What happened in the Engineering Insurance Market in the ... · Executive Summary 2017/18. Costliest hurricane season ever Potentially costliest construction loss ever Soft signs

IMIA Conference 2018What happened in the Engineering Insurance Market in the last 12 Months

Singapore, September 2018Stephan Lämmle, Munich Re

Image: S. Lämmle, MR

Executive Summary 2017/18

Costliesthurricane

season ever

Potentially costliest

construction loss ever

Soft signs of market

stabilisation

Construction 4.0 and energy market trends

continue to offer new

opportunities

4 September 2018IMIA Conference 2018 2

Agenda

Image: used under license from shutterstock.com

Engineering market 1. Current projects2. Energy3. Potential

1NatCat1. Climate Change & NatCat Developments2. Hurricanes HIM3. Wildfire California

2Engineering Insurance Market 1. Current market status2. M&A’s3. Sustainability

3

Loss Examples4“The future has already started yesterday” – Trends 1. Energy2. Infrastructure/Construction3. Cyber Risk

5

Summary & Outlook64 September 2018IMIA Conference 2018 3

Projects What was on in 2017–2018?

4IMIA Conference 2018

Bridges Ports

Source: H.Reiner, MRImage: H.Reiner, MR

Ports Country Contract ValueMozambique Rail and Port Project Moz USD 2,3 bn

Taman Sea Port Russia USD 2,0 bn

Bridges Country Contract ValueGordie Howe Bridge, Detroit/Windsor USA/Canada CAD 2,7 bn

Canakkale Bridge Project Turkey EUR 1,7 bn

ICA Northern Marmaray and 3rd bridge Turkey USD 3,9 bn

New NY Bridge USA USD 4,4 bn

4 September 2018

182 m high Concrete Faced Rockfill Dam (CFRD)

3 x 205 MW Francis turbines

BOT 25 year concession period project for the Government of Lao Peoples Democratic Republic (GOL)

Developed by the Nam Ngum 2 Power Company Ltd. (formerly called SEAN – Southeast Asia Energy Ltd.).

ECV US$ 640 million

Scheduled construction time: 58 months

Nam Ngum II Hydroelectric Power Project HEPP Laos

Image: Heiko Wannick, MR


Image: Heiko Wannick, MR

4 September 2018



Airports Hydro Power Plants

Image: H.Reiner, MRImage: Source: Changi Airport Group

Hydro Power Plants Country Contract ValueBatang Toru Hydro Power Plant Indonesia USD 1,3 bn

Huanghe Hydro Power Development China USD 2,0 bn

Koysha Hydroelectric Project Ethiopia USD 2,5 bn

Airports Country Contract ValueWestern Sydney Airport AUS AUD 4,2 bn

Newark Airport - Redevelopment Terminal A USA USD 1,4 bn

Denver Airport Extension Tier I & II USA USD 1,8 bn

NYC La Guardia Airport Expansion USA USD 15 bn

4 September 2018



High Rise Tunnel

Tunnel Country Contract ValueBrenner Basistunnel – Pfons-Brenner Austria EUR 1,4 bn

Ismailia Rail+Road Tunnels Egypt USD 2,0 bn

Melbourne Metro Tunnel Project AUS AUD 10,5 bn

West Gate Tunnel (Western Distributor) AUS EUR 3,1 bn

Image: H.Reiner, MRImages: S. Lämmle, MR Image: S. Lämmle, MR

Buildings Country Contract ValueWashington State Convention Center Addition USA USD 1,1 bn

Tishman Speyer Hudson Yards Spiral Tower USA USD 3,5 bn

Signature Tower Jakarta IND USD 1,7 bn

Yas Island Development Project, Abu Dhabi UAE EUR 5,8 bn

4 September 2018

Cable Car Zugspitze

Zugspitze, Germany

Image: Stephan Lämmle, Munich Re


Total length: 4.5 kilometers

Difference in altitude: 2,000 meters

Total cost: EUR 50 million

Records: highest support pillar ww

127 meters longest flying of a cable car

3,213 meters without support

Capacity per cabin: 120 people/ 700 passengers per hour

So far, only 300 passengers were possible

Technical data Summit: Zugspitze Length: 4.467 m

Mountain terminal (platform height): 2.950 m asl Difference in elevation: 1.945 m

Capacity of vehicle: 120 persons + 1 cabin guard Capacity per hour: 700 Persons

Height of steelwork pylon: 127 m Longest span: 3.213 m

Number of vehicles: 2 cable-mounted cabins Travel speed max.: 10,6 m/s

4 September 2018

Riyadh Metro


Riyadh Metro, Saudi Arabia: $23.5 billion investment

Comprises 109 miles of railway

Begin operation set by 2019.

