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TOPICSrisk solutions

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 protectionIt’s all about the mindset

ColumnInsuring means shaping the future

Dear Reader,

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 company’s 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 Re’s syndicate at Lloyd’s, 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

Yours sincerely,

Dr. Torsten JeworrekMember of the Munich Re Board of Management and Chairman of the Reinsurance Committee

NOT IF, BUT HOW

Foreword

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.

Page 4

Contents

News 2New HSB product covers cyberrisks 3 watkins syndicateFaces of terrorism 4... but no clear profile

You don’t 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 Re’s Board of Management, on worthwhile investments in renewable energies

Imprint and preview 17

2000–2010

2010–2020

2020–2030

Road Rail Telecoms Electricity Water

1,200

1,000

800

600

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200

0

2 Munich Re Topics Risk Solutions 3/2012

news

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 underwriting 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 system’s performance fails to meet the speci-fications guaranteed, Munich Re’s cover takes effect. This cover gives the manufacturer the advantage that it can remove the long-term, technical guarantee risk from its balance sheet and use the capital thus freed up for purposes such as investment. Insurance broker Marsh was Sky- Fuel’s 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 company’s 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. HSB’s 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

cyBerrisks


watkins syndicate

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

watkins syndicate

Review

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 insurance industry collaborated with the UK government to create the specialist terrorism reinsur-ance scheme, Pool Re. Property insurers signed up to Pool Re and started to offer terrorism cover to their clients again, but this time ceded the terrorism elem-ent of the risk to the Pool.

Almost immediately the Pool was put to the test, with IRA activity increasing in the UK. In 1993, a second truck bomb was detonated in London just a few me tres from the site of the first, causing similar devastation, but fewer casualties as warnings had been issued and the area evacuated. The Pool has since responded to attacks across the UK on ten further occasions.

The attacks of 9/11

The events in America on 11 September 2001 marked a sea change in both the mindset and the actions of terrorists; the world had never before seen coordin-ated terrorist attacks on such a massive scale, with appalling loss of life and destruction. Moreover, the impact of those attacks on insurance was remark- ably widespread, affecting not only the property and business interruption markets, but also liability, accident and health, aviation and contamination (asbestos), as well as standard terrorism cover.

Insurance is always adapting to changing market needs, and these events caused insurers and govern-ments worldwide to reconsider the way that terrorism insurance should be offered. The initial response of the property insurance market was to exclude cover, which prompted the creation of several government-backed schemes similar, in principle, to Pool Re in the UK.

Terror or war?

Once again, the definition of terrorism became an issue. For example, in the days immediately following 9/11, the US President’s insistence that the attacks had been an act of war against the American people led to confusion about whether the insurance re -sponse would come from the property market or the war market. This issue is also key in the operation of government schemes as, for example in the UK and Australia, it would be the Treasury Department which would determine whether an event is to be deemed an act of terrorism.

A government definition may not be enough though, and the issue may end up being decided in courts of law. History shows that what one regime might con sider an act of terrorism, a subsequent govern-ment might only describe as “riots”. Again, this poses questions for the insurance industry, since “acts of terrorism” and “riots” would be covered by different sections of the insurance market. This ideological subjectivity can be seen elsewhere; in the USA, the Worldwide Incidents Tracking System (a database created by the National Counterterrorism Center after 9/11) lists 34 incidents in the US between 2004 and 2010, including those caused by animal liberation terrorists and eco-terrorists, but does not list attacks against abortion clinics. There is truth in the cliché that “one man’s terrorist is another man’s freedom fighter”.


watkins syndicate

Topics Risk Solutions: What kind of coverage does Watkins offer against the risk of terrorism?

Sandy Cheetham: Here at Watkins, we write a good portfolio spread across a number of lines of business, offering various products to match our clients’ needs. The book remains mainly a pure terrorism account, with the vast majority of our clients still buying stand-alone terrorism cover. Clients that have exposure and assets within emerging markets tend to buy the broader “political violence” cover more these days.

Do you concentrate on special markets?

It is our aim to maintain a broadly spread portfolio of risk across mul-tiple occupations and multiple re gions around the world in order to ensure that the account has a bal-anced base and structure.

