

By researching the risks, the foundation promotes understandingof their causes and effects.

The foundation regards networkingbetween international experts anddecision-makers as an opportunity togain an overall picture of the risks andpromote risk-prevention schemes.

The foundation sensitises the public in order to propagate knowledge ofthe dangers and persuade people toaccept the implementation of safetymeasures.

Finally, the foundation provides direct help for people by actingspecifically in their interests.

In the125 years since its establishment,Munich Re has built up a vast fund of expertise in the field of global risks.The Munich Re Foundation’s role is to place this knowledge, previouslyused internally for business purposes,at the service of mankind in general. It is knowledge which holds tremen-dous potential for preventing risk and improving living conditions or, asstated in our motto, for translating“Knowledge to Action”.

The foundation’s work is as varied asthe risks themselves and focuses onpeople in their different circumstances.Its principal aim is to help people indeveloping countries to better assessand manage the risks they face. Only if knowledge of the risks is firmlyentrenched in the much-quoted “lastmile”– which is the “first mile”as far asthe people at risk are concerned – is itpossible to provide effective support.

What sets the Munich Re Foundationapart from other institutions of this kindis its ability to bridge the narrow dividebetween the different disciplines.Interdisciplinary thinking implies skillnetworking and adopting a broadapproach to the issues at stake. Forinstance, rather than considering water,poverty and megacities in isolation,the foundation looks for ways to supplywater to poor areas in megacities.Thus,knowledge networking opens up newopportunities and realises potential.

Putting people firstThe Munich Re Foundation’s strategy

Strategy

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Water:Resource and risk factor

Environmental and

climate change

Disaster prevention

Urbanisation and

megacities

Poverty

Population development

The foundationexamines and deals with issuesin their overallcontext.This reveals hidden links.

People at risk

Environmental and climate change

Climate change is a fact. The mean atmospheric temperaturehas increased by some 0.8°C in the past 100 years. The poles are melting, the glaciers arereceding, sea levels are rising, we are experiencing more and moreprecipitation and extreme wind-storms. To ensure forthcominggenerations have a future worthliving, we have to make the rightchoices now.

We are committed to combattingclimate change.

Disaster prevention

Natural catastrophes areunavoidable. However, if we are fully aware of the risks, we candeal with them more effectively,avoid casualties and minimise the damage.

Backed by Munich Re’s expertise in the field of catastrophes, thefoundation supports people atrisk. Its objective is to make thatknowledge available to a broadpublic and find workable solutionsfor those affected.

Water: Resource and risk factor

Water is indispensable to mankind.A mere one per cent of the world’swater resources is available asdrinking water. Around 1.1 billionpeople have no access to cleandrinking water; 2.6 billion have tomanage without basic sanitationfacilities.

At the same time, the number offloods has increased dramaticallyin recent years. This situation will be further exacerbated byclimate change.

The foundation’s objective is topromote awareness of the problemwhilst directly helping people whoface daily water shortages.

Population development

The present world population ofsome 6.5 billion is expected toincrease by just under three billion in the next 45 years. Mostof this increase will affect the 49poorest countries. By 2050, thepopulations of those countrieswill have more than doubled, from668 million to 1.7 billion. Meanwhilethe threat of an ageing populationlooms over the industrialisedcountries.

Population development is animportant aspect of many of thefoundation’s projects.

Urbanisation and megacities

Cities are centres of economicdevelopment. For that very reasonthey act as a magnet to the economically weak members of the population. The megacities ofthe future will mainly be found in the developing world and willface a great many problems: thegrowth of slum areas and shanty towns, full of noise and dirt, without clean water and proper sanitation. Whilst people on the city outskirts will frequentlybe threatened by floods or landslides.

We support projects that provideeffective long-term help for the “forgotten populations” ofthe conurbations.

Poverty

Poverty is not only measured in terms of income. The situation is aggravated by illiteracy, poorhealthcare, high infant mortality,frequent cases of discriminationagainst women, lack of access to clean water and sanitation and increasing pollution. Naturalhazards threaten the slum areas and shanty towns of themegacities. In the United Nations Millennium Declaration, 180 heads of state pledged tohalve the number of people livingin poverty by 2015.

The Munich Re Foundation has setitself the aim of supporting this Millennium Development Goalthrough its projects.

Issues

The foundation addresses themajor challenges of our time: environmental and climate change,water as a resource and riskfactor, urbanisation and mega-cities, population growth and disaster prevention. Faced withsuch complex and not seldom politically charged issues, we are careful not to over-extendour resources, and advocate solutions that are manageable and consequently all the moreeffective.


Research

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Environmental changes, populationgrowth, poverty, ignorance: manyfactors are inextricably linked when a flood or cyclone develops into a ca-tastrophe. The Munich Re Foundationsupports research into the causes and consequences of catastrophes as well as into systems designed tomitigate the risks.

The foundation’s UN University Chair on Social Vulnerability created in 2005 laid the cornerstone for a scientific analysis spanning a numberof years into the hazards facing indi-viduals and society in the developingcountries. Furthermore, the foundationgave its backing to the budding scientific experts who came up withcreative ideas on climate protection in a schools competition.

The Director of the UN University in Bonn, Prof. Janos Bogardi, in conversation with Board of Trustees member Prof. Gerhard Berz;alongside them Prof. Hans van Ginkel, UN Under-Secretary-Generaland Rector of the UN University in Tokyo.

The official signing of the foundation’s first project, the Chair at the Institute for Environment and Human Securityat the UN University in Bonn.

Environment-related extreme eventsare increasing throughout the world. We can only take the right strategicaction if we research their causes and effects.Prof. Janos BogardiDirector of the Institute for Environment and Human Security of the University of the United Nations in Bonn


Disasters hit the nerveFoundation Chair on Social Vulnerability

Research

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Prof. Úrsula Oswald-Spring,Universidad Nacional Autónoma de México (UNAM) – Psychologist and politician – 2005/2006

Prof. Hans-Georg Bohle,University of Bonn, Germany – Geographer and expert on poverty in India – 2006/2007

Prof. Anthony Oliver-Smith,University of Florida, USA – Anthropologist on Central Americaspecialising in migration and displaced persons – 2007/2008

Prof. Thomas E. Downing,Stockholm Environment Institute, United Kingdom – Climate and environmental scientist – 2008/2009.

The Institute for Environment andHuman Security of the UN University(UNU-EHS), where the foundation’sChair is located, was inaugurated in Bonn in 2004. Its Director is hydrologist Prof. Janos J. Bogardi,who was previously Head of Sustainable Water Resources Development and Management at UNESCO.

The UN University comprises a global network of research and educational institutes together withassociated institutions and scientistswhose activities are coordinated by the UNU Centre in Tokyo. Its task is to find solutions for the world’spressing problems.

Starting in 2006, the UN Universityand the Munich Re Foundation willorganise an annual summer academy.At that forum, outstanding PhD candidates will have an opportunity to discuss their field of social vulnerability research and the resultswith high-ranking scientists and international experts.

The first Academy will be held from 23–29 July 2006 at Schloss Hohen-kammer, the topic being “Global water hotspots: Water-related socialvulnerabilities and resilience-building”.The scientists will consider how toclose gaps in our academic, politicaland practical knowledge and discussways of developing the relatively newresearch field, social vulnerability.

Natural catastrophes are made up of two distinct factors: a major naturalevent such as a storm or flood and a population that is not adequately prepared to deal with it. The new Chair on Social Vulnerability of theInstitute for Environment and HumanSecurity at the University of the UnitedNations (UNU) in Bonn researches the complex relationships that causehuman societies to be vulnerable. In 2005, the Munich Re Foundation’sfirst project was to set up this Chair.

How do people from different culturesassess natural catastrophe risks?Given their economic situations, whatpreventive measures do they and canthey take? Can a uniform, global risk-prevention strategy bring long-termsuccess? The cultural and economicdimensions of risk perception that thenew UNU Chair is researching are ofmajor significance in the developmentof appropriate preventive and safetysystems. The object is to educateinternational students in catastrophemanagement and prevention. Theywill put this knowledge to practicaluse in their home countries.

The Chair will be occupied on a rotatingbasis by outstanding internationalscientists who will build up a researchnetwork. Thus, it will be possible topursue a long-term research objective.Each research fellow will occupy theChair for a period of one academic year.The designated Munich Re FoundationChair holders are:

More than threemillion people wereleft homeless bythe Pakistan earthquake thatstruck in October2005.

Hurricane Katrinaescalated into a tragedy in New Orleans. The evacuation process was notsufficiently tailored to theneeds of the population.

Interview

Women are harder hit by disasters

Prof. Úrsula Oswald-Spring of the University of Mexico (UNAM) is researching how gender-specific social characteristics affect the situation of women when disastersstrike. An interview with the scientistwho holds the foundation’s Chair onSocial Vulnerability at the Institute forEnvironment and Human Security in2005/2006.

What brings a professor from Mexicoto a Chair at the UN University in Bonn?

Oswald-Spring: Not least the 20 years’theory and practical experience in disaster research and management I acquired as Environment Minister ofthe Federal State of Morelos in Mexico.In addition, the new HUGE safety concept that I set up for UNESCO andis concerned with human, gender-specific and environmental security,fitted in well with the Institute’sresearch focus.

Are there gender-specific differencesin the consequences of disasters?

Oswald-Spring: Women are at greater risk than men for cultural reasons. Often their social tendenciesare characterised by their caring forothers: their children, husbands, families, the old and needy. In today’ssocial structure, women are often at a disadvantage in terms of income,job, workload and social status.Wherehighly traditional work concepts prevail, women tend to be largely confined to the home and are not aswell educated.

What effect does this have when disaster strikes?

Oswald-Spring: Women support theweak and needy, and frequently payfor it with their lives. At the same time, in many cultures their lives are regarded as less valuable and they are consequently less well protected.In some societies, women are not allowed to venture outside the homeunless in male company. As a result,warnings of impending disaster takelonger to reach them and they areoften harder hit by the consequences.