Six metro lines build simultaneously by three different consortiums.

Stations are deep underground, shallow underground, elevated

The underground section consists of 10 m diameter TBM driven, single tube tunnel and cut-and-cover section

Images: Heiko Wannick, MR

4 September 2018

Agenda





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Trends in Operational Power Next Generation “G, H, J” Class Combustion Turbines are Online


1. Comprehensive combustion turbine factory test stand validation.

2. OEM enhanced warranties

3. Plug & Play auxiliaries = Lower construction human error

4. Trend to Air-cooled combustion turbines not tied to bottoming cycle

5. Cleanest available fossil power plant technology

6. Initial claims activity is favourable

7. Initial claims covered under warranty

1. Higher power density (MW output / BI exposure) and greater PD values

2. Higher engineering complexity, manufacturing difficulty: casting, blade cooling, 2 Layer TBC, Ultra Low DLN

3. OEM announced CT upgrades before base model is proven

4. Titanium CT Compressor blades and LP steam turbine blades

5. Multiple stages of CT compressor variable guide vanes

6. Super-alloy rotor components

7. OEM warranties are not created equal

Favorable Conditions Conditions On The Watch List

Continue to monitor fleet leader field issues

4 September 2018

Development of GTS Power Output

0

100

200

300

400

500

600

39 45 48 64 70 77 82 85 93 96 98 2003 2011 2017


1.000 °C

1.100 °C

1.200 °C

1.300 °C

1.400 °C

1.500 °C

1.600 °C

1.700 °C

H/J-class

G-class

F-class

E-class

220-265 MW

120-170 MW

<300 MW

300-500MW

Firing class (only Heavy Duty)


Solkiss to build world’s largest rotating solar plant in South Korea

Image: dpa / picture alliance / Wang Wen / Imaginechina

14IMIA Conference 2018 4 September 2018

Solkiss 465 kW Rotating Solar Plant

Solkiss, which specializes in the development of floating solar arrays, has revealed details of its proposed 2.67 MW PV project at the Deoku Reservoir.

The installation will not only float atop the water but will also follow the sun’s movement throughout the day.

Levelised costs of energy are anticipated to drop between approximately 10-14 % for every doubling of installed capacity

Large Projects – Floating Windfarm

Growth in size of wind turbines prospects; source EWEA


Power to X


Jet fuel production pathway Technology Readi-ness Level (today)

Critical element (e.g. determining bandwidth bottom)

PtL 5–8 CO2 extraction from air (TRL 6)Fischer-Tropsch (low-temp) 6 reverse water gas shift (RWGS)Fischer-Tropsch (high-temp) 5 high-temperature electrolysis (SOEC)Methanol (low-temp) 8 ASTM approval, final conversionMethanol (high-temp) 5 SOEC, ASTM approval, final conversionBtL 5–9 Gasifying feedstock other than woodFischer-Tropsch pathway 5–9Methanol pathway 5–8 ASTM approval, final conversionHEFA (Hydroproccessed Esters and Fatty Acids) 4–9 Feedstock

Used cooking oil 9 quantity, logisticsPalm, rape seed 9 sustainability, quantityAlgae 4–5 reactor, extractionHTL (Hydro-Thermal Liquefaction) 4–6 FeedstockWastes/residues 6 quantity, structureAlgae 4 reactor, extraction, conversionAtJ (sugar, starch) (Alcohol-to-Jet fuel)

5–9 Feedstock quantity

SIP (sugar) (Synthesized Iso-Paraffins) 7–9 Feedstock quantity

Current Technology Readiness Levels (TRL) of production pathways to renewable jet fuel

Source: LBST

4 September 2018

Agenda





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China has overtaken North American and European economies to become the largest investor in infrastructure

4 September 2018 18IMIA Conference 2018

Global spending on economic infrastructure 2006–2015 as % of GDP The majority of infrastructure investment has been concentrated in transport

With its rapid economic expansion and urbanization, China has overtaken the US and the EU to become largest investor on infrastructure

India has developed its motor network to the 2nd largest in the world

In Europe and North America growing flow of goods are straining aging transportation infrastructure, which is often poorly maintained