You don’t have to be the target to be a victim

In addition to writing a large UK port-folio through our service company NMU, we also write a large North American property book. The new business that we are seeing at the moment tends to originate from the Middle East following on from the Arab Spring rising back in 2011, and similarly we still see an increasing number of enquiries from Thailand following on from the riots in 2010.

What specific segments of clients do you target?

At Watkins, we aim to target a broad spectrum of clients ranging from residential, entertainment, hotels, retail and office exposures, to heavy industry, energy (extraction, process-ing, generation, etc.), con struction and mining clients – all on a world-wide basis. Our clients’ locations and assets will range from multi national entities to single risk-exposed sites. The top five drivers of premium for our account are utility power com panies, offices/residential/retail, telecoms/media, energy and con-struction.

What advantage do your clients have in buying an insurance solution?

I have worked in the terrorism market now for over ten years, and it became very apparent early on in my career that you didn’t have to be the target to be a victim. This is what we explain to our clients, asking them not whether they can afford the cover, but instead whether they can afford not to buy the cover that is available to them. The way the mar-ket has developed, we can now write specific policies to meet the clients’ individ ual needs. Be it with wording exceptions, country-specific limits, or location-specific cover, there is no “one size fits all” policy, and we like to reflect that in our underwriting.

Sandra Cheetham, expert in terrorism [email protected]

>> Products that are available at Lloyd’s: – Terrorism Only – LMA 3030 / 5039 (T3 / T3A) – Riots, Strikes, Civil Commotion (RSCC) and Malicious Damage – LP0437 / LMA392 – Terrorism, Sabotage, RSCCMD, Mutiny, Insurrection, Coup D’état, Rebellion (AFB 1-6) – Full Political Violence – including War (*) AFB1-7, (*) we currently do not write War on Land cover at Watkins – Terrorism Liability – T3L / T3EL – Event Cancellation Cover (Terrorism Specific)

with more than ten years of experience in insuring terrorism risks, sandra cheetham knows what she’s talking about. at watkins, she writes specific policies designed to meet customers’ individual needs.


Wilful damage or sabotage

The Naxalite Maoist insurgency is still active in India. As in Peru, there is anxiety that the rural populace is being denied proper access to land and produce and not benefiting from mining and hydro-power devel op-ments. The Indian government has recognised that there are some legitimate concerns, but remains con-vinced that the Naxals’ prime intention is to establish a Marxist Indian state. Rather than strikes, their action generally takes the form of targeting large energy in stallations. Pakistan also sees attacks on its energy industry, while oil and gas pipelines are a popular target in Turkey. This focus on the infrastructure is de signed to raise awareness and cause disruption, rather than any loss of life.

Generally, in cases where a group’s motivation is economic or political, its actions tend to be very specific ally targeted malicious damage or sabotage, normally aiming to disrupt rather than kill, since the group hopes to avoid the backlash that might well follow fatalities. Some religiously motivated groups may not have the same inhibitions as their frame of reference is apocalyptic; to die for one’s faith is a glorious death that will guarantee entry into paradise, while non-believers are largely irrelevant or may even be con sidered legitimate targets. The attacks on the US embassies in Kenya in 1998, attributed to the Egyptian Islamic Jihad, killed at least 223 people and in jured in excess of 4,000.

It is interesting to compare the terrorist acts of the FARC in Colombia with those committed by al Qaeda and the war in Afghanistan. The FARC, which is clas-sified as a terrorist organisation, holds territory in the country and generally only attacks military and eco-nomic targets – characteristics which are intrinsically “warlike”. In Afghanistan, which is internationally accepted as a war zone, al Qaeda does not hold terri-tory in the same way and targets civilians and military indiscriminately.

Political violence

Economic uncertainty has also provoked acts of polit-ical violence. Austerity measures in Greece triggered widespread civil commotion as the population felt the financial effects of public sector pay cuts, pension reductions and tax increases. The fear of a population which felt disenfranchised by its own government found expression in violence. Civil commotion is also common in South America; strike action is a develop-ing problem in Ecuador and Peru, where the local populace fears that it will not reap the benefits of the gold mining industry – concerned that the country’s assets are being stripped without any commensurate increase in local prosperity or investment in local infra structure.

watkins syndicate

Munich Re Underwriting Limited is the managing agency for the Watkins Syndicate (also known as Watkins Underwriters at Lloyd’s), one of the largest marine insurance underwriters at Lloyd’s. The Watkins Syndicate – founded in 1977 and acquired by Munich Re in 1997 – has earned a leading position and an outstanding reputation for top- quality underwriting.

