risk management for the led industry

RISK MANAGEMENT for the LED INDUSTRY

Providing performance insurance to the LED industry

Increased security for long term investments

Dr. Ulrich Bohnert

Munich Re

Corporate Insurance Partner – Special Enterprise Risks

Green Tech Solutions

SIL Europe 2014:



October 23, 2014; 13:30 - 14:00

Green Tech Solutions

AGENDA Intro Definition of Risk Warranty Risk Risk Analysis Summary

Munich RE

Diversified structure – Diversified risk

4 Munich Re - Green Tech Solutions

Munich Re (Group)*

Asset management

*This listing is incomplete and provides no precise indication of shareholdings.

Primary insurance

Reinsurance Munich Health

Belgium

Corporate Insurance Partner

Great Lakes Reinsurance (UK) PLC

KA Köln.Assekuranz Agentur GmbH

MSF Pritchard Syndicate 318

Temple Insurance Company

Watkins Syndicate

MunichRE Group 1

http://198.65.252.133/default_main.asp

Munich RE

Insurance covers from “Green Tech Solutions” Solutions for special enterprise risks

5

PV Industry

PV manufacturers

PV projects

Wind Industry

Serial loss

Offshore logistics

CSP projects

LED manufacturers

Biomass

Energy storage

Munich Re - Green Tech Solutions

7

RISK DEFINITION

How to define risk ?

ISO 31000 (2009) / ISO Guide 73:2002 :

Risk is the effect of uncertainty on objectives

Business Objective: A desired measurable quantity to

be achieved within a time frame and with available

resources

Sociological / Psychological:

Risk is the mentally perceived representation of assumed

possible dangers by individuals, groups or organizations

and linked to emotions like fear


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RISK DEFINITION

Risk Profiles (Example Company or Project)


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WARRANTY RISK

Warranty wordings used in the LED industry Are such statements clear, complete, measureable and achievable ?

Free from defect:

Product is according to specification on datasheet

Durability:

Product will not fail within XX months

Reliability:

Lumen maintenance is L70B50 in the first X years

Lumen output will be above L70F10

Issues:

• Burden of proof

• Well defined verification

• Clear reimbursement rules


WARRANTY RISK

Insurance for LED performance warranties

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Target

clients

Product qualification and production data,

company background, warranty setup, factory visit

Which risks does the insurance cover ?

Perils

Faulty Manufacturing

Material Defects

Material Aging

Risk

Analysis

Manufacturers of LED quality modules,

LED industrial lamps, LED streetlamps


Warranted features

Durability

- LED chip/module

- Driver

Reliability

- Lumen maintenance

- Color maintenance

Warranty

Reliability Backup

Durability Backup

Insurance

Quality Credibility

Financial Backup

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Insurer LED

Manufacturer Lamp Owner

Facility Owner

Bank

Investment

Financing

WARRANTY RISK

Risk Management using Insurance


Testing Institutions

Cert Reports

Durability Checks

Reliability

Technology Reviews

Manufacturer

Supplier Qualification

Production Monitoring

SPC / ORT

Results

Field Returns / Claims

Buyer/Owner

Acceptance

Commissioning

Monitoring

Maintenance

Research

New Failure Mode

Effects

New Materials Impacts

Failure Rate Distribution

Degradation Rate

Distribution

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RISK ANALYSIS

Information available in the LED Landscape ? Risk of asymmetric information (moral hazard) and risk of unavailable information

parts published not published rare anonymized only estimates


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RISK ANALYSIS

Lifecycle steps to consider for warranty covers Risk of incomplete scope

Claims Reporting and Handling

Degradation and Breakdowns

Warranty Structures

Production, Quality Control, Binning

Technology, Design, Certification


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RISK ANALYSIS

Insurance Processes for Warranty Liabilities

Pre-Policy:

• Questionnaire: Company, Products, Warranties, Production

• Warranty Datasheet Nameplate

• Certification/Qualification: IES LM-80-08, TM-21, BoM, Reliability Plan

• Quality Controls: SPC, ORT, Material tracking, FMEA, etc.

• Factory audit, transparency check

Claims Handling:

• Fulfillment of policy requirements

• Verification of warranty handling

• Root cause analysis for serial loss


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RISK ANALYSIS EXAMPLE

Monte-Carlo-Sim of Lumen Distributions over Lifecycle


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RESUMEE

Summary

Technical reliability has uncertainties

Uncertainty causes risk limited investments

Selling LED products requires commitment

Manufacturers have to carry warranty burden

Insurance helps to withstand unexpected shocks


Thank you very much for your attention

SIL Europe 2014



München, October 23, 2014

Green Tech Solutions, Special Enterprise Risks

http://www.munichre.com/gts

http://www.munichre.com/gts

Disclaimer

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© 2014 Münchener Rückversicherungs-Gesellschaft Aktiengesellschaft in München

("Munich Re"). All rights reserved.

The content of this presentation (including, without limitation, text, pictures, graphics, as well as the

arrangement thereof) is protected under copyright law and other protective legislation. These

materials or any portions thereof may be used solely for personal and non-commercial purposes.

Any other use requires Munich Re’s prior written approval.

Munich Re has used its discretion, best judgement and every reasonable effort in compiling the

information and components contained in this presentation. It may not be held liable, however, for

the completeness, correctness, topicality and technical accuracy of any information contained

herein. Munich Re assumes no liability with regard to updating the information or other content

provided in this presentation or to adapting this to conform with future events or developments.

This presentation contains forward-looking statements that are based on current assumptions and

forecasts of the management of Munich Re. Known and unknown risks, uncertainties and other

factors could lead to material differences between the forward-looking statements given here and

the actual development, in particular the results, financial situation and performance of our

Company. The Company assumes no liability to update these forward-looking statements or to

conform them to future events or developments.

Risk Solutions

Münchener Rückversicherungs-Gesellschaft

Aktiengesellschaft in München

Königinstr. 107

80802 München

Germany

© 2014 Münchener Rückversicherungs-Gesellschaft

© 2014 Munich Reinsurance Company

Impressum Risk Solutions

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