Source: GD VERA data; CONSTRUCTION INTELLIGENCE CENTER; SFR1.4; RID

North America27%

1,9%

Europe27%

3,1%

LATAM7%

4,2%

MEA6%

4,4%

RoAPAC10%

4,4%5,0%

China15%

6,9%

India3%

8,8%

Japan6%

Water

Telecom

Energy

Transport

annu

al a

s av

erag

e %

of G

DP

% of global infrastructure spending 2015

Global Ø 3,7%

Infrastructure spending 2015 [USD bn]

730 560 340Global total:2.825176 219 339 243 217

Investment demand of ~USD 65–70tr through 2030


Global infrastructure needs 2015–30 [USD bn] To estimate demand by region, historic spending levels are considered and projected by shifts in GDP from 2015 to 2030; this assumes that regions’ demand is based on infrastructure needed to support the economy they will have in 2030

Simply to support projected growth, over the next 15 years there are investment needed at approx. USD 65-70tr, this does not account for the costs of addressing large maintenance and renewal backlogs and infrastructure deficiencies in emerging economies

Infrastructure investment will continue to shift to emerging economies

EconomyDemand2015–30

CAGR2015–30

North America 7,7 3,8%

Europe 12,6 3,5%

MEA 5,0 5,6%

RoAPAC 7,2 5,3%

India 5,9 7,7%

China 20,5 6,8%

Japan 3,8 2,5%

LATAM 4,5 4,5%

Global 67,2 4,7%

Cumulated needs 2015–30 [USD tr]

100%

China

India

8%(479)

8%(217)

7%(410)

Japan

Europe

NorthAmerica

2030

5.892

35%(2.081)

11%(635)

12%(685)

9%(243)

LATAM

11%(635)

11%(666)

8%(219)

2015

2.826

26%(730)

6%(176)

12%(339)

20%(562)

12%(339)

5%(301)

RoAPAC

MEA

32%(900)

22%(1.300)

Source: GD VERA data; CONSTRUCTION INTELLIGENCE CENTER; SFR1; RID

Construction market shows growth, private finance and innovation potentials

20

McKinsey:Infrastructure Growth <> Productivity Gap The world needs to invest $3.3 trillion in economic infrastructure

annually through 2030 to keep pace with projected growth

Construction labor productivity has not kept pace with overall economic productivity

A sector ripe for disruption … on innovation … on BIM … on big data and smart grid … on financing

pwc:P3 PotentialThe value of public-private partnerships (P3s, also known ass PPPs) for infrastructure in the US is no longer in question, and we expect to see a rise in P3’s in the years ahead.

McKinsey:Government spendingGovernment investment has been declining in a number of major developed economies since the crisis

The industry is yet to fully embrace technology

IMIA Conference 2018 4 September 2018

The P3 Market – The Contract Market

Some Common Classes of P3 Contracts


Public Transit – Busing and Rail

Charter Schools

Corrections

Water Treatment and Distribution

Bridge, Toll and Roadway Authorities

Public Utilities, Co-generation

Stadiums and Arenas

Alternative Energy – Solarand Wind

Government Building Lease Backs

Dams, waterway management

Public Housing and Dormitories

Port Authorities

Social Services

Agenda





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NatCat

Cyclone MekunuOman

Hurricanes HIM

Wildfires California

Earthquake Mexico


World map of natural catastrophes 2017

24IMIA Conference 2018 4 September 2018Source: Munich Re

Loss events worldwide January – November 2017Geographical overview

25IMIA Conference 2018 4 September 2018Source: © 2017 Münchener Rückversicherungs-Gesellschaft, NatCatSERVICE – As at December 2017

Wildfire(LNU Complex Fires)8-20 Oct USAFatalities: 25

Landslide14 AugSierra LeoneFatalities: 500

Earthquake 19 SepMexicoFatalities: 369

Hurricane Harvey25 Aug – 1 Sep USAFatalities: 62

Hailstorm8-11 MayUSA

Earthquake12 NovIran, IraqFatalities: 493

Flood, landslide22 Jun - 5 JulChinaFatalities: 56

Selection of catastrophes

Loss events

Meteorological events(Tropical storm, extratropical storm, convective storm,local storm)

Hydrological events(Flood, mass movement)

Climatological events(Extreme temperature, drought, wildfire)

Geophysical events(Earthquake, tsunami, volcanic activity)