Watkins Syndicate is comprised of experienced underwriting teams in the areas of cargo, liability, energy, space, specie, transport and logistics, yacht and marine trade, war, terror-ism, and accident and health. Main-taining a global network of service companies, it is located throughout the UK, Ireland, the United States, as well as in Asia, with offices in Hong Kong, Singapore and Dubai. A separ-ate unit, Watkins Marine Services, is dedicated to transportation-related and energy risk management.

Additional services include a highly respected claims management team that works closely with insureds and underwriters to ensure high-quality claims handling.

Watkins Syndicate also provides a range of professional risk manage-ment services, including site inspec-tions, risk audits and support in optimising the insured’s risk profile. Marine project management is available for construction under- takings.

With a business culture that encour-ages excellence and innovation, the Watkins Syndicate is dedicated to delivering solutions that give its clients a competitive edge.

Watkins Syndicate


Greater significance of security arrangements

In conjunction with insurers, risk assessment has even greater importance than before, and specialists will advise on security arrangements to mitigate risk. Although, in general, security tends to be designed more for theft reduction, it has the added benefit of making property less accessible and better monitored – and therefore a more difficult target for terrorists. Furthermore, risk assessors will look further than the insured property. An insured might be quite confident that they would not be a target for an extremist group, but what if another company working in the same building is testing products on animals? Or if the neighbouring tenants support a particular polit ical regime? Terrorist attacks may be quite indiscrim inate, and you needn’t be a target in order to be a victim.

Intensive cooperation with insureds

The evolution of the terrorism market also delivers clear benefits to the insured party. There is now great expertise in the market, which offers a range of products covering all forms of political violence. Underwriters are keen to work with insureds to offer a product that fully meets their needs and fits around existing policies and government-backed schemes. Moreover, insureds can take comfort that the new transparency of wordings ensures that coverage is full and effective. The changing faces of terrorism that challenged the insurance market have now engendered new standards of expertise and professionalism.

The vast majority of the victims were local people; 12 Americans died. The Kenyan bombings were easy to classify as terrorism, yet terrorism has many different faces, with riots, strikes and civil commotion at one end of the scale, moving through malicious damage, insurrection, revolution, mutiny and finally to war at the other end.

Lack of clarity led to uncertainty

Classifying every act of political violence is a complex issue often involving bias, and this lack of objectivity has a great impact, particularly for multinational corporations, which may find that different perils are covered differently across the world, and potentially, by different policies. Underwriters in Lloyd’s and elsewhere saw that there was a need to enhance the exist ing cover by filling gaps in coverage and elimina-ting duplications and so started to develop specialist, stand-alone terrorism products.

With these products came a new approach to risk assessment, a new level of sophistication in research and exposure modelling, and particular attention to the scope of coverage.

Development of standard wording

Lloyd’s developed a standard wording designed to dovetail cover around that which was offered by Pool Re and, in some cases, broaden the cover. For example, Pool Re limits cover to acts which are in -tend ed to overthrow or influence the government, whereas the Lloyd’s wording extends cover to acts committed for political, religious or ideological pur-poses. Alongside the Lloyd’s terrorism wordings, there also exist stand-alone policies that target specific nuclear, biological and chemical risks and the political violence risks of riot, strikes, civil commotion and re lated perils.

Insurers have learned that they need to be more pre-cise and careful with their policy wordings. In cases where an “all risks” policy is silent on the subject of terrorism, cover is deemed given. Similarly, where there is the risk of duplicating cover, it has become common for the underwriter to insert a clause stating that in the case of duplication, the political violence cover will sit in excess of the “all risks” cover.

Narrower definitions of loss events

Wordings have also become tighter on definitions of events, for example in determining whether a series of coordinated attacks constitutes one event or several. Again, this was a question raised after 9/11, when the lessee of the World Trade Center argued that the attack on – and subsequent collapse of – the two build ings were two separate events. This has been addressed by the “72 hour” clause, i.e. that any subsequent event which occurs within 72 hours of the first event and which can be shown to have had the same proximate cause as the first event is to be treated as part of the same event.

watkins syndicate

The attacks of 11 September 2001 led to changes in airport security requirements around the world.


