Insurance solutions for industryIssue 3/2012
Facing terrorist risksNew products ensure improved levels of transparency. PAGE 5
Cyberrisks New product off ers comprehensive protection
Fire protectionIts all about the mindset
ColumnInsuring means shaping the future
Demand for our young magazine is growing, which is of course very pleasing and encouraging to us. Despite that, I am often asked: What is Risk Solutions actually? Let me explain it with reference to the topics dealt with in our current issue:
Breaches in data security, fraud or identity theft can jeopardise a companys economic success from one day to the next. With that in mind, a combined insurance cover against a variety of cyberrisks is now available in the US market.
Terrorism has many faces so insurance solutions need to be just as versatile. That is why Watkins, Munich Res syndicate at Lloyds, has collaborated clo-sely with other syndicates to develop special covers for terrorism risks and made the wording as well as the terms and conditions of terrorism policies clearer and more precise.
Experience indicates that preventive measures are an essential factor in avoiding fires. Our experts at Hartford Steam Boiler consequently offer our clients support in optimising their risk management.
That is the essence of our operating field Risk Solu-tions: custom-tailored solutions for industry and major corporations which take your risk management seriously and provide the protection you need and want.
Munich, June 2012
Dr. Torsten JeworrekMember of the Munich Re Board of Management and Chairman of the Reinsurance Committee
NOT IF, BUT HOW
1Munich Re Topics Risk Solutions 3/2012
Better safe than sorrySearching baggage is one of the daily security routines practised at air-ports all over the world. It can help to prevent terrorist attacks on aircraft.
News 2New HSB product covers cyberrisks 3 watkins syndicateFaces of terrorism 4... but no clear profile
You dont have to be the target to be a victim 7Underwriter Sandra Cheetham explains insurance products offered by Watkins
Fire ProtectionMotivation counts 10Fire protection involves more than expensive hardware
columnInsuring means shaping the future 16Thomas Blunck, member of Munich Res Board of Management, on worthwhile investments in renewable energies
Imprint and preview 17
Road Rail Telecoms Electricity Water
2 Munich Re Topics Risk Solutions 3/2012
natural hazards Weather risks in North America
Weather-related risks in North Amer-ica are in a state of constant flux as a result of natural climate cycles and, increasingly, anthropogenic climate change.
In our forthcoming publication, Weather risks in North America, we conduct an in-depth analysis of the atmospheric hazard situation on that con tin ent, including hurricanes, tor nadoes, winter storms, floods, wildfires and droughts. In addition, the brochure looks at risk exposure and provides an overview of the various aspects involved in under- writing weather-related risks in the USA and Canada. >> Further information may be found at www.munichre.com/publications
Munich Re employs over 140 engin-eers throughout the world. We regu-larly arrange individual and practical training courses to help them keep abreast of the latest developments in their respective fields. In addition, our engineers take part in an inten-sive training programme that can last up to 24 months. This programme takes them through a variety of dif-fer ent topics, including calculat ing risks in underwriting, claims preven-tion, and effective claims manage-ment. The individual training also involves spending several months at one of our offices abroad to intensify their market-specific knowledge. The so-called Engineering Days at Munich Re reinforce the global net-working of our engineering know-ledge to the benefit of our clients.
engineering Leading through knowledge
ciPPerformance guarantee for solar power plants
For the first time, Munich Re is in -suring performance guarantees for concentrated solar power (CSP) plants. This cover for the parabolic trough components used in CSP systems produced by the US manu-facturer SkyFuel is a new addition to our range of innovative insurance solutions for renewable energy tech-nologies. SkyFuel gives customers all over the world performance guaran-tees of up to five years for thermal efficiency and of up to 20 years for specular reflection. If the systems performance fails to meet the speci-fications guaranteed, Munich Res cover takes effect. This cover gives the manufacturer the advantage that it can remove the long-term, tech- nical guarantee risk from its balance sheet and use the capital thus freed up for purposes such as investment. Insurance broker Marsh was Sky- Fuels risk advisor on this transaction.
Estimated average annual world infrastructure expenditures in US$ bn
source: oecd, infrastructure to 2030: telecom, land transport, water and electricity, oecd 2006
Munich Re Topics Risk Solutions 3/2012 3
Data theft can be very costly and tarnish a companys good reputation.
In view of the rising incidence of data breaches and the serious threats of identity theft and fraud, cyberrisk coverage is important protection for any company and can help it avoid financial losses and damage to its reputation.
HSB Freestyle Advantage is the first insurance product to combine equipment breakdown cover with optional data compromise and identity recovery cover. HSBs Data Compromise and HSB Identity Recovery covers are now available with HSB Freestyle Advantage in the United States (subject to state approvals).
Comprehensive protection The insurance automatically includes cover for mould, worldwide off-premises cover, and the costs of restoring data that were lost or damaged due to a breakdown. The policy also offers increased cover for upgrading to more energy-efficient equipment and additional green equipment breakdown cover.
HSB Freestyle Advantage offers the unique benefit of combining data compromise and identity recovery covers with the broadest equipment breakdown insurance available today. >> More information at: www.hsb.com
5Munich Re Topics Risk Solutions 3/2012
Faces of terrorism
the evolution of covers for terrorism risks delivers clear benefits to insureds.
Baggage left on the platform. A potential threat?
If you were to conduct a survey among people includ-ing politicians, entrepreneurs and members of the armed forces asking them to define terrorism, there would be no clear result. They would agree only on some aspects, for instance that terrorism seeks to cause human suffering, to instil widespread fear and to disrupt life and business. And that terrorism often aims to spread fear beyond the immediate victims. One example: The 1972 Olympic Games in Munich were overshadowed by the actions of the Palestinian terrorist organisation, Black September, which re -sult ed in the deaths of eleven members of the Israeli Olympic team. It is estimated, however, that there were one billion television spectators who were also effectively targeted by this terrorist action.
Up to now, there is no universally accepted definition of terrorism. Even within governments, it can be hard to reach a consensus. For example, the Federal Bureau of Investigation in the USA defines terrorism as per the Code of Federal Regulations as the unlaw-ful use of force and violence against persons or pro-perty to intimidate or coerce a government, the civil-ian population, or any segment thereof, in furtherance of political or social objectives (28 C.F.R. Section 0.85), while the US Department of Defense and the US Department of State use different definitions.
The British government currently uses the definition from the Terrorism Act (2006), which states that an act of terrorism is an act the use or threat [of which] is designed to influence the government or an inter-national governmental organisation or to intimidate the public or a section of the public, and ... [which] is made for the purpose of advancing a political, reli-gious or ideological cause. What does this mean for insurers?
by Sandy Cheetham and Sara Roberts
Munich Re Topics Risk Solutions 3/20126
Traditionally, terrorism coverage was wrapped up in the standard cover offered by the property market, but the Baltic Exchange bombing in London in April 1992 was pivotal in altering the UK insurance market. The early 1990s saw a fresh wave of terrorist activity in London by the Irish Republican Army (IRA), which exploded a large truck bomb outside the Baltic Exchange, killing three people, injuring nearly 100 and causing property damage amounting to 900m. This was 226m more than the total financial cost of all the previous explosions relating to the troubles in Northern Ireland up to that point, and its impact on UK property insurance was profound, as it prompted a widespread withdrawal of terrorism as a peril from property cover.
At the time, quite apart from the risk of a major loss, the complexities of estimating exposures were almost insurmountable, and there was no reliable method of accurately calculating premiums.
However, leaving London or any area of the market without adequate insurance cover was potentially threatening to the stability of the UK economy, and the i