Hurricane Irma6-14 Sep Caribbean, North AmericaFatalities: 126

Hurricane Maria19-22 Sep CaribbeanFatalities: 102

Typhoon Hato23 AugChina, VietnamFatalities: 22

Cyclone Debbie27 Mar – 6 AprAustraliaFatalities: 12

FloodJun - OctBangladesh, India, NepalFatalities: 1,787

Flood, landlsideJan – MarPeruFatalities: 147

DroughtJan – Oct(Western-, Southern Europe)

Winter damage, frost15 Apr - 9 May Europe

Wildfire (Knysna Fire)7-13 Jun South AfricaFatalities: 9

Loss events worldwide in the first half year of 2018Geographical overview – Fewer severe natural disasters

Small, medium and large loss eventsCatastrophesHydrological events

Flood, mass movementMeteorological eventsTropical storm, extratropical storm,convective storm, local storm

Climatological eventsExtreme temperature,drought, wildfire

Geophysical eventsEarthquake, tsunami,volcanic activity

Source: Munich Re, NatCatSERVICE, 2018

Winter storm Friederike18 Jan. 2018, EuropeOverall losses: US$ 2.7bnInsured losses: US$ 2.1bn Fatalities: 11

Winter storm1–3 Mar. 2018, USAOverall losses: US$ 2.2bnInsured losses: US$ 1.6bn Fatalities: 9

Severe storm, winter damage13–17 Apr. 2018, USA, CanadaOverall losses: US$ 1.2bnInsured losses: US$ 0.82bn Fatalities: 3

Hailstorm, tornado18–20 Mar. 2018, USAOverall losses: US$ 1.3bnInsured losses: US$ 1bnFatalities: 0

Severe storm12–16 May 2018, USAOverall losses: US$ 1.4bnInsured losses: US$ 1bn Fatalities: 5


Natural catastrophes on the rise Number of relevant events by peril 1980–2017

Hydrological eventsMeteorological eventsClimatological events Geophysical events

Number of relevant loss events has increased by around 3% on average since 1980

Striking is the almost continuous increase in the number of weather-related natural catastrophes

Number of geophysical events like earthquakes ore volcanic eruptions remained virtually stable over the time

Source: Munich Re, NatCatSERVICE, 2018 27IMIA Conference 2018 4 September 2018

Agenda





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Hurricanes make 2017 year of highest insured losses ever

29IMIA Conference 2018 4 September 2018Source: Munich Re

Images: Munich Re Topics Geo 2017

Highest-ever hurricane losses in a single year

30IMIA Conference 2018 4 September 2018Source: Munich Re Topics Geo 2017

Hurricane Harvey was the wettest tropical cyclone ever to hit the USA. In parts of Texas, unprecedented flooding occurred. The direct economic losses are likely to be as much as US$ 95bn, which would make Harvey the second-costliest hurricane on record after Katrina.

With wind speeds of up to 300 km/h, Hurricane Irma will go down in history as a storm of superlatives. Initial estimates put overall losses at US$ 57bn and insured losses at US$ 29bn, making Irma the fifth-costliest hurricane of all time.

Hurricane Maria caused extreme damage on Puerto Rico and other islands in the Caribbean and was the most destructive natural disaster ever for Dominica. On many islands it took several weeks before the infrastructure for the supply of electricity and water was operating reasonably efficiently again.

Hurricanes HIM

NatCat

Lloyd’s, big reinsurers hit hardest by 2017 hurricanes: Best

Property/casualty insurers and reinsurers with hurricane Harvey, Irma and Maria (HIM) reported net losses over $100 millionRank Company HIM net losses (millions) Notes

1 Lloyd’s of London $4,8002 Swiss Re Ltd. $3,600 Pretax; includes Mexican earthquakes3 Munich Reinsurance Co. $3,2004 Berkshire Hathaway Inc. $3,000 Includes Mexican earthquakes5 American International Group Inc. $2,700 Pretax6 Liberty Mutual Insurance Co. $1,770 Pretax7 Chubb Ltd. $1,761 Pretax8 XL Group Ltd. $1,3309 Everest Re Group Ltd. $1,200 Pretax

10 Talanx A.G. $1,050 Includes Hannover Re S.E.; includes Mexican earthquakes11 Fairfax Financial Holding Ltd. $930 Pretax12 MS&AD Insurance Group $88513 Alleghany Corp. $755 Includes all catastrophe losses14 Sompo Holdings Inc. $73615 Zurich Insurance Group Ltd. $700 Pretax16 Travelers Cos. Inc $643 Pretax17 ReinsuranceRe Holdings Ltd. $62518 QBE Insurance Group Ltd. $60019 Allstate Corp. $593 Pretax20 Axis Capital Holdings ltd. $584 Pretax