Michael Mowrer, Executive Vice President of HSB Professional Loss Control, was a firefighter himself.

Fire Protection

mike mowrer has more than four decades of experience in fire loss prevention. his take on the subject is that the main factor in successful risk management is not expensive technology, but the mindset of the management.

It’s all about the mindset


Topics Risk Solutions: Mike, you look back on 40 years of experience in fire loss prevention. What can you say about the trends you have seen during that time?

Michael Mowrer: It is surprising that we seem to have the same problems over and over again. It’s not that we don’t know better, but we keep making the same mistakes that result in big losses to property or lives.

Why are you so pessimistic?

I think of the Triangle Shirtwaist fire, which took place in a sweatshop in New York more than 100 years ago. The doors were actually locked at that time. One hundred forty-six people were killed, and it was the largest industrial loss of life in history until 1993, when there was a big fire at a toy factory in Thailand. It was a very similar event, and almost 190 people were killed. Again, it was a kind of a sweatshop working environ-ment with inadequate emergency exit arrangements. And events of this kind still occur, although less fre-quently. There was a fire in 2010 in Bangladesh at a garment operation in a high-rise building. And again, doors were locked. There were about 30 fatalities.

HSB operates globally. What differ-ences do you see in fire protection standards?

There are differences, for example, between the USA and Europe. Here in America we put a lot of emphasis on automatic sprinkler systems. In Europe, there is more dependence on public fire brigades.

It is also a question of what the laws require, but more often that is not the only issue. For example, we had a fire in the USA in the early nineties at a food processing facility – they cooked chicken – and there were doors locked at that occupancy. The fire killed 25. So even though you have laws – and I don’t know that our laws are that much different from those in Asia for something as basic as life safety – the issue is that most of our enforcement of laws tends to be after the fact, which is under-stand able since public resources are limited.

What can the insurer do?

And that is one of the roles that can be very important for the property insurance carrier. When we conduct surveys of facilities – mostly large industrial or large, high-value facil-ities – we give a realistic view of the hazards and what kind of protection is provided. The exposure can be occupancy-related – at a chemical facility you will find flammable liquids, or it could be a fireworks manufacturer where you’ve got explosives, a munitions plant where you have very high hazards, or it may be something like a warehouse where there are lots of combustibles. The law may require a certain level of protection, but not always the ade-quate level from a financial perspec-tive. Regulations can sometimes be more focused on the protection of people than of assets.

What else does this involve?

Effective protection must also include management programmes. “What kind of fire prevention pro-grammes do you have? Do you have education for the employees? Do you have a private fire brigade? Do you have procedures in place to control ignition sources, like hot work per-mits?” And frankly, probably the most significant issue is: “What’s man age-ment’s attitude toward protection?”

To what extent is it part of your ser-vice to help cultivate that kind of a proactive risk management attitude?

It is really fundamental. When we go to a site we always involve manage-ment. They participate in the survey, so we can get information on the occupancy and what the various process hazards are. At the end of a survey, we always sit down with the management and describe what we have found. “What are the problems? What do you need to work on?” That is when you can see what their approach is – “Thanks. We’ll see you in a few years.” Or, “Wow, that is really important and we want to do something about that.” Then we develop a report that not only identi-fies the problems and makes recom-mendations, but tries to categorise the recommendations so they have a better idea of where to put their emphasis. That information is not only important for management, but that same information is what the insurance company uses to evaluate the quality of the risk.

Fire Protection


Fire Protection

What kinds of risk awareness have you encountered among corporate managers?

I can’t help but think of a graphic example from my personal career. Most of my work has been focused on nuclear hazards – nuclear power plants, nuclear weapons plants and research facilities. For several years, I was doing work as a consultant at a site operated by a contractor for the government. This particular con tract or was fanatical about fire protection and safety. They were very good at training and telling people what they had to be careful about. The facility had several thousand employees. Then the contractor was re placed along with the top man-agers.

In a matter of just a few months after that change, it was amazing to see how radically different the culture was. You had the same hazards, the same protection and the same work-ing personnel, but the attitude had changed for the worse. You could really see how the risk environment had physically changed just because of the attitude of the very top management.

Was that case unique?