What needs to be done?

Oswald-Spring: First, we have to identify the gender-specific and age-specific differences imposed by society – there are practically no scientific data available at present. Then, we have to see how vulnerability is distributed withinsociety in the individual regions. That helps us – both governments and administrative authorities – to take greater account of women’sincreased vulnerability, particularlywhen devising evacuation plans. If warnings reach the women quickly, they generally take care of the whole family.

What will you retain after a year in the foundation’s Chair?

Oswald-Spring: It has enabled me toreinforce my ties with other expertsand I hope this will result in long-termcooperation so that we can develop anintegrated view of social vulnerability.We will be able to create a fresh awareness of how social vulnerabilitycan be reduced in the different cultures,based on theoretical considerationsand empirical analyses.

Chair incumbentÚrsula Oswald-Spring researchesthe effects ofdisasters in the sociological context.


Young people createknowledgeSchools competitionon energy efficiency

Research

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The highlight of the competition is the presentation of the prizes in Berlinon 26 April 2006. At the ceremony, the teams and their project partnerspresent the most original and interesting ideas and receive their prizes from the Federal Minister forthe Environment, Sigmar Gabriel. In addition to cash prizes amountingto €15,000, there are a number of special prizes.

The competition is organised by the Berlin Zeitbild Verlag publishinghouse, which has many years’ experience in education field. TheMunich Re Foundation decided topartner the project because its ownrole of finding sustainable solutions,applying knowledge and taking appropriate action coincides with the competition’s objectives.

“Young people with boundless energy – Protect the climate!” was the theme of a national campaignorganised by the German FederalEnvironment Ministry (BMU).Pupils were asked to draw on theirknowledge of climate change, energyand energy efficiency to devise techniques or models or make othercontributions on the subject. TheMunich Re Foundation has been supporting this venture, designed to encourage young people to acquire knowledge which they thenput into practice, since 2005.

Lessons on wind energy, a model boat powered by fuel cells or a solarenergy slug barrier: if these and other prizewinning 2004 projects areanything to go by, the 2005 awardswill be a fascinating experience. Individual schoolchildren, completeclasses and even whole schools have spent a year applying theirenthusiasm and imagination to thesubject of renewable energies andhave come up with some novel waysof conserving fossil fuel.

The idea behind the competition is to increase awareness of climate-change issues. 26,000 German schoolsreceived support materials on theenvironment, mobility and climateprotection in the form of worksheets,handouts and a quiz on the subject of energy efficiency. Participants werefree to contact local associations, businesses and civic groups to obtaininformation and financial backing for their projects.

26,000 Germanschools wereencouraged bybrochures andposters to takepart in the energy efficiencycompetition.

Climate facts

Greenhouse earth: 2005 proved tobe the warmest year since recordsbegan over 100 years ago. In thattime, the temperature has risenby 0.8°C overall and by 0.6°C in the last 30 years. This has largelybeen due to greenhouse gasessuch as carbon dioxide (CO2).

Drew Shindell, Goddard Institute forSpace Studies, NASA

The earth’s hotting up

Heat: The heatwave that struckcentral and southern Europe in2003 was one of the biggest catastrophes since the MiddleAges and caused around 35,000deaths. The likelihood that similaror even stronger heatwaves willoccur has more than doubled as a result of human activity.

Peter A. Stott et al., 2004,Nature 432, p. 610 ff.

Flood: Apart from windstorms, themost frequent causes of naturaldisaster losses in many countries,including Germany, are floods. One third of all economic lossesare due to floods. In addition toincreased settlement of exposedareas, this is arguably due to climate change.

Dr. Wolfgang Kron, Munich Re, Climate Symposium, Würzburg, 3–4 May 2004

Dying species: Over a million species, a quarter of all land animals and plants, could becomeextinct by 2050 as a result ofglobal warming. This concern has been expressed by a team of international researchers in a paper published in the highlyrespected journal “Nature”.

Chris D. Thomas et al., 2004, Nature 427, p. 145 ff.

Allergies: The steadily increasinglevels of CO2 in the air can stimulate plant growth and pollenproduction, according to inves-tigations carried out on the species ambrosia artemisiifolia. At the same time, higher tem-peratures mean a longer growing season. Allergy sufferers are thussubject to increasingly severeexposure factors.

Center for Health and the Global Environment, Harvard Medical School

Diseases of southerly climes:According to a study carried outby the University of Bonn, diseasevectors and pathogenic agentswhich thrive in warm climates are gradually being introduced to Europe from Asia and Africa. Thus, as a result of environmentaland climatic changes, diseases not previously encountered inEuropean latitudes could causeproblems.

German Federal Environmental Agency(publisher), 2003, Climate Change, Study No. 05/03

If climatologists’predictions proveaccurate, the atmospheric temperature will rise by up to 6°C by the end of thecentury. This wouldhave dramatic consequences.

The diagram shows how the atmosphere’s meantemperature hasevolved in the last million years (in logarithmicallyspaced time intervals).

Source:Munich Re 2003

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Prognosis

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Our expertise is increasing by leaps and bounds. But only networking allowsus to use that expertise to the full.Dipankar MahalanobisMicrocare, Uganda

Networking By networking our knowledge of global risks, we create new opportunities and exploit fresh potential. The Munich Re Foundationprovides the necessary impetus and organises symposiums and meetings of international experts to find solutions to global problems.

In 2005, two conferences were held at which experts discussed disasterrisk management and microinsurancefor the lowest income-bracket groups.Each produced quite specific results:the Hohenkammer Charter listed the ten major challenges of risk prevention and the MicroinsuranceConference presented viable solutionsto meet the needs of people in developing countries.

Experts at the International Symposium entitled “Worldwide disaster prevention – Awareness is the key”.

From the left: Dr. Irmgard Schwaetzer, German Committee forDisaster Reduction (DKKV), Christoph Bals, Germanwatch, Dr. Eugene Gurenko, World Bank, David Peppiatt, ProVention Consortium and Dr. Juan Carlos Villagrán, UN University.

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Dipankar Mahalanobis, Managing Director of Microcare, shares his experiences in loss developments and risk evaluation in Uganda und explains how the very poorest can be insured there.

Poor and uninsuredInternational Microinsurance Conference

Networking

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“People still tend to doubt that insurance cover for the poor ispossible”, said Dirk Reinhard, Vice-Chairman of the Munich Re Foundation. Low premiums coupledwith often relatively high risks, the level of administration costs andgenerally poor access to the peopleconcerned make microinsurance an unattractive proposition in the eyes of many providers. “However,the conference has shown that thereare viable solutions. Nevertheless, we still have much to learn and there has to be a greater transfer ofknowledge.” The various parties involved – local groups, microfinanceand microinsurance organisations,development workers, authorities andtraditional (re)insurers – need to pooltheir expertise and specialist skills.

This was confirmed by Craig Churchillof the International Labour Organiza-tion (ILO) in Geneva, who chaired the CGAP Working Group on Micro-insurance: “The number of micro-insurance schemes and insureds hasdoubled every year for the past tenyears – albeit starting from a low base”.Many schemes were quite small to begin with, but some held greatpotential.“This is shown by three programmes, one in Bangladesh, onein Uganda and one in India, each offering insurance to over a millionpeople.”

Together with CGAP we will be staging another microinsurance conference, this time in South Africa,where we are already seeing firstencouraging signs.

Microinsurance has an important part to play in combatting globalpoverty. That was the conclusion ofthe international conference entitled“Making insurance work for the poor. Current practices and lessonslearnt”, held from 18–20 October 2005 at Hohenkammer. The event was organised by the Munich ReFoundation and the Working Group on Microinsurance of the ConsultativeGroup to Assist the Poor (CGAP).

Of the four billion people throughoutthe world who have to manage on less than two dollars a day, fewer than ten million are currently able toafford insurance cover. Low-incomehouseholds therefore have to fundmedical expenses and doctors’ feeslargely out of their own pockets. Insome cases, such outgoings canaccount for over 30% of their income.When natural events strike, peopleoften lose their entire livelihoods.Microinsurance is a crucial weapon in the fight against poverty, although not easy to set up in practice.

The war on poverty is also a majorfactor in disaster prevention – this viewwas confirmed at the internationalsymposium entitled “Worldwide disaster prevention – Awareness is thekey”held by the Munich Re Foundationin November (see p.14). Given thisenormous, hitherto unsatisfied needfor security, the UN, in declaring 2005to be the International Year of Micro-finance, stressed the importance ofsupporting those in need by means ofappropriate financial instruments.

The Munich Re Foundation and CGAPWorking Group on Microinsuranceextended invitations to some 100experts from 25 countries. They discussed how microinsurance couldbe organised so that those on very low incomes could obtain basic lifeand health cover. The main item on the agenda was a debate on theresults of 20 case studies that dealtwith existing microinsurance schemeson three continents.

Further information

www.microinsuranceconference2005.org

Interview

Simple ideas work best

Financial services provider Microcarespecialises in health insurance systemsfor the lowest income-bracket groupsand has already launched a number of successful projects in Uganda. Weasked Dipankar “Dubby” Mahalanobis,Managing Director of Microcare aboutmicroinsurance needs and opportun-ities in developing regions.

What is microinsurance?

Mahalanobis: In a nutshell, it is insurance for the poor. It is very important that people in developingand emerging countries who have noaccess to traditional financial servicesshould be given a fair opportunity andaffordable solutions. To date, access to microcredits and microinsurancehas often been only very limitedwhere the predominantly poor ruralpopulations are concerned. At thesame time we are mainly dealing withregions where traditional insurers arenot yet actively involved.

How can microinsurance mitigate poverty?