31IMIA Conference 2018 4 September 2018Source: A.M. Best Co. Inc. Data and research (as of Nov, 31, 2017)

Agenda





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NatCatWildfires California


Rain fuels wildfire risk

4 September 2018

Large wildfires typically require two meteorological ingredients:

dry conditions and

high winds

and combustible material

Wet-dry cycle increases the wildfire hazard

First the north burned, then the south

Two series of devastating wildfires in October and December left behind a trail of destruction in California

Wildfires in California are likely to become more frequent in the future

NatCatWildfires California


Global wildfire hazard and significant loss events

4 September 2018Source: Munich Re NatCatSERVICE

Munich Re Topics Geo 2017

Agenda





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Insurance Industry

IMIA Conference 2018Source: Partner RE

Cycles

1994–1997 1998–2000 2001 2002 2003–2005 2006–2007 2008–2016+ 20xx?

Erosion Phase

Destruction Phase Pain

Fear

Fun Phase

Re-Building Phase

Coasting Phase

Erosion Phase

Destruction Phase

Phase PY Dev. AY Pick Bal. Sheet Soft/Hard Market Cycle YearsCheating Erosion Favourable Cushion Weakening Soft Market: Rates declining and initial AY picks still have a cushion 1994–07 2008–15+

Destruction Favourable Shortfall Weakening Late Soft Market: Rates continue to decline and AY picks are deficient 1982–83 1998–00 20xx?

Pain/Fear Pain/Fear Adverse Shortfall Weakening The Turn: Brief period when all 3 factors are negative = mgmts. removed, reserve charges taken and rates begin to rise

1984 2001

Restoration Fun Adverse Shortfall Strengthening Early Hard Market: Period with largest rate increases: underwriters are having fun

1985 2002

Re-Building Adverse Cushion Strengthening Hard Market: Rates peak, balance sheets continue to strengthen 1986–90 2003–05

Coasting Favourable Cushion Strengthening Late Hard/Early Soft Market: Rates remain adequate but declining 1991–93 2006–07

4 September 2018 36

Market Quotes

No sign of a hard market despite insurer consolidation: Narim

Adrian Ladbury, 26 June 2018

Focus: Construction rates driven below technical level despite heavy cat losses

Oscar Treceno and Stephan Lämmle, IMIA, 17 June 2018

AIG Names Jamie Miller Chief Underwriting Officer, North America Property

Business Wire, 25 June 2018

Engineering Insurance results deteriorate but better times could be ahead: Swiss Re

www.insurancejournal.com

The industry was at a place where rates were not sustainable. It couldn’t afford much more rate decline. The second half of 2017 merely put a point on that.

Jeff Beauman, vice president, All-Risk Underwriting, FM Global

Not so fast on any hard marketKatie Dwyer, 20 February 2018

Lloyd’s targets seven loss-making classes in new €6.4bn crackdown

Peter Hastie, 6 June 2018

Risk Conditions Quote 1 Quote 2 Quote 3Singapore, 1.5 bn land reclamation, wharf construction and dredging 9 years construction project with sink caissons

Malaysia, high rise building 90 stories and 6 basements with linked hotel

Thailand, Olefin Reconfiguration Project, $US 1,1 bn 50 months construction project

Indonesia, Toll Roads, $US 300 mio 2 years construction project

Thailand, Potash Mine, $US 1.7 bn PD/DSU 42 months construction project

Indonesia, 150 MW CCPP 28 month construction project

Market adequacy level


IMIA Swiss Re/IMIA

4 September 2018

Lloyd’s threatens to close under-performing syndicates

IMIA Conference 2018 4 September 2018 39

Lloyd’s in numbers:

2017 combined ratio: 114 percent

11+ managing agents require “high touch” intervention

52 percent of syndicates lost money 2015–2017

2017 underwriting loss £3,4bn

Reinsurers run 105 percent combined ratio for 2017

Source: Willis RE

The reinsurance sector posted a hefty 104.8 percent combined ratio last year as the market was stung by $144bn of losses from natural catastrophes, broker Willis Re has said.