I’ve also done a lot of work at com-mer cial power plants. And you see the same thing comparing two iden-tical coal-fired plants in different places. Management’s attitude in one is: “Well, coal plants are dirty and you can’t really keep them clean.”

Dust accumulates and now you have potential for fires and explosions. While the management attitude down the street is: “We’re going to have a clean plant – you can eat off the floor.” It takes work, but it can be done, and the hazard is significantly reduced. It all goes back to what management thinks.

So attitude has a very top-down, trickle-down effect?

That’s exactly the point. And that is why we think it is so important to spend time educating management so they understand what the prob-lems are and what can be done. Sometimes that is all it takes for managers to recognise the need and say: “Okay, that’s something I can do and I’m going to focus on it.”

When you talk about education and attitude, you are not necessarily talking about hardware or big invest-ments, are you?

That’s right, it’s all about attitude and mindset. If management says: “Safety is important, and we are going to provide a safe working en -vir onment”, that attitude goes to the workers, and they are going to be more focused on safety. If there is a “who cares” attitude in top manage-ment, that shows up in the worker very, very quickly.

Hartford Steam Boiler, a member of Munich Re’s Risk Solutions family since 2009, provides a range of specialty insurance coverages for business, home and farm. One of the world’s leading equipment break-down insurers, HSB helps clients reduce risk through a unique com bination of specialty coverages, en gineering-based risk management strategies and loss reduction ser vices. A.M. Best Company has awarded the HSB Group of com-panies its highest financial rating, A++ (Superior).

Hartford Steam Boiler sets the stand ard in equipment breakdown and other specialty insurance world-wide, with technical knowledge, superior risk solutions and customer commitment you can count on, backed by 145 years of leadership. HSB shows you how to stay ahead of emerging risk challenges in a com-plex world.

Hartford Steam Boiler (HSB) is a leader in equipment breakdown and other specialty coverages, inspection services, loss reduction and engin-eering-based risk management for business, home and farm. Today, as a proud member of Munich Re, we are continuing our tradition of excellence using our technical knowledge to help clients manage risk and opti-mise their business results.

HSB is rated A++ (Superior) by A.M. Best Company. As part of Munich Re, we have the ability to leverage a glob al knowledge base to develop and deliver innovative, forward- think ing risk solutions to help our clients manage risk in a complex and evolv ing world.

The HSB difference is grounded in extensive technical knowledge, devel oped over 145 years and en -hanced by our relationship with Munich Re. Our inspection force is one of the largest in the world, with over 1,200 engineers, inspectors and technical personnel around the globe. Our longstanding focus on excellence, dependability and collab-oration has earned us a reputation for understanding the challenges facing our customers and delivering superior risk solutions and coverages that our clients can count on.

Hartford Steam Boiler is headquar- tered in Hartford, Connecticut, USA. Through our affiliates in Canada and the UK, we serve businesses, indus-tries and institutions worldwide.

Hartford Steam Boiler


Fire Protection

Does that mean there is a lot of low-hanging fruit for companies willing to improve their management’s safety attitude?

Yes. And it is so critical. If you can improve just one thing, management attitude is that one thing. From an insurance standpoint, if I were an underwriter and read a report that says: “Here’s a reasonably well protected plant, but management attitude is very poor”, I’d have to stop and think. If I read a report about the same kind of facility and protection that says: “Management is absolutely enthusiastic and focused on the softer side issues”, I’d put my money on that one every time.

You and your colleagues are involved in a number of organisations that directly impact codes and standards related to fire protection.

HSB PLC is very active on a pro bono basis in several fire-protection- re lated organisations. The biggest in the USA is the National Fire Protec-tion Association.

We participate in many of their tech-nical committees, where we help shape the standards. Another one is the Society of Fire Protection Engin-eers. We also participate in the Edison Electric Institute Fire Protec-tion Task Force, which is an electric utility organisation. This is one of the ways we give something back to the communities we work in.

You have seen a great deal over the past four decades. Where do you feel the market is going?

One of the things is a movement toward performance-based codes and standards. In the past, the USA was focused on prescriptive codes. Here is the hazard, here is exactly what you have to do. The new per-form ance-based philosophy requires a lot more engineering evaluation, because you have to say: “Here is the hazard, and I am going to provide a reasonable level of protection by doing something different.” That demands a lot of interaction with the code enforcement people. If I build a new facility and want to meet the intent of the requirements, now I have to do an engineering evaluation to justify it to the code officials.