Mahalanobis: The World Bank defines poverty as living on less thanone dollar a day. This means that more than 1.2 billion of the world’spopulation are living in poverty. We all face events in our lives that causefinancial hardships, irrespective offinancial status. They include illness,disability, old age or the death of arelative. Microinsurance helps offsetthese unforeseen events. It getspeople back on their feet and givesthem a basis for self-sustainability and further development.

What are the most pressing problems?

Mahalanobis: At the moment only afew products are economically viable.We need greater commitment on thepart of the donor countries or morepublic-private partnerships. Anotherdifficulty is the lack of understandingof the concept of insurance. Peopleoften only look at the premium anddecide it is too expensive. Advertisingby word of mouth can help, so that if certain individuals in a communityhave already been paid under a lifeinsurance or education endowmentpolicy, others soon come round to the idea. Apart from that, the simplerthe idea, the more convincing.

What have you gained from theHohenkammer conference?

Mahalanobis: It was a blend of ideas,practical examples and theory. It enabled me to establish contact withmany experts from a variety of different fields and countries. We realised that we are a large communityand are often faced with the same problems. This network will help me in future to tackle thorny issues in my daily work, exploit synergies andcome up with new ideas.

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1, 3Some 100 expertsfrom 25 differentcountries analysedmore than 20 case studies in presentations andworkshops.

2Dipankar Mahalanobis,Microcare, Uganda.

4Craig Churchill,International LabourOrganization (ILO),Switzerland.

5Vijay S. Athreye,TATA-AIG Life Insurance CompanyLtd, India.

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With this very much in mind, theMunich Re Foundation invited 100 participants from 30 countries to aninternational symposium. Leadingrepresentatives of governmental and non-governmental organisationssuch as the World Bank, the UnitedNations, the International Red Crossand the German Association for Technical Cooperation (GTZ) met with finance and insurance experts for a discussion entitled “Worldwidedisaster prevention – Awareness is the key”.

Prominent figures such as Dr. IrmgardSchwaetzer of the German Committeefor Disaster Reduction (DKKV), Dr. Bernd Eisenblätter of the GTZ, Dr. Salvano Briceño of the United Nations International Strategy for Disaster Reduction (UN/ISDR) and Dr. Johann Schaar of the InternationalFederation of Red Cross and Red Crescent Societies (IFRC) underlinedthe fact that the key risk preventiontasks would only be solved if politicians, economists, scientists and the people concerned worked in partnership.

The conference culminated in the drafting of the Hohenkammer Charter,in which the various experts definedthe ten most important challenges forthe future (see inset).“Catastrophesare unavoidable and this is somethingwe must be prepared for”, was howThomas Loster, Chairman of theMunich Re Foundation, summed up the key points.“We can reduce suffering considerably, but only if wetackle the problems together.”

The dramatic effects of earthquakes,cyclones and floods can only be significantly reduced in the long termif those living in the exposed areas are aware of the risks and know whatto do to protect themselves. Expertsattending the international symposiumorganised by the Munich Re Foundationapproved the ten key points of theHohenkammer Charter for optimisingglobal disaster prevention.

The incidence of deaths and propertydamage was higher in 2004 and 2005than ever before. This was largely dueto disasters such as the devastatingtsunami that followed the IndianOcean seaquake in December 2004and Hurricane Katrina, which causedwidespread devastation in the southernUS states of Louisiana, Mississippiand Alabama and culminated in theNew Orleans flood. These acts ofnature brought home all too clearlythe importance of risk awareness andrisk prevention.

Only with the aid of internationalcooperation will we succeed inimplanting the knowledge of the risks in people’s minds.

Risk awareness is the keySymposium on worldwide disasterprevention

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Networking


Hohenkammer Charter

The Hohenkammer Charter laid animportant foundation stone forbetter combining and focusingglobal efforts.

The ten most important challengesfor optimised risk prevention:

1. PovertyPeople living in poverty are especially vulnerable; povertyrelief is therefore a key element.

2. PeopleDisaster prevention efforts mustreach or start with the people inthe areas at risk.

3. Decision-makersThe swift implementation of viable preventative measures presupposes the committed involvement of decision-makersfrom communal to national government level.

4. DialogueThe exchange of views betweenthose concerned must be activelypursued in order to achieve acommon understanding of the problems and solutions.

5. PartnershipsPoliticians, trade and industry,scientists and those affectedhave to cooperate better andmore efficiently. Alliances –public-private partnerships –have to be infused with life.

6. Development policyRisk prevention has to be singled out as one of the central components of developmentcooperation and national programmes, and implementedaccordingly.

7. PropagationPromising risk prevention initiatives that currently exist at communal level must be transmitted and propagatedworldwide.

8. IncentivesPolitical, legal and economicincentives are called for, to support investment in disasterprevention, and to accelerate the processes involved.

9. InsuranceRisk transfer, such as insuranceand solidarity networks, helpsreduce the vulnerability ofgovernments and people in risksituations.

10. Awareness developmentDeveloping awareness is the key tothe implementation of adequatemeasures before disaster strikes.

We can reduce suffering considerably, but only if we tackle the problems together.


Intensive discussions between politicians, scientists, economists andrepresentativesof developmentorganisations.

1Dr. Maryam Golnaraghi, WorldMeteorologicalOrganization(WMO), Switzerland.

2Victor Orindi,ACTS & World Agroforestry Centre, Kenya.

3Dr. Bernd Eisenblätter, German Association for Technical Cooperation (GTZ), Germany.

4Dr. Norman Kin-Wai Cheung,Kings College, United Kingdom.

5On the right, Leila Moonda of the South African Insurance Association(SAIA), SouthAfrica and next to her ShaoyuWang, Swiss Federal ResearchInstitute WSLDavos (SLF).

Sensitisation In order to take the right action, youhave know what the challenges are.The Munich Re Foundation organisespresentations and discussions to sensitise the public to global risks.

In 2005, water was singled out as aspecial concern. Five dialogue forumswere held in which the audience had an opportunity to find out aboutthe problems of water as a resource in the megacities of the emerging and developing world and about legal aspects of water distribution.Presentations on drought, flood and natural flood protection programmesdemonstrated that water could also be a risk factor. Another dialogueforum looked at its cultural significancein myth and religion.

Dr. Cecilia Tortajada, Vice-President of the Third World Centre for Water Management (left), and Prof. Janos Bogardi,Director of the UN University’s Institute for Environment and Human Security, addressed the first dialogue forum on the water problems of megacities.

16 17

For me, responsibility begins with sensitisation to the risks to which others are exposed. Dr. Stefan KröpelinProject leader of the University of Cologne’s special research programme on adaptation and cultural innovation in the arid regions of Africa

Living with virtually no water. Dr. Stefan Kröpelin, a projectleader at the University of Cologne, maintains good contactsin northern Chad – a key factor for successful research indeserts and arid regions.

Water in megacities10 May 2005

The relentless march of urbanisationmeans more and more cities with over ten million inhabitants. The provision of drinking water and access to sanitation pose serious problems, particularly in the developing countries. Prof. JanosBogardi, Director of the Institute forEnvironment and Human Security atthe UN University in Bonn, describedthe enormous challenges facing the growing conurbations in the dialogue forum on “Water in megacities”. In order to halve thenumber of people with no access to a toilet and bathroom by 2015, sanitation facilities would have to beinstalled for around a million people –the equivalent of a city the size ofCologne – every three days. This is the ambitious target set by the United Nations. The situation remains dramatic, not least due to the dearth of drinking water supplies. “Everyyear the number of children who diedue to poor water quality is five timeshigher than the number killed in thetsunami catastrophe of December2004”, Bogardi warned.

Dr. Cecilia Tortajada, Vice-President of the Third World Centre for WaterManagement in Mexico City, used the Mexican capital to illustrate theproblems. Private households aloneneeded 40 times as much water asMunich.“There is enough water available but it has to be transportedover distances of up to 150 km, and the height difference involved is morethan 1,000 m, all in all a highly energy-intensive process”, Dr. Tortajada confirmed. In addition to this, some 30–40% – enough to supply the needs of four million people – is lost in the distribution system. These are not the only problems. Fallinggroundwater levels are causing someareas of the city to subside by up to 40 cm a year, and the consequencesfor the over-burdened sewerage system are adding to the wastewaterdisposal problem.

The idea behind the Hypo Foundationfor Culture exhibition “Water in mythand nature” held at Munich’s Kunst-halle in summer 2005 was to combineinformation with aesthetic experience.The Munich Re Foundation supportedthe exhibition by staging a series ofpresentationsanddiscussionsrevolvingaround the theme of water.

There is no shortage of this life-givingelixir in Germany. Supplies of good-quality drinking water are so plentifulthat you can even use it to wash thecar or flush the toilet. People tend toforget this, although it should no morebe taken for granted than the extensiveflood protection provided by the dykes along our rivers. The Munich ReFoundation’s “Dialogue forums onwater”series was designed to promotepublic awareness of regional and global water issues.

The exhibition, which not only featured around 70 first-class paint-ings dating from the 16th century tothe present but also covered politicaland scientific aspects of the issue, fitted in perfectly with the theme of the presentations. It was organisedjointly by the Technical University ofMunich, the Bavarian State Office for Water Management, the DeutscheMuseum and Munich Re.

Facets of a life elixirDialogue forums on water

Sensitisation

18 19

Some 30–40% of Mexico City’s water is lost in the distribution process: enough to supply four million people.

Dr. Cecilia TortajadaVice-President of the Third World Centrefor Water Management in Mexico City

Despite these major issues, the speakers agreed that megacities, with advantages such as better infrastructure, nevertheless offeredenormous opportunities. In order to exploit this potential, a long-termurban development strategy had tosafeguard water supplies. Every possible avenue should be explored to achieve this, and in particular partnerships between municipal authorities and private enterprise.