FY 2017 reported combined ratios for the index

0

20

40

60

80

100

120

140

160

FY17 FY16

104.8%

In %


Agenda





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M&A movements in the market

Allianz Eyes M&A Targets Zurich, Hartford, QBE, Argo and more after missing out on XL

Dinesh Nair, Julie Edde and Ruth David, 12 June 2018

TMK puts liability, property and construction underwriters at risk

Bernard Goyder and Charlie Thomas, 12 July 2018

Notable M&A deals in the past 12 months

Brain C. Schneider, 20 June 2018

Acquirer Value AcquiredCVS $69 bn AetnaAXA $15,3 bn XL GroupAIG $5,6 bn ValidusPheonix Group $3,2 bn Standard Life AberdeenAxis Capital $0,5 bn NovaeAspen CEO O’Kane relocates to Bermuda

Peter Hastie, 23 May 2018

Aspen confirms $2.6bn Apollo buy-out

reinsurance, 28 August 2018

Industry Insurers are giving upMS Amlin closes office in Hamburg … Mapfre closes in Cologne

HFR, 8 June 2018

Up-for-sale Chaucer hikes 2018 reinsurance spend

reinsurance, 27 June 2018

Agenda





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Coal vs RE Past and future


0 2000 4000 6000 8000 10000

China

USA

India

EU

SEA

ME

Africa

2016 Growth to 2040

0 50 100 150 200

Coal

Gas

Nuclear

Renewables

2010–16 2017–40

Net capacity additions Electricity demand

Global average annual net capacity additions [TWh] Electricity demand by selected region

Renewables step up, coal strikes out non-OECD shows stronger growth than OECD

Coal Divestment Policies

Source: UnfriendCoal.com

Global: Swiss Re establishes thermal coal policy to support transition to a low-carbon economy

AIR team, 3 July 2018

Zurich ends coal investment as insurers pull $20bn from sector

Lucy Burton, 15 November 2017

Allianz to stop selling insurance to coal companies

Oliver Ralph & Olaf Storbeck, 4 May 2018

Hannover Re to step away from coal investment

Charlie Wood, 20 June 2018

Coal underwriting

Coal divestment

Other climate leadership

Swiss Re (Switzerland)

Zurich (Switzerland)

AXA (France)

SCOR (France)

Aviva (U.K.)

Allianz (Germany)

Munich Re (Germany)

Legal & General (U.K.)

Lloyd’s (U.K.)

Generali (Italy)

MetLife (U.S.)

Sompo (Japan)

XL Catlin (Bermuda)

AIG (U.S.)

Axis Capital (U.S.)

W.R. Berkley (U.S.)

Berkshire Hathaway (U.S.)

Chubb (Switzerland

Hannover Re (Germany)

Liberty Mutual (U.S.)

Mapfre (Spain)

Prudential (U.S.)

QBE (Australia)

TIAA Family (U.S.)

Tokio Marine (Japan)

N/A

N/A

N/A

N/A

N/A

N/A

Summary Scorecard Joachim Wenningoutlines… Munich Re’s climate activitiesMunich Re will no longer invest in companies that derive more than 30% of their revenues from the mining of or generation of electricity from coal. Munich Re will no longer insure any new coal-fired power plants or mines… in OECD countries.

MR online, 6 August 2018

Agenda





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Major Losses in the Power Industry 2017

IMIA Conference 2018

EnergyQuarterly newsletter | a JLT publication | January 2018

4 September 2018 47

Image: S. Lämmle, MR

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

0

100

200

300

400

500

600

700

Property D&F(non US open

market)

Cargo PowerGeneration

Yacht Property D&F(non-USbinder)

ProfessionalIndemnity (non-

US)

Marine Hull OverseasMotor

Gross combined ratio and variance to planned profit for 2017

Variance to plannedprofit

Gross combined ratio2017

Source: Llodys

Power cause of loss analysis

Selected infrastructure lossesDams, bridges and buildings under restoration

Dams & bridges

Hidroituango DamXepian-Xe Nam Noy HydPP Adjaristsqali HydPPOroville Dam

Apr 28th, 2018Jul 24th, 2018

2018Feb 7th, 2017

ColumbiaLaos GeorgiaUSA

Tunnel collapse, landslideSaddle dam collapseTunnel collapseSpillway damage

CV $ 2.6 bn PD/630 m DSUCV $ 1 bn37 km tunnel$ 800 m PD/200 m DSU

Chirajara Bridge Ponte Morandi, Genua

Jan 15th, 2018Aug 14th, 2018

ColumbiaItaly

Pylon CollapseCollapse of bridge section

CV $ 30 mt.b.d.