For example, a large chemical facility is being built not far from here. The fire protection codes are very specific. But a lot of the chemicals in the process are water-reactive, so you cannot use a normal approach. You need alternatives, which means working with the code enforcement people to demonstrate that it is an appropriate level of protection. That’s where we are headed, not only in the USA, but around the world. We are getting more and more performance-based, which is very engineering-intensive.

Firefighters in action. Proper risk management helps to reduce the likelihood of fire enormously.


PASSION FOR PROTECTION

With more than 43 years of fire protection engineering experience with heavy industry, Michael Mowrer, Registered Professional Engineer, is one of the world’s leading experts on fire protection. He has been with Hartford Steam Boiler (HSB) for more than three decades, participating in a wide variety of fire protection projects with primary emphasis on electric utilities.

His areas of specialisation include project management, fire protection programme review, life safety surveys, evaluation of facilities with re spect to the Occupational Safety and Health Administration (OSHA) and National Fire Protection Associa-tion (NFPA) standards in the USA, esta b lishment and review of fire detection and suppression system design criteria, fire protection training, audits and HPR property inspections, and development of fire hazards analyses.

Fire Protection

It sounds like a lot more innovation is called for.

That’s right. And it’s not just innova-tion: you have got to get agreement from enforcement people that it is adequate protection. Particularly in the USA, where there is a strong tendency toward lawsuits, when you do something creative that meets the intent rather than the letter of the code, you absolutely need that agree-ment.

Speaking of worldwide trends, HSB became part of Munich Re – a very international company – a few years ago. How has that affected your work?

It’s been really interesting. Especially since last year, we have been working very closely with the people in Munich as they have reorganised their loss control engineering.

One of the things we’re doing is look -ing at property loss control reports like the ones I mentioned and telling the underwriters whether the facilit ies are missing basic protection features. And we also do physical surveys – we have people working on projects in the Philippines, Canada, as well as Central and South Amer- ica – in addition to the USA. So we have a great relationship with the Munich Re organisation.

In closing, what do you like most about your work?

I got my degree in fire protection engineering, and my career has been wonderful. I feel like I have seen just about every kind of industry over the years. And there are not many people who can look back and say: “I am confident that I have saved lives, and I have positively impacted potential for large property losses.” There is a lot of satisfaction in knowing you are making a real difference.

He has developed and presented more than 175 seminars in North America, Europe, and Asia on fire pro-tection for nuclear and fossil fueled power plants, fire protection design, fire watch training, NRC fire protec-tion requirements, industrial fire hazards, fire brigade leadership, and fire emergency planning.

Before 1972, he was also involved in the evaluation of public water supplies and the level of public fire protection provided for communities throughout the State of Missouri. An experienced volunteer firefighter, Michael Mowrer is Fellow of the Society of Fire Protection Engineers and Member of the National Fire Protection Association in the United States of America.

[email protected]


Risks are becoming more complex, and new risks are constantly emerging.

Companies increasingly need a strong partner to help minimise their risks and safeguard their financial and innovation capacity.

Our operational field Risk Solutions will develop a customised, made-to-measure insurance solution for you, too. Our clients benefit from our experi ence, commitment and innovative drive.

You can find the right contact partner quickly and simply with our Risk Solutions Quickfinder at www.munichre.com/rs.

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you want to minimise risks and safe guard your innovation capacity ?


column

renewable energies

There are lots of reasons why it is necessary to restructure the energy sector, but two in particular are well known: first, greenhouse gases from fossil raw materials aggravate global warming and thus contribute to the increase in extreme weather events. Second, fossil raw materials are finite. Even though we cannot be sure when the last oil reserves will be tapped, humanity’s ever-grow ing hunger for energy leaves us no choice but to shift to renew-able energies.

Against the background of ongoing climate change, the international insurance industry is making an important contribution not only to the success of restructuring, but also to speeding it up. Insurance relieves entrepreneurs and their financial backers of some of their risks, there- by facilitating investments in new technologies.

“Manufacturers who are in sured have a competitive edge.”

Munich Re has played a pioneering role here for many years, and our commitment is part of our long-stand ing strategic orientation. In recent years, we have developed a series of innovative insurance solutions.