The Isar plan: Near-natural flood protection21 June 2005

It is possible to set up flood controlsand still preserve the attractivenessand biodiversity of an alpine river. This was illustrated by Dr. Klaus Arzet,Head of Munich’s Wasserwirtschafts-amt (Water Management Bureau) in the dialogue forum “The changingface of a river – Renaturalisation of the Isar”. He took his audience on a guided tour of the banks of the city’sriver, the Isar, spanning past, presentand future.

At the beginning of the 19th century,the Isar, which until then had regularlyflooded the Au, Tal and Lehel quartersof the city, was tamed, partly by beingchannelled through straight canalsbuilt of stone and concrete. In the early1990s, the state of Bavaria and the cityof Munich decided to restructure theriver bed. The aim of the resulting Isarplan was to optimise flood control andimprove urban recreational quality by providing “more space and a returnto the river’s natural environment”, Dr. Arzet explained.

Now that work has been completed attwo of the three sites, the appearanceof the river has changed. Gravelbanks, meanders and islets concealsophisticated protective structures,such as dyke reinforcements, tree conservation systems and fish ladders.Flora and fauna thrive. According toDr. Arzet, initial surveys show that, injust a short period of time, biodiversityhas greatly increased. Flood controlalready complies with the State ofBavaria guidelines for 2020.

By 2008, when the Isar plan has beencompleted, the river’s attraction as a recreational destination will havebeen greatly enhanced. The 260-kilometre-long alpine river has long been a popular venue for excursions. The cost, some €30m in all, is lowcompared with other projects in Bavaria and Munich. The Isar plan will bring benefits all round. Thereturn of the river to a near-naturalstate will improve conditions forpeople, the ecology, the city, the State of Bavaria and the Isar itself.

Water belongs to everyone!28 June 2005

Almost a fifth of the world’spopulation has no clean drinkingwater. The third dialogue forum, a podium discussion entitled “Conflict over water – Human right to water” shifted the emphasis to the way resources are shared.

Prof. Peter A. Wilderer of the Instituteof Advanced Studies on Sustainability,European Academy of Sciences andArts, pointed out that worldwide foodproduction already accounts for 70%of our water and the percentage isincreasing. Prof. Wilderer, holder of the 2003 Stockholm Water Prize,appealed to the politicians to continuethe dialogue on the right to water.

Dr. Andreas Kuck of the German Association for Technical Cooperation(GTZ) also spoke about the politicalsignificance of water. 40% of theworld’s population lives on cross-border rivers. Dr. Kuck pleaded for amore efficient use of water to defusethe conflicts on how it is shared. He chose the example of Amman, the capital of Jordan, where treatedwastewater, rather than drinkingwater, is used for agricultural purposes.

In the third presentation, Dr. ThomasKluge, of the University of Frankfurt’sInstitute for Socio-Ecological Research(ISOE), also addressed the efficiencyissue. According to Dr. Kluge, the institutional and technological challenges of water provision are “not about the supplier’s legal statusbut how the supplier is regulated”. He called for wastewater treatmenttechniques aimed at maximum energy conservation and better use of phosphates, nitrates and other substances found in water. The relevant technologies would have tobe perfected in Germany before being marketed elsewhere. Dr. Kluge stressed that the industrialised countries had to act as role models:“We have to practise what we preach.”

Rosemarie Bär, coordinator for devel-opment policy at the Swiss Coalitionof Development Organizations,expressed concern that “it is not theresources which are lacking but thepolitical will”. The use of water shouldbe enshrined as a human right inorder to ensure that water was freelyaccessible to future generations andto maintain supplies of this resource.

For some, water in the city is abarrier – floodingin Mexico City.

For others, the banks of thecooling riverafford relaxationin the heart ofthe city – theIsar in Munich.


Water, the risk – Drought and floods26 July 2005

Vast deserts but also areas that suffer from huge floods: many peoplelive in regions affected by water extremes. The dialogue forum entitled“Water, the risk: Too much – too little”addressed the issue of droughts and floods. The conclusion was thatthe people at risk were exposed to considerable forces and that joint action was required.

The main research field of Dr. StefanKröpelin, project leader of the University of Cologne’s special programme on adaptation and cultural innovation in the arid regions of Africa, is the world’s largest desert.The Sahara has not always been a desert; periods of drought have alternated with periods of humidityover thousands of years. “However,the Sahara is now so dry that rain usually evaporates before it touchesthe ground. You don’t even find germs there”, Dr. Kröpelin added.

People had adapted to the extremeconditions, managing in some caseson less than a litre of water a day. Drinking water had to be transportedover considerable distances, or pumped from wells more than 3,000metres deep. Water from them is available as a fossil resource but supplies are not replenished by rain.Like oil, once the water has been pumped out, it is not replaced. Thegeographer cum geologist explainedthat for about a billion of the earth’sinhabitants, seawater desalinationwas the only practicable solution inthe long term. “It is a laborious process, but there is enough solarpower in the region and it should beharnessed accordingly.”

On the other hand, overuse caused thedeserts to spread.“The progressivedesertification of southern Europe is mainly due to agricultural overuse,not to climate factors”, Dr. Kröpelinconfirmed, stating that if the excessiveuse of the land were halted, the environment would have a chance torecover, as research in the Saharadesert showed.

Water, the myth – Element of sacred cleansing12 July 2005

Life-giver, thirst-quencher, purifier:water has exercised a spiritual magicon people from earliest times. Prof. Matthäus Woschitz, who teaches religious studies at the University ofGraz, explained in his dialogue forumpresentation “Water, the myth – Element of sacred cleansing” howwater has acquired a sacred qualitythrough the medium of “homo religiosus”. Ideas and customs revolving around the processes ofcleaning and purifying were thus partof religious life in all ancient cultures.

Water derives its religious symbolismas a means of purification closely linked with the ideas of salvation andspiritual well-being. One of the usesencountered in all cultures is to wash away guilt and restore the soul. Prof. Woschitz explained that the“deliver us from evil” passage in theLord’s Prayer reflected the basic issue underlying all religions and philosophies: the release of mankindfrom suffering, guilt and evil. As oneof the most common means of ritualpurification and sanctification, waterhad a deep symbolic significance andrepresented a new spiritual beginningand an acknowledgement.

This power inherent in the basic element was not confined to religiousmetaphors but was also found in fairytales and legends. For instance, in theGrimm fairy tale “Puss in Boots”a miller’s apprentice is transformed intoa marquis when he bathes in the river.The Professor explained that sheddinggarments and bathing in the riversymbolised “knowing oneself”, i.e.confessing to one’s own weaknesses.Water thus signifies a new spiritualbeginning and an acknowledgement –symbolising the fundamental humanissues.

Sensitisation

20 21

Water, giver oflife, quencher of thirst and purifier, is also areligious symbol in many countries.

Similarly, it is people who play a keyrole in floods. Dr. Wolfgang Kron,Head of Hydrological Risk Research in Munich Re’s Geo Risks ResearchDepartment, is convinced that “thereare few places on earth today wherepeople are safe from flash floods,even on mountains”. A single floodcould cause catastrophic damage, as in Bangladesh in 1998, when 40% of the land was inundated. In industrial countries, a single floodevent often caused economic losses in the order of many billions of euros. The increased risk of flood due to climate change called for the formation of a risk partnership between policymakers, industry andthe public. “We must learn to live with floods, but we also need to worktogether to prevent rising losses andtragic events”, said Dr. Kron.

But all too often we quickly forgotabout the risks, even after severe losses. Long-term preventive measures such as flood protectionzones, tended to founder on the resistance of the local population.“Our only chance is to increasepeople’s awareness of the flood risk”,Dr. Kron concluded.

Summing up, foundation ProjectManager Anne Wolf commented, “We are already eagerly looking forward to the autumn 2006 series of dialogue forums on ‘The risks ofliving in Munich’”.

2005 Munich Re Foundation presentations

To make people aware of the global challenges it seeks toaddress (see p. 3) in addition tothe “Dialogue forums on water”, the foundation’s team membershave also given presentations at a number of different events. An extract:

16 MarchNatural disasters – Trends and consequencesGTZ, Frankfurt

21 AprilNatural disasters and climate change – Observations and trendsAllianz Landesbeirat, Mühlacker

19 MayClimate change – Risks and opportunities for the banking and insurance sectorsUNEP FI, Barcelona

2 JuneDevelopment cooperation – An overviewGeo round table, Munich

22 JuneFinancial productsRed Cross Work Conference, The Hague

23 JulyStorms, floods, earthquakes – Is there still hope for us?Tsunami day, University of AppliedSciences, Rosenheim

27 JulyThe effects of climate change on the frequency of disastersBayernLB, Munich

23 AugustConcept and background of the Munich Re FoundationStockholm Water Week

12 SeptemberGlobal natural disasters – Serving people at riskSTS Forum, Kyoto

13 SeptemberMDGs: A business case for thefinancial industry?10th International Business Forum2005, New York

28 SeptemberSustainable investment – Choice or obligation?MEAG, Munich

3 OctoberDisaster prevention – The last micrometreISRD, London

9 OctoberNatural disasters, climate changeand the MDGsJournalists’ seminar, University of Hohenheim

24 OctoberOn waterWasserStiftung Ebenhausen

14 NovemberUNEP FI – A global partnership insupport of the Kyoto processEvangelische Akademie, Tutzing

18 NovemberGlobal challengesInWent, Lauingen/Donau

21 NovemberFrom Knowledge to Action – Natural disasters – Awareness is the keyLions Club, Schleißheim

24 NovemberClimate change, weather disasters – What lies ahead? What can we do?Verein Energie mit Zukunft, Bad Endorf

24 NovemberMicroinsuranceGeo round table, Munich

15 DecemberWater and desert – Disasters and optionsInWent, Feldafing Drinking water has

to be transportedover considerabledistances, or pumped from wellsmore than 3,000metres deep.

When Bangladeshwas hit by floodsin 1998, 40% of the country wasinundated.


Action The foundation’s projects translateknowledge into specific actions to support people in risk situations,working in cooperation with competent partners. The projects are directly geared to the needs of those at risk and actively involve the people themselves and the existing structures.