Building restoration projects

Hotel Ritz, ParisCite de Sciences, ParisSan Diego Hilton HotelMandarin Oriental Hyde Park, LondonGlasgow School of Art Hotel Atlantic City, Borgata,Hotel Mandarin, BejingLloyds Estate

Jan 19th, 2017Aug 20th, 2015May 26th, 2018

Jun 6th, 2018Jun 16th, 2018Sep 23rd, 2007Feb 09th, 2009Jun 25th, 2018

FranceFranceUSAUKScotlandUSAChinaIndia

FireFireExplosionFireFireFireFireCollapse after heavy rainfall

£ 108m refurbishmentCV € 110m

£ 85m refurbishment2nd fire after 2014


During monsoons in Mumbai, landslide and collapse of property are not uncommon.

A residential complex has suffered collapse of a part of the podium,

Cause was apparently due to an excavation work in the adjoining compound by another builder

Selected Claims

Lloyds Estate


Image: Hari Radhakrishnan

4 September 2018

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Starting position: A changing energy landscape Fundamental paradigm shifts in the whole energy sector


Investment in renewable energy edged up 2% to $280 bn last year, reaching its third highest level since 2015 and 2011

The highest investment amounts went into the solar ($161 bn) and wind ($107 bn) sector, together accounting for $268 bn or 96% of total renewable energy investment in 2017

Beside an increase of 18% in the solar sector, all other renewable energy sectors saw a decline in investment

Global annual investment in renewable energy


Investment by technology 2004–2017 (US$ bn)1

1 Does not include large hydroSource: BNEF/UNEP “Global Trends in Renewable Energy Investments 2018”

At the end of 2017, PV and wind reached new records of total installed capacity, together accounting for 941 GW or 43% of total renewable capacity (or 87% of total installed capacity not including hydro power).

Hydro power (large and small) accounted for 51% of total installed RE capacity

With 16.4% p/o 26.5% of total global electricity generation Hydro power is representing the largest share in RE still at the end of 2017

Cumulative global installed renewable energy capacity


Total cumulative installed RE capacity 2017: 2,195 GW

1 Does not include pumped storage capacitySource: REN21 “Renewables 2018 Global Status Report”

Fossil fueland nuclear

73.5%

Hydropower16.4%

Wind 5.6%

Other RE 4.5%

Renewable Energy26.5%

Global annual investment in renewable energy Comparison investment by technology and region in 2017


Investment by technology (US$ bn) Investment by region (US$ bn)

Source: BNEF/UNEP “Global Trends in Renewable Energy Investments 2018”

$268 bn or 96% of all renewable energy investment in 2017 went into the solar and winds sector

The leading country by far for RE investment was China, accounting for $127bn or 45% of last years global total

In Conclusion


Power conclusion

Electricity demand for electricity continues to increase around the world

Falling technology costs and global push for de-carbonization drives development of renewable energy

Regional pockets where new coal and nuclear capacity are showing growth

Investment to improve and expand aging transmission and distribution

Continuing expenditures to modernize [HVDC, smart grid] and expand T&D infrastructure

Development of non traditional power project activity increasing globally

Potential for in plant modernizations, upgrades and life extension projects appear promising

Source: 2018, Industrial Info Resources, Inc.

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New TechnologyPlant and Machinery

Source: S. Lämmle, MR Source: S. Lämmle, MR Source: S. Lämmle, MR


Contemporary Innovations

BIM Building Information Modelling

Robotic Construction

3D printing and additive fabrication/manufacturing

VR & AR assisted construction

Performance design optimization

Prefabrication logistics

Parametric and algorithmic design

Digital concrete

Nano materials

Drone assisted surveying and construction

Worker exoskeletons

…Trend Radar – New Technologies in Civil Construction



1. Increased digitisation of work process (optimisation, cost, sustainability…)

2. Increased use of prefab (distributed fabricators –automated transport)

3. Slow but steady adoption of automation and robotics on-site

4. Increased use of robots and drones for monitoring and surveying

5. Increased demand for tech-savy construction workers

By Dr. Russell Loveridge, Managing Director, NCCR Digital Fabrication

Predictions for the future of digital fabrication in construction…

59IMIA Conference 2018 4 September 2018Images: Presentation Dr. Russel Loveridge, NCCR Digital Fabrication, eth – ITA @ Partner RE 06/2018


Image: Presentation Dr. Russel Loveridge, NCCR Digital Fabrication, eth – ITA @ Partner RE 06/2018 60IMIA Conference 2018 4 September 2018

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Cyber in the headlines

Merck’s $915mn NotPetya hit may infect beyond its $275mn cyber now

Peter Hastie, 27 June 2018

I don’t think we or anybody else really knows what they’re doing when writing cyber insurance

Warren Buffet

Listen up – You might have a Silent Cyber Risk problemMeghan Schaber, 18 April 2018

“Cyber probably not insurable”, Swiss Re CEOStaff writer, 12 September 2017

Buffet warns on cyber risks. Neither he nor others in the industry really know the risk…

May 2018

Are silent cyber and behaviour risks in your line of site?