Thomas Blunck, member of Munich Re’s Board of [email protected]

Our performance covers give manu-facturers of solar modules or wind power plants long-term protection and their investors the desired plan-ning certainty. For manufacturers, what this actually means is that they can remove the decades-long war-ranty risk from their balance sheet, thus reducing their financial liabil-ities and freeing up capital for new investments. Another added value is the technical reliability that this cover indicates. Manufacturers who are insured have a competitive edge.

One of our newest products, the Option Cover, goes one step further, complementing the existing perform-ance guarantee cover for photo-voltaic manufacturers with a new insurance solution to their insolvency risks, thus providing additional investment protection. This solution covers plant operators against the risk that solar modules may over time fail to produce the output guaranteed by the manufacturer, but it can no longer be held liable for its war-ranties due to insolvency. The cover makes it easier for banks and invest ors to plan both the return on investment and other key financial para m eters over what is generally a very long project life cycle and thus affords greater security that the project’s debt can be serviced.

Only a few weeks ago, we for the first time insured performance guaran-tees for solar thermal power plants, specifically for parabolic trough elem ents used in CSP (concentrated solar power) technology.

Other products that we are working on are, for example, cover in respect of the risk of failure or the reduced performance of special ships or assembly cranes of offshore wind power plants, performance guaran-tee cover for offshore wind power plants, and also cover in respect of the performance of biomass and solar-thermal power plants.

Investments in new tech nol o gies will pay off

I am sure that investments in new technologies, combined with the right insurance cover, will pay off – and indeed for all of us. In part because, by expanding renewable energies, we will also be able to con-strain further global warming.

Insuring means shaping the future

Breaking news In our media-driven society, it is fairly common to see the actions of companies and individuals unfairly focused upon and often misconstrued. This focus can lead to reputa-tional damage for the parties involved. As a consequence, sales can drop significantly, thus causing severe liquidity problems. Investors and analysts will notice and judge accordingly – with even more impact on the balance sheet.

>> You can also order Topics Risk Solutions as an e-mail newsletter at www.munichre.com/trs/en/newsletter

© 2012Münchener Rückversicherungs- GesellschaftKöniginstrasse 10780802 München GermanyTel.: +49 89 38 91-0Fax: +49 89 39 90 56www.munichre.com

Responsible for contentGroup Communications

EditorRegine KaiserGroup Communications(address as above)Tel.: +49 89 38 91-27 70Fax: +49 89 38 91-7 27 [email protected]

Picture creditsCover: Corbis/Monty RakusenInside front cover: Robert Brembeckp. 1: picture-alliance/Steve Parsonspp. 2, 13: Shutterstockp. 3: picture-alliancep. 4: Getty Images/Fusep. 7: Charles Sturgep. 9: ddp images/AP/Gene Blythepp. 10, 14: Charles Brooks/Charles Brooks Photographyp. 15: plainpicture/ George Hammersteinp. 16 Illustration: Kevin Sproulsp. 16 Photo used for illustration: Munich ReInside back cover: picture-alliance/dpa/Abaca

Editorial deadline5 June 2012

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Corporate Insurance PartnerOffers holistic insurance protection for industrial and corporate clients throughout the world. The portfolio includes cover concepts for prop erty, energy, engineering, casualty and special enterprise risks, with specific solutions for contingency risks.

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Preview of issue 4/2012

Hartford Steam BoilerLeading monoliner and inspection company for engineering risks. Apart from engineering covers, its range also includes specialty and engineering solutions, claims management and risk management services.

www.hsb.com Tel.: [email protected]

KA Köln.Assekuranz Agentur GmbHInternationally active underwriting agency for industrial risks, specialising in marine and group accident insurance.

www.koeln-assekuranz.com Tel.: +49 221 3 97 61–200 [email protected]

Watkins Syndicate 457Lloyd’s biggest marine insurer with an extensive portfolio of solutions for accident and health, liability, cargo, marine and logistics, offshore energy, space flight and yachts. The Watkins Syndicate operates its own department for terrorism risks.

www.watkins-syndicate.co.ukTel.: +44 (0) 20 7886 [email protected]

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© 2012Münchener Rückversicherungs-GesellschaftKöniginstrasse 107, 80802 München, Germany

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