In 2005, the foundation sponsoredthree water projects: one to helppeople living along a river in Mozambique to set up a flood warning system; another to erect fog nets to enable the inhabitantsof Eritrea’s Asmara plateau area to produce their own drinking water; the third to equip Pakistaniearthquake victims with drinkingwater filters to protect them from potentially fatal diseases.

22 23

Flood early warning system: Wolfgang Stiebens knows Mozambique like his own back yard. Here he explains the benefits of the River Búzi early warning system, which needs the support of the entire village community if it is to succeed.

People can only act responsibly when they have grasped the point of risk prevention.Wolfgang StiebensAdviser to the International Institute for Disaster Risk Management (DRM),GTZ project leader for the Mozambique flood warning project

In 2005, women and children in Africa spent some 40 billionhours fetching water on foot. Education and training tendedto fall by the wayside.

The state of Mozambique in southeastAfrica is frequently hit by storms. The torrential rain causes the rivers toswell and burst their banks in no time,sweeping people to their deaths andleaving behind a trail of devastation.In future, a group of local volunteerswill monitor water levels to ensurepeople have adequate warning. TheMunich Re Foundation is sponsoringthis simple but effective early warningsystem.

2000 was a dreadful year for thepeople of Mozambique. A low-pressure system and cyclones Elineand Gloria brought excessive rainfallin February and March, causing widespread flooding, particularly onthe Búzi und Save rivers in CentralMozambique. Some 19,000 squarekilometres of land, more than 2,000 of it arable, were flooded. 700 peopledied in the catastrophe and thousandslost their livelihoods.

Until now, it has not been possible to predict the onset of the severefloods that constantly plague thecountry. Rainfall and water levels are not systematically recorded.Mozambique, one of the world’s poorest countries, lacks the financialresources to set up a hydrologicalmodel.

In 2005, the foundation supported the Mozambique flood warning system, which involved installingsimple but effective early warning surveillance on the River Búzi to alertthe local population to the threat offlood waves.

Red flag signals dangerMozambique floodwarning system

Action

24 25

The River Búzi is a lifeline for thepeople of the Province of Sofala in CentralMozambique. When the watersare calm, the rivercan be navigated by dugout.

In Mozambique,women and girlshave the task offetching water.Distances of some30 kilometres are by no meansunusual.

The system is operated by villagers specially appointed to check waterlevels using easy-to-read gauges, andrecord daily precipitation amounts.Once the readings reach a criticallevel, an analysis and early warningcommittee in the district capital ofBúzi is alerted by radio. If the reportsindicate widespread heavy rainfall, the blue, yellow or red flag is raised,depending on the degree of alert.Designated helpers swarm out, armedwith megaphones, to raise the alarm. The areas at risk are evacuated.

The system was installed by the GermanAssociation for Technical Cooperation(GTZ) and the World Institute for Disaster Risk Management (DRM).They called in experts from Honduraswho had successfully set up a similarlocally-administered scheme in theirown country. Volunteers from MunichRe’s South African office supportedthe project and helped to monitor it.

A successful trial run in November2005 showed that the people on the river’s upper reaches fully appreciated the social responsibilitythey bore. Village elders, mayors and district administration were all behind the project.

Búzi hazard maps will now be drawnup and the project will be extended to include other exposed regions in Mozambique. The Munich Re Foundation and the GTZ also want toorganise a district disaster preventionconsultancy service in conjunctionwith Mozambique’s National DisasterManagement Institute (INGC).

Battle-scarred

In 1975, soon after Portuguesecolonial rule ended and independ-ence had been declared, a civil war broke out in Mozambique thatwas to last 17 years and claim at least a million lives. Large areas of the country and its infra-structure were devastated. Evennow, some 70% of Mozambique’spopulation lives on less than US$ 0.40 a day. More than half theinhabitants can neither read norwrite; the infant mortality rate isaround 12.5%. The average lifeexpectancy will continue to fall, in part due to the number ofpeople infected with HIV.

The country is frequently hit bynatural disasters. Apart fromcyclones and heavy storms, whichsweep over the southeastern part of the African continenteach year, there have also beenperiods of severe drought in the recent past.

Despite this, Mozambique’s economic fortunes took a turn for the better when the peacetreaty was signed. Annual economic growth has averaged 6% since 1995, although this has primarily benefitted SouthAfrican companies. In 2004, the rate of children starting full-time education was 92%;democracy has stabilised.

InsightsMozambique/Germany

Designated helpers learn what to do inemergencies.

The village communitygathers to hearabout the latest developments.

Risk awarenessbegins at school –the village school inBúzi.

Easy to read: redmarkings indicatethe danger levelsalong the river.

Access to clean drinking water (%)

Illiteracy rate (%)

Number of kilometres of tarmac roads (%)

City 76

64

Male 38

19

Female 69

Countryside 24

City/Countryside 100

Life expectancy in years

Days rain per year in Maputo/Berlin

Radios/1,000 people

99

Less than 1

44

570

Mozambique

Area801,590 sq km

Population19.4 million

Population density24 inhabitants per sq km

76 82

Male Female

40 41

Kilocalories/person/day

2,082 3,484


167

Collecting the minute water dropletsfrom the fog is a simple but highlyeffective process, yielding large quantities of precious drinking water.With the backing of the Munich ReFoundation, WasserStiftung Eben-hausen has begun to erect fog nets tosupply about 1,000 people with cleanwater. The droplets condense on contact with the fine plastic fibres ofthe nets and the water thus collectedcan then be channelled away. Fog-Quest, a Canadian NGO, developedthe technique and has already successfully installed nets in dry coastal parts of Chile and the Yemenwhere there are frequent fogs.

Following a successful trial run in 2005,some 40 nets will be erected in 2006which will yield around 300 litres ofwater per net per day and supply threevillages. A reservoir with a capacity of 30,000 litres is being built to storethe water. A local water committee will handle the administration and distribution aspects and fix prices thatare affordable. The reservoirs will beguarded and opened for a few hours a day.

The fog nets show that experiencehanded down over the years can beput to good use. In South Africa’sKalahari desert, Bushmen have longmanaged to survive by collecting thedew from plants. Using the samesimple but effective principle, the Eritrean fog nets have the potential to vastly improve people’s lives in the long term.

Eritrea, which was once covered in dense forests, now suffers from a chronic water shortage. Special collecting devices that can harvestminute droplets of water from fogcould soon provide urgently neededdrinking water for many people on the country’s Asmara plateau. TheMunich Re Foundation is sponsoring a fog net project organised by Wasser-Stiftung Ebenhausen.

It is generally the females who fetchwater on the African continent. Womenand girls spend some 40 billion hourseach year transporting this vital com-modity. This is a particularly strenuoustask in the Asmara plateau area of Eritrea, which lies some 2,000 to 2,500metres above sea level. Women oftenspend many hours walking to water-holes in the valleys, laden with 20-litrecanisters, since springs and wells arefew and far between on the plateau.Tankers from the capital, Asmara, alsosell water in the valleys but in generalpoor people cannot afford it.

Rain seldom falls on the plateau outside the summer rainy season.However, in the dry season betweenNovember and March, fog and clouddevelop in the mountain range some500 kilometres long that separates the plateau from the coast. They areformed when hot air from the country’s interior rises, drawing inmoist air from the Red Sea.

Water collectorsFog nets in Eritrea

Action

26 27

The Board of WasserStiftungEbenhausen isdelighted: the donation madeby Munich Re andthe foundation willfinance 20 fognets in Eritrea.

Unity amidst cultural diversity

Eritrea is the youngest state on the African continent. In 1993,after nearly 30 years of war, the country won its independencefrom Ethiopia. Over the years, the war and subsequent borderconflicts with its neighbour havetaken their toll.

Despite its war-stricken past and desperate economic plight,Eritrea is developing a strong cultural awareness. Its constitu-tion confers an equal status on all nine languages of the differentethnic groups. Each group will foster its cultural traditions andprimary school teaching is to beavailable for all children in theirnative language.

The Ministry of Culture and Education is promoting schemes to identify and protect sites of historical and archaeologicalinterest, which will also make Eritrea more popular as a touristdestination.

A team installs the nets. The photograph showsa small prototypethat can provideup to 30 litres ofdrinking water perday.

The method ofinstallation has to ensure that as much water as possible is harvested in theNovember to March dry season.

In order to refinethe technology, it is important to update the records and statistics. Delegates fromthe villages taking part in the project and members of theCanadian FogQuestorganisation analyse the data.

Eritrea

Area121,144 sq km

Population4.6 million

Population density36 inhabitantsper sq km

InsightsEritrea/Germany


Illiteracy rate (%)


City 72

43

22

Countryside 54



Days rain per year in Asmara/Berlin

99

Less than 1

76 82

Male Female

57 60


1,5193,484

Radios/1,000 people

464

570


60

167

The joint programme to provide emergency drinking-water kits ensuredsupplies for 150 families – 1,000 people in all – at a makeshift campnear Balakot. The city, situated close to the epicentre and once home to 60,000 people, was almost completelydestroyed by the earthquake. Never-theless, people descended on it fromthe surrounding mountain villages,remote areas being cut off from anyhelp.

Employees of the local Pakistani-American Dosti Foundation aid organisation taught the families howto use the water filters in Urdu, theirnative language, oral instruction being essential in view of the region’s55% illiteracy rate. The people weredivided into groups of 10 to 15 for the half-hour information sessions, in which they learnt basic water storage and hygiene techniques. Each family received a water filter and an instruction leaflet translatedinto Urdu by local THW employees.Thus, clean drinking water supplieswere assured for around 100 days at a cost of just €10 per person.