Willis Towers Watson, 13 December 2017

PRA challenges firms on silent cyber risk14 November 2016

Silent cyber risk is largest inhibitor of cyber insurance market growth, UK study finds

Business wire, 23 April 2018

Apple chip supplier TSMC warns of $255m hit from computer virus

Financial Times, 6 August 2018

Triton Cyber Attack: hackers target the safety systems of industrial plants

SCOR Newsletter 2018 Authors: Rebecca Cheetham, Group Senior Risk Manager & Sébastien Heon

Cyber exclusions

Silent cyber

Definition: Unassessed and/or unmeasured cyber exposure under conventional (re-)insurance contracts in the following situations:

The (re-)insurance contract

is silent on cyber or

contains a cyber exclusion which does not comprehensively exclude cyber or

contains a cyber inclusion which is ambiguous, unclear or incomplete

Overview of cyber exclusion clause examples

Cyber Exclusion Clauses

NMA 2914/2915 CL380

Aon Clause

IMIA Clause

Scope of exclusion

Pure data loss only X

All losses resulting from a cyber incident X X X

Consequential BI expressively excluded X X X

Write back

PD caused by cyber X X X

Data loss caused by PD partly silent silent X

Silent cyber –inclusion ambiguity

Silent cyber –exclusions gaps

Silent cyber –absence of exclusions

Cyber endorsements

Stand-alone cyber

coverage

Illustrative


Are data an insured property?

4 September 2018

Agenda





3


5


Do you remember?IMIA offers a lot of answers

The IMIA clause is intended as acyber exclusion/write-back"toolbox" and reference clauseincluding up-to date cyberdefinitions. Purpose of the clauseis to convert silent cyber into anaffirmative, risk specific cybercover, to provide contract certaintyand to enable proof of evidence

IMIA Advanced Cyber Exclusion Clause 2016 IMIA/LEG DSU Worksheet 2013

IMIA Photo Library 2017


IMIA Conference 2012 – Market survey

Summary

See aggressive

players struggle/

disappear

Notice first mild

rate increases

Trend supported by

significant man made

claims

Increasing infrastructure investments, innovations

and new risks offer

ample opportunities


Know your risks … and safe landings


Image: Stephan Lämmle, Munich Re Video: Stephan Lämmle, Munich Re

4 September 2018

Western Highspeed DiametreSt. Petersburg (1) 2016 Stephan Saur

Plant for placing modues at Venice sea barrier 2014 Silvano Bonelli

LNG Tank Dunkirk France 2013 Richard Radevsky Megalim Ashalim Solar Power Plant by Eran Ben Zvi –Tel Aviv, Israel s

Steelwork for Izmir Bay Bridge Turkey 2014 Richard Radevsky Sky ladder by Christoph Hoch - Hong Kong, China HPP Coca Codo Sinclair, Ecuador Armoring works 2014 Christian Alt

HPP Belo Mnte – Penstock View by Lucas Lopes Power Station Cyprus after explosion of weapon store 2011 David McGhie

TBM Breakthrough Palomino HPP Dominic Repc 2012 Joachim Pawellek

68

Thank you for your attention

IMIA Conference 2018 4 September 2018

Disclaimer

Munich Re Company (for itself and on behalf of each company within its group of companies) (collectively „Munich Re“) reserves all rights to the content of this document. No part of this document may be copied, reproduced or made available to any third party without Munich Re’s prior written consent. Munich Re will accept no liability to any third party to whom this document is disclosed whether in compliance with the proceeding sentence or otherwise. This document does not constitute any form of legal, accounting, taxation regulatory or actuarial advice. Without prejudice to the generality of the proceeding sentence this document does not constitute an opinion of reserving levels or accounting treatment. Munich Re accepts no responsibility for the accuracy, correctness, completeness, topicality or technical accuracy of any content of this presentation. Munich Re will not be liable, in any event, for any special, indirect or consequential loss or damage of any kind arising from any use of the information contained in this document.

694 September 2018IMIA Conference 2018

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