In the early hours of 8 October 2005,the Kashmir region of Pakistan wasshaken by one of the most violentearthquakes of the last hundred years.The top priorities for many thousandsof victims were to obtain shelter fromthe rigours of winter and clean water.The Munich Re Foundation donatedwinter tents and launched an initiativein cooperation with Germany’s federaldisaster relief agency (THW) to supplyemergency drinking-water kits so thatpeople could treat water themselves.

According to United Nations estimates, 88,000 people died and 3.3 million were left homeless by the Kashmir earthquake, which had a force of 7.6 on the Richter scale. The approach of winter, which is verycold and brings heavy snows in thefoothills of the Himalayas, coupledwith widespread destruction of water pipes and sanitation facilitiescalled for swift measures. As a result of consuming unclean water, children and expectant mothers in particular were severely affected by gastroenteritis, which proved fatal in some cases.

Water filters for earthquake regionEmergency aid for Pakistan

Action

28 29

Germany had always proved very willing todonate at times of major naturaldisasters. The tsunami of 26 December 2004 far outweighed anything previouslyencountered.

By comparisondonations for the autumn 2005 Pakistani earthquake, where the death toll was 88,000, were considerably lower.

Source:German Institutefor Social Issues(DZI), 2006

Donations in Germany

¤670m

Seaquake in SoutheastAsia/Tsunami2004

¤350m

Elbe flood2002

¤80m

Pakistan earthquake/Kashmir region2005

¤66m

Oder flood1997

Pakistan – The forgotten catastrophe?

International and national aid to the earthquake victims in the Pakistani area of Kashmir got off to a slow start. Not until calls went out for urgentdonations and a UN donors’ conference was organised in mid-November 2005 did at leastsome of the desperately neededsupplies arrive.

Unicef spokesman Rudi Tarnedenblames this on the large number of disasters that struck in thecourse of 2005. Tsunami aid, thefamine in Niger, the hurricanes inthe Caribbean and the Pakistaniearthquake had stretched aidorganisations, the public and anumber of governments to theirlimits.

In addition, little informationtrickled through from this remotearea, a restricted military zonewhere the way of life is very different, and hard for Europeansto identify with.

The initiative ofTHW and the MunichRe Foundation secured suppliesfor 150 families inemergency camps.Enough drinkingwater for 100 dayscan be obtained at a cost of ¤10per day.

The head of thefamily explains howto treat the water.

Pakistan

Area803,940 sq km

Population162 million

Populationdensity186 inhabitantsper sq km

InsightsPakistan/Germany



City 95

59

Countryside 87



Days rain per year in Islamabad/Berlin

99

76 82

Male Female

62 64


2,316 3,484

Illiteracy rate (%)

Male 47

Female 71

Less than 1

Radios/1,000 people

105

570


29

167

From Knowledge to Action

30 31

Dr. Hans-Jürgen Schinzler

Interview

Dr. Hans-Jürgen Schinzler is Chairmanof Munich Re’s Supervisory Board.From 1993 to 2003, he was Chairmanof the Board of Management and hasbeen a prime mover in setting up thefoundation. As Chairman of the Boardof Trustees, he is closely involved inthe foundation’s work.

Mr. Schinzler, the foundation has now completed its first year’s work. What conclusions do you draw?

Schinzler: Initial results of our activities, such as the flood warningsystem in Mozambique or the fog nets in Eritrea, show that in just oneyear we have managed to improve the quality of life for people living inthese regions. If our commitmentwere emulated elsewhere, that would indicate long-term success.

What was your main concern as Chairman of the Board of Trustees?

Schinzler: I particularly wanted toensure that we did not set targets thatwould take ten years to achieve. We wanted something we could really“get to grips with” – a commitmentthat would bring results in the shortterm and have lasting impact. Apartfrom project work, we have also been involved in research to increaseknowledge of risks and enhancepublic awareness.

During the past year, the foundationhas been active in developing countries on the African continent. Is that the geographical focus?

Schinzler: Our principal objective is to be a positive driving force in developing and emerging countries.However, unlike traditional devel-opment cooperation, the foundation’sprojects are not limited to the world’spoor areas. The industrialised nations,too, will face problems such as watershortages. The foundation’s initiativecan get things moving on many fronts.

The foundation has set a new trend and shown that even a small lever can move big weights. Dr. Hans-Jürgen SchinzlerChairman of the Supervisory Board of Munich Reinsurance Company and Chairman of the Board of Trustees of the Munich Re Foundation


However, evolution can also explainsome of modern man’s foibles. The homo sapiens brain attained itspresent form at least 50,000 and possibly 200,000 years ago. Thismuch-prized intellectual organ wasthus fashioned at a time when thedeterminants of survival were of a different ilk from those of today. Twoaccomplishments were particularlycrucial: the ability to elude predatorsand clobber your enemies. Our periodof apprenticeship in the savannahequips us to perform some amazingfeats today, such as the ability wehave to rapidly sort a huge number of optical impressions according to hazard potential when we find ourselves in traffic for example. Onthe other hand, hominid evolutionpresumably also explains why somewestern industrial nations currentlyfear terrorists more than climatechange.

We have come a long way since theStone Age. But we still do not dealwith risks much better than our ancestors did. Dr. Patrick Illinger, Science Editor at the Süddeutsche Zeitung, reflects on the problemshuman beings have surviving intoday’s world with brains formed inprehistoric times.

Life would be hell if humans had tocalculate all the risks of everyday lifewith mathematical precision. Beforecrossing a road we would have toweigh the merits of getting to theother side against the risk of being run over. Car journeys would be sheertorture given the stochastically notnegligible probability of finishing up as one of the 5,000 or so killed each year on Germany’s roads. And each boeuf à la mode would be spoiled by the piquant flavour of acholesterol-rich coffin nail.

In that respect, it is fortunate thatnature has endowed us with a generous portion of irrationality. The majority of life’s pleasures are ultimately hazardous to a greater or lesser extent. Generally speaking,all progress involves risk. Were it not for derring-do, curiosity and a willingness to subject themselves toconsiderable suffering, our ancestorswould never have started chippingaway at stones in Tasmania’s OlduvaiGorge and using them to slit opentough-skinned fruits some 2.5 millionyears ago. The benefits of this first-ever authenticated innovation inhuman history ultimately outweighedthe risks.

Surviving with riskPatrick Illinger on the evolution ofrisk handling

Essay

32 33

Dr. Patrick Illinger

Man is always strong when directlyfaced with danger. If a predator leaps from a bush, the body reactsinvoluntarily. Our behaviour is governed by hard-wire reactionswhich thus, in the best case, ensureour survival. In this situation, our own actions have nothing to do with the reasoning and weighing up associated with a vague problem of sizeable temporal or spatial proportions.

However, the danger with less transparent risks is that we will fail torespond adequately or take preventiveaction. Prior to 26 December 2004, not more than a handful of eccentricmarine geologists had half an eye on the tsunami issue. The fact thatviruses not only infect birds but arealso spread by birds appears to have caught a number of politicians unawares. And one harsh winter suffices to make even the most savvyof our contemporaries doubt the phenomenon of climate change. Thisshows how difficult it is for humanbeings to develop an awareness of a problem based on scientific factsalone. In consequence, dedicatedresearchers occasionally attempt torevive the globally languishing commitment to reduce carbon dioxideemissions by comparisons with tangible threats such as terrorism.This, however, is the wrong approachbecause the fear stimulus does notautomatically trigger the right reaction.Humanity should not let itself bedeprived of the luxury of using reasonto find long-term solutions to complexproblems. However, this means that complex risks must be recognisedas such.

This is impeded by the simple biological fact that individuals are not able to react emotionally to long-term, theoretical, multi-causalrisks. Humanity can only make up for this shortcoming collectively. It requires thorough research andknowledge of the state of the world.Just as we have acquired an appreciation of art, pleasure and symbolism, so we should feel compelled to understand coherencesin nature. That would be the most fitting consequence of the commit-ment shown by our Olduvai Gorgeancestors, who once managed to escape the destiny of being mere submissive playthings of the forces of nature.

The danger with complex, long-term risksis that we will fail to respond adequately or take preventive action.

Dr. Patrick IllingerScience Editor at the Süddeutsche Zeitung and member of the Board of Trustees of the Munich Re Foundation


Dr. Patrick Illinger

Dr. Illinger, born in 1965, has a PhD in physics and is a sciencejournalist. He has been on the editorial staff of the SüddeutscheZeitung since 1997 and Head of the Science Desk since April 2002.Since December 2004, he has alsoedited “SZ Wissen”, a popular science magazine. Dr. Illinger is a member of the foundation’sBoard of Trustees.

“ ... This jubilee event, Munich Re –125 years, is indeed something tocelebrate. “Jubilee” comes fromthe Hebrew word “Jovel”, a “joyfulnoise”. Today, we want to shareour joy but we also want, in somemeasure, to share our knowledge.Companies with broad knowledgehave a certain responsibility, andacting responsibly means sharingthat knowledge.

By establishing the Munich ReFoundation with its capital of ¤50m, Munich Re is assuming itsresponsibility. And, as well asdonating our money, we are alsodonating our knowledge. The new foundation’s projects willtranslate knowledge about ‘people and risks’ into action.

Today marks the birth of thefoundation. It also signals thestart, within hours of its birth, of the foundation’s project work.

The foundation deals with issueswhose complexity matches thecauses and circumstances of therisks. Population development isinextricably bound up with theelement of water, on the one handa valuable resource and on theother, as is the case with floods,a risk factor. This is also true of environmental and climatechange or disaster prevention and poverty relief. The foundationseeks to examine overarchingaspects from a variety of per-spectives in order to developsustainable solutions in the areaof risk prevention.”

Munich Re had something special in mind to celebrate its 125th anniver-sary. The anniversary celebrations on 7 April 2005 marked the inauguration of the Munich Re Foundation. ItsChairman Thomas Loster and Prof.Janos J. Bogardi signed an agreementestablishing a foundation chair.The “Munich Re Foundation Chair on Social Vulnerability”at the UN University in Bonn will conduct riskresearch focusing on cultural differ-ences in the approach to loss eventsand environmental changes.

Donating our knowledge

In his address at the official ceremonymarking the start of the anniversarycelebrations, Dr. Nikolaus von Bomhard, Chairman of Munich Re’sBoard of Management, outlined thereasons for setting up the foundation.

The official ceremonyMunich Re Foundation begins its work

Launch

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Companies with broad knowledge have a certain responsibility, and acting responsibly means sharing that knowledge.

Dr. Nikolaus von BomhardChairman of the Board of Management of Munich Re

Why do people take greater care oftheir possessions than their lives?

The new foundation’s first project was to set up a chair to conductresearch into social vulnerability. In his address Prof. Bogardi, theDirector of the UN University in Bonn,explained the need to investigatesocieties’ vulnerability to risks, whichwas often attributable to culturalfactors.

“ ... The research conducted byour institute is based not on theusual scientific risk componentsassociated with extreme eventsand gradual environmental changesbut on the vulnerability of peopleand societies.

When quantifying vulnerability, we tend to equate it with substi-tute indicators such as poverty.We then lose sight of traditionalrisk-handling techniques and the extent to which high-techsocieties set themselves up assitting targets. It is more thanpure supposition that, where vulnerability is concerned, thereis a yawning gap between realityand perception.

One of the most poignant photosof the floods that hit Mozambiquein 2000 shows a group of peopleseeking refuge from the risingwaters clustered around a tree on a small embankment. Their mosttreasured possessions, whichinclude a bicycle, have been hoisted into the safety of thetree.

Why do people expose themselvesto danger rather than risk losingtheir possessions? Would thereaction be the same in Asia, Latin America or Europe? Can this attitude of a few people beapplied on a wider scale? – Thereare many questions involved thathave not yet been adequatelyresearched but we need urgentanswers in order to create a workable basis for disaster prevention – not just to be ableto take political decisions butalso for public information andearly warning purposes. Humansafety can only be improved if weseek to reduce our vulnerability in the long term. Which is why weare especially thankful to theMunich Re Foundation for makingthis long-term commitment andgiving the UNU-EHS Institute an opportunity for further studyand research.”

Dr. Nikolaus vonBomhard and Prof.Janos Bogardiaddressing theguests at the official ceremonymarking “Munich Re –125 years” on thesubject “People atrisk”.

Prof. Klaus Töpfer,UN Under-Secretary-Generaland ExecutiveDirector of UNEP,emphasises theimportance of environmentallysound economies.


Two special features characterise theway they manage their assets. Firstly,they are in principle established inperpetuity and consequently have totake a long-term view. Indeed one German foundation has roots goingback to the 12th century. The LünebergSaint Benedict Hospital fund is theoldest German foundation, havingenjoyed a virtually uninterrupted existence since its inception in 1127.

The second characteristic is that theyare legally obliged to conserve theirassets, and thus required as a rule to invest prudently and profitably. This is in marked contrast to the notuncommon investor practice of pursuing short-term gains at relativelyhigh risk.

The foundation’s asset managementalso has to tread carefully betweenreturn expectations and its own aimsand purposes. Sustainability is notjust an image-building exercise but an important part of successful assetmanagement.

Is sustainability an issue for foundations?

To what extent should asset man-agers take sustainability factors intoaccount? In other words, should they consider ecological and social as well as purely financial criteria. Surprisingly, studies such as theHeissmann Foundation survey (2005)show that, up to now, foundationshave not tended to do so. However,these are issues to which the MunichRe Foundation gives high priority.After all, people might justifiably question the credentials of a foundationwhich earned investment returns from the very ecological or social ills it set out to redress. At the same time,a foundation remains true to its long-term perspective by managing itsassets in a way that reflects a concernfor the living conditions of futuregenerations.

The Munich Re Foundation’s work is financed entirely out of incomegenerated from its own assets. Thus, careful management and goodreturns are essential to its success. It takes special investment strategiesto be able to reconcile ecological andsocial with economic criteria.

According to a study conducted by the Bertelsmann Foundation, amongthe most common reasons for estab-lishing a foundation are the desire to make things happen and a sense of responsibility towards others.Moreover, the benefactors like to decide for themselves what form theirsocial commitment will take. So too,the decision taken in 2000, which culminated in the establishment of the Munich Re Foundation in 2005,was prompted by a sense of socialresponsibility and the desire to givethe general public a greater stake in Munich Re’s success.

Endowed with a capital fund of €50m,it ranks as a medium-sized foundationin Germany. According to the federalassociation of German foundations,such institutions currently manageassets totalling some €60bn and theirpopularity is on the increase. Whilst in the 1980s an average of 150 newfoundations was established each year,the figure reached an all-time high in2005, with 880. There are now 13,940civil law foundations in Germany.

Sustainable and profitableThe Munich Re Foundation’s investment strategy

Investments

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German Stock Exchange, Frankfurt

The return on sustainable investments

A frequent misconception is that sustainable investment means lowerreturns. However, numerous surveyshave been carried out that refute thisargument. Indeed, studies carried out by WestLB Panmure (2002) andSchröder (2005), although not basedon statistical evidence, concluded that sustainable investment actuallyimproved performance and reducedthe risk profile.

It is quite conceivable that companieswhich do not switch to productionprocesses and products that conservefossil fuels in response to the challengeof climate change will suffer the eco-nomic consequences in the mediumto long term. The sharp increase in the world’s population coupled withrapid economic growth in countrieslike China and India will, in the long run,mean soaring energy consumptionfigures and, as seen in 2005, a conse-quent hike in fuel prices. At the sametime, it is likely that climate protectionregulations will become more stringentand that tougher sanctions will beimposed on emissions of greenhousegases. Even China has now imposedmaximum vehicle fuel consumptionlimits.

Sustainable investments – A growth market

According to an Avanzi SRIResearch survey, the number ofEuropean sustainability funds had risen 6% to 375 by mid-2005.In the same period, the volume of assets under managementincreased by 27% from ¤19bn to over ¤24bn. This form ofinvestment is clearly no longer a niche market. Although on thewhole smaller than conventionalfunds (with average assets ofaround ¤64m at the present time) there are a number of notable exceptions, for examplesome British funds already manageassets in excess of ¤1bn.

Institutional investors are alsostarting to take an interest inthe sustainability issue. It is difficult to put a precise figureon sustainability assets since it is not easy to identify the proportion of such assets within a portfolio. The Carbon DisclosureProject seeks to encourage industry to do more for climateprotection with the backing of institutional investors.Indeed, in 2005 such initiativesfound favour with companies administering assets worth some ¤26bn.

The Munich Re Foundation’s investment strategy

To maximise the available investmentopportunities in accordance with itslegal status, the Munich Re Foundationand MEAG, the Munich Re Group’sasset manager, created a special fund at the beginning of 2002, MEAGMRS. This vehicle was chosen notleast because, more than any other, it enabled the foundation to managedividends earned in accordance with its needs. At the same time, thecosts were more acceptable than for other forms of investment, giventhe volumes involved.

The fund is managed in accordancewith the total return principle, that is tosay performance is based on absoluteyear-end earnings rather than on abenchmark. The regional, rating andasset-class criteria that governMEAG’s investment strategy are laiddown in the mandate. To reduce therisks, equity exposure is limited to30%, the remainder being invested incorporate and government bonds.Investments are only made in Europe.

In addition to these requirements, the foundation’s Board of Trustees has passed a number of sustainability guidelines. The acceptance criteriastate that companies can only beadmitted to the investment universe ifthey are among the leading companiesin their particular class in terms of sustainability. For instance, companiesare eligible if they have a high rankingin one of the many sustainabilityratings. Small and medium-sized companies, which are not normallycovered in these ratings, can still be included in the investment universeif they are active in a qualifying sectorsuch as renewable energies or water treatment. The guidelines also laydown negative criteria applying to thearmaments industry, for instance.


Investments

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Fund 2002 2003 2004 2005 Performance p. a.1

LIGA-Pax-Balance-Stiftungsfonds-Union –21.86 2.71 4.93 11.32 -0.73F&C HVB-Stiftungsfonds –4.40 10.68 7.25 8.40 5.48DVG-Stiftungsfonds - 2.59 4.89 7.34 4.94Fonds für Stiftungen INVESCO - - 5.95 15.56 10.76DEKA-Stiftungen Balance - - 4.38 7.93 6.16dit-Stiftungsfonds Balanced - - 1.75 2.65 2.20dit-Stiftungsfonds Bonds - - 2.96 3.21 3.09Average –13.13 5.33 4.59 8.06 4.56Benchmark2 2.20 6.13 7.52 7.97 5.96MEAG MRS 1.34 9.41 7.19 8.94 6.72

Comparison ofMEAG MRS’s performance withthat of otherfoundation fundsavailable in Germany.

Table 1Performance of selected foundation funds

1 Performance p.a. based on the available data.

Performance (%) –from publicly available datasources and MEAGas at January2006.

Performance p.a.shows the movingaverage for theyears reported.

2 Benchmark: 85% FTSE Eurozone Government Bond Index(all maturities), 15% DJ STOXX 50.

Twice a year, MEAG and foundationrepresentatives meet with Munich Refinance experts to plot the fund’s strategy. The fundamental decisionconcerns the split between bonds and shares in the light of anticipated market developments.

Convincing investment strategy in difficult times

In the past few years, investmenttrusts have discovered foundations as potential clients. Although therewere only two possible alternatives on the market when MEAG MRS waslaunched, by 2005 the figure had risento seven.

Table 1 compares MEAG MRS’s performance with that of other foundations’ funds. Although MEAGMRS measures performance in terms of total return, a benchmark has been provided for the purposes of comparison. It consists of 85% FTSE Eurozone Government BondIndex (all maturities) bonds and15% DJ STOXX 50 shares. The bondindex comprises Eurozone govern-ment bonds with at least one year to maturity. The average unexpiredperiod at 31 January 2006 was 7.9 years.

Portfolio selection process

The selection process is in two stages. First, MEAG’s fund managersand the foundation compile a list of around 400 issuers in accordancewith the mandate and sustainabilityrequirements. The fund managers can then select the most promisingsecurities from this list without havingto refer the matter for approval.

A completely different set of issues is involved in defining the investmentuniverse. The social responsibility criteria applied in selecting Europeangovernment bonds are neither highlysophisticated nor sufficiently perform-ance-linked. The positive criteria used by sustainability rating agenciesat the present time are not especiallyrelevant for the foundation since some of the negative criteria by whichcertain countries are excluded, suchas human rights’ infringements, donot apply to funds which invest only in Europe. Another problem is that the negative and the positive criteriasometimes conflict, so that a marketleader in the water treatment fieldmay fail to qualify in other respects.Decisions have to be taken on themerits of the particular case.

The investment mix can be changedwhen necessary, for example if a suitable candidate files an initialpublic offering. The fund managersare free to build up a portfolio of the most promising securities from this pool without consulting the foundation. This two-tier assessmentprocess is now used by many sustainability funds.

The result is highly satisfactory. MEAG MRS achieved above-averagereturns in each of the reported years.Although for much of the period the number of peer comparisons was limited, the 6.72% average annual performance since 2002 neverthelessalso constitutes a peak value. Despitethe tough climate in the financial markets in 2002, MEAG MRS managedto not only maintain its value but evenmarginally increase it. In subsequentyears, it was consistently among thefront runners, giving a solid perform-ance.The slight underperformanceagainst the benchmarks in 2002 and2004 was more than made up for bythe 2003 and 2005 results.

However, what counts is the longer-term evolution rather than the per-formance in a given year, particularlysince foundations do not generallychange their asset mix from year toyear but favour a steady course.

Table 2 shows the return on €100invested in the various funds between1 January of the respective years and31 December 2005 (expressed on totalreturn basis).

The result highlights the strength of MEAG MRS’s investment strategy,even from a long-term perspective.Since its inauguration at the start of2002, no alternative investment in one of the other funds has achieved a comparable total return. Thus, thelow-risk policy can be seen to havepaid off and the fund has succeeded in preserving its capital base even in a bear market. Despite its relativelylow risk profile, the results wereamong the best even in the goodyears. Although just behind the topperformers in some years, this has virtually no impact in the long term.

Conclusion

The MEAG MRS special fund hasshown that sustainability does nothave a negative effect on yield. On the contrary, the fact that socialand ecological factors have beentaken into account has contributed to its success. Furthermore, by not slavishly following an index, the fund is able to make full use of favourable opportunities such asthose offered by the solar industryin 2005.

Moreover, through its special investment strategy, the foundation is able to demonstrate a credibilityand sense of responsibility that havefar-reaching implications. Whilst it is true that past performance does not guarantee future results, the foundation is confident that it is on the right track.

Fund Category Investment on 1.1.2002 1.1.2003 1.1.2004 1.1.2005

LIGA-Pax-Balance-Stiftungs- Mixed fund with different

fonds-Union investment objectives 93.75 119.97 116.81 111.32F&C HVB-Stiftungsfonds Defensive euro-area mixed fund 123.01 128.68 116.26 108.40DVG-Stiftungsfonds Defensive euro-area mixed fund - 115.50 112.59 107.34Fonds für Stiftungen INVESCO Mixed fund - - 122.44 115.56DEKA-Stiftungen Balance Defensive euro-area mixed fund - - 112.66 107.93dit-Stiftungsfonds Balanced Guarantee fund - - 104.45 102.65dit-Stiftungsfonds Bonds Guarantee fund - - 106.27 103.21Average 108.38 121.38 113.07 108.06Benchmark 125.92 123.21 116.09 107.97MEAG MRS Mixed funds 129.47 127.76 116.77 108.94

Table 2MEAG MRS and other foundation funds – A comparison (1.1.2002 = 100)

Comparison ofMEAG MRS’s performance withthat of otherfoundation fundsavailable in Germany.

Value of ¤100investment on 1 Jan. of the relevant year asat 31 Dec. 2005assuming the yieldis reinvested infull.

Performance (%) –from publicly available datasources and MEAGas at January2006.


Dr. Dirk JohannsenHead of Corporate Communications,Munich Reinsurance Company

Christian KlugeMember of the Board of Managementof Munich Reinsurance Company

Prof. Lenelis Kruse-GraumannInstitute for Psychology,FernUniversitaet in Hagen, Universityof Heidelberg


Prof. Renate SchubertHead of the Institute of EconomicResearch of the Swiss Federal Instituteof Technology, Zurich

Dr. Wolfgang StrasslMember of the Board of Managementof Munich Reinsurance Company (on the Board of Trustees since June 2005)

The Board of Trustees takes all decisions regarding fundamental issues and monitors the managementof the foundation. The members of the Board of Trustees are:

Dr. Hans-Jürgen SchinzlerChairman of the Supervisory Board of Munich Reinsurance Company (Chairman of the Board of Trustees)

Prof. Gerhard BerzFormer Head of Munich ReinsuranceCompany’s Geo Risks ResearchDepartment

Dr. Nikolaus von BomhardChairman of the Board of Management of Munich Reinsurance Company

Prof. Hartmut GraßlFormer Director of the Max PlanckInstitute for Meteorology in Hamburg

Stefan HeydMember of the Board of Managementof Munich Reinsurance Company(until December 2005; on the Board of Trustees until December 2005)

Prof. Peter HöppeHead of Munich Reinsurance Company’s Geo Risks ResearchDepartment

Dr. Patrick Illinger Science Editor at the Süddeutsche Zeitung, Munich

Dr. Torsten JeworrekMember of the Board of Managementof Munich Reinsurance Company (on the Board of Trustees since January 2006)

Board of Trustees of the Munich Re Foundation

40

Picture credits

Zeitbild Verlag, BerlinInside front cover/1, page 8

Oliver Jung, MunichInside front cover/2, 7, 10Pages 4, 5, 10, 11, 13, 14, 35

Anne Wolf, Munich Re FoundationInside front cover/3Page 16

Ilona Roberts, UN University, BonnInside front cover/4

Thomas Loster, Munich Re FoundationInside front cover/6Pages 23, 24 right, 25 top and bottom left

WasserStiftung EbenhausenInside front cover/5Page 27

National Research Center for Environment and Health (GSF)Inside front cover/8

Federal disaster relief agency (THW)Inside front cover/9Page 29

Alexander Allmann, Munich RePage 6 top

Reuters/CorbisPage 6 bottom, 19, 21 right

Prof. Úrsula Oswald-Spring, MexicoPage 7

Dr. Stefan Kröpelin, University of ColognePage 17

Ansett Richard, Corbis/SygmaPage 20

Peter Turnley, CorbisPage 21 left

Wolfgang Stiebens, DRM/GTZPage 22

Colin Griffiths, Munich Re, South AfricaPages 24 left, 25 top right

Dirk Reinhard, Munich Re FoundationPage 26

Karsten de Riese, BairawiesPage 30

Thomas Dashuber, SZ WissenPage 32

David Pollack, CorbisPage 36

Oliver Soulas, MunichInside back cover

Sources

Fischer Weltalmanach 2005CIA World Factbook 2005UN World Development Indicators 2005www.auswaertiges-amt.dewww.fao.orgwww.ipicture.de/datenPages 25, 27, 29

Imprint

© 2006Munich Re FoundationKöniginstrasse 10780802 München, GermanyTelephone +49 (0) 89/38 91-88 88Fax +49 (0) 89/38 91-7 88 [email protected]: 80791 München, Germany

Order number302-05 001

Editorial teamAnne Wolf, Thomas Loster

Editorial supportScience&MediaOffice for scientific and technological communication,Unterföhring/Munich

Karin Groß-Kaun, Beate Brix and Florian WöstCorporate CommunicationsMunich Re

DesignKeller Maurer Design, Munich

Printed byWKD Offsetdruck GmbHOskar-Messter-Strasse 1685737 Ismaning, Germany

Thomas LosterGraduate in geography; Chairman of the Munich Re Foundation

Dirk ReinhardGraduate in Industrial Engineering and Management; Vice-Chairman

Anne WolfGeographer, specialist in German studies, MBA; Project Management, Media Relations

Angelika BoosTeam Assistant

Anja MilbergQualified lawyer, licenciée en droit;Project Management (until November 2005)

Team of the Munich Re Foundation

Left to right:Angelika Boos, Thomas Loster, Anne Wolf, Dirk Reinhardand Anja Milberg

27 MarchThe Munich ReFoundation awardsthe first Munich Re FoundationEarly Warning System Prize in cooperation with the German Committeefor Disaster Reduction (DKKV).The ¤50,000 priceis in recognitionof an innovativeproject aimeddirectly at“people at risk”.

23–29 JulyWe hold the SummerAcademy on SocialVulnerability atSchloss Hohen-kammer. This conference, whichfocuses on “Globalwater hotspots”, is organised by thefoundation and theInstitute for Environment andHuman Security ofthe University ofthe United Nationsin Bonn.

September toNovember“The risks of livingin Munich” will againbe a topic of discussion in 2006.Five dialogue forumswill explore a number of riskaspects in depth.

NovemberMicroinsuranceopportunities andprospects will be on the agenda again in 2006. Thefoundation and the“Consultative Groupto Assist the Poor”Working Group onMicroinsurance, areorganising anotherconference, whichwill take place inSouth Africa.

March2006 overview

July September November

Munich ReFoundationFrom Knowledgeto Action

Munich Re FoundationKöniginstrasse 10780802 München, Germany

Telephone +49 (0)89/38 91-88 88Fax +49 (0)89/38 91-788 [email protected]

Letters: 80791 München, Germany

Documents

Annual report 2005