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Munich Re, Versicherung von Maschinen Kapitel

Machinery insuranceTypes of cover and policy conditions

Table of contents

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Munich Re, Machinery insurance

2 Foreword

4 Machinery insurance

Who should be insured?What can be insured?What protection does machinery insurance offer?What does the insurance not cover?How high should the sum insured be?How are premium rates calculated?What kinds of indemnity are there?What kind of deductible applies?

8 Machinery loss of profits or business interruption insurance(MLoP or MBI)

Period of indemnity and time excessSum insured – Explanatory commentsPremium calculation

12 Comprehensive machinery insurance (CMI)

Main features of comprehensive machinery insurancePremium calculation

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Munich Re, Machinery insurance

Owing to high investment costs and businesses’ growingdependence on technical equipment, machinery damagecan lead to severe financial losses for owners and opera-tors alike. This financial loss can arise as property damageor result from the stoppage or interruption of the business.

In the early 20th century, the insurance industry thereforestarted offering owners and operators insurance againstmachinery damage over and above that covered by firepolicies, thereby assuming the financial risk that can ariseas a result of sudden and unforeseen damage to machin-ery. Having their technical equipment and machineryinsured allows owners and operators to forgo establishingreserves for possible damage to their machinery. Theirliquidity is thus unaffected in the event of any subsequentmachinery damage.

The oldest form of engineering insurance is boilerinsurance, which was introduced following a spate of lossescaused by exploding boilers. At the start of last century,Munich Re, together with a number of other Germaninsurance companies, introduced machinery breakdowninsurance, which covered all of a business’s machinery and technical equipment.

In the 1920s, insurance for low-voltage installations wasbrought out, in particular to cover telephones and teleprint-ers. In the 1950s, this evolved into electronic equipmentinsurance as developments in the areas of computing,electromedicine and telecommunications required insurersto come up with modern coverage concepts.

Finally, as businesses became increasingly dependent ontechnical equipment and machinery and therefore moreand more at risk from heavy financial losses caused bybusiness interruptions, machinery business interruptioninsurance was introduced. This took account of the fact thatthe failure of an important production facility could meanbankruptcy for many enterprises.

Munich Re’s latest product is comprehensive machineryinsurance, an “all risks” policy that combines the classiccoverage offered by the policies already mentioned withcomponents taken from classic fire insurance.

Although they have been in existence for just over 100 years, engineering insurances still represent a dynamicyoung branch of the insurance industry that keeps pace withtechnical developments. Insurers of technical plant andmachinery have to be versatile and constantly adapt theirproducts to the changing technical environment. If they suc-ceed in keeping up with technical advances, then – drawingon their experience from numerous losses – they can act asadvisers to industry and influence future technical progress.

Foreword

Since industrialisation began, machines and technical equip-ment have grown steadily in number as well as in complexityand size. In the industrialised countries in particular, peopleare heavily dependent on the smooth operation of technicalequipment and machinery, a trend that gives rise to evergreater deployment of capital for acquisition, operation andmaintenance.

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Munich Re, Machinery insurance Foreword

Munich Re has made it its business to follow technicaladvances closely with a large team of engineers, the aimbeing to use their experience to advise cedants and assistthem in assessing various risks and stipulating adequateconditions. In this way, Munich Re is able to providecomprehensive customer service not only with regard toacquisition but also in the area of loss prevention andclaims settlement.

Industrial development took off rapidly aftersteam engines were introduced to drive pro-duction machinery and generators.

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Munich Re, Machinery insurance

Who should be insured?

Machinery insurance is important for anyone operatingtechnical plant or machinery, whether they be large indus-trial enterprises or small firms. In the case of machinery orplant failures, the latter are in fact at greater risk than largeenterprises, as often there are no back-up machines and theentire production can depend on a single machine. But evenat large industrial facilities, the failure of certain machinescan lead to major losses and thus threaten the existence ofmajor companies.

Many machines are financed by means of loans, whichmeans that creditors also have a vested interest in seeingthat the machinery and equipment they have financed iscovered by insurance. If borrowers have adequate insur-ance, their ability to make loan repayments will also becovered in the event of a machinery failure. Machinery busi-ness interruption insurance in particular covers prolongedloss of revenue.

What can be insured?

All types of machinery, apparatus, electrical equipment andtechnical plant can be covered under machinery insurance,such as power generating units (boilers, turbines, genera-tors, gas turbines), power distribution plant (transformers,high- and low-voltage switchgear), production machineryand technical plant and equipment (machine tools, weav-ing looms, paper machines, kneaders, pumps, compres-sors, heat exchangers, tanks, apparatus, piping, etc.).

In order to improve the spread of risks, all the plant andequipment in an enterprise or self-contained section of anenterprise should be insured wherever possible. The high-est premium components are calculated in respect ofmachinery with the highest risk of loss. Plant and machinerythat is less at risk accounts for a substantially smallerproportion of the premium.

To be able to precisely define the insurance cover for abusiness’s machinery and technical plant and equipment, itis necessary to list the individual objects, together with themain technical data, in a machinery schedule. Only for theitems of machinery listed in this schedule can the insuredvalue, risk and premium be determined and fixed andinsurance cover granted.

The items to be insured may be new or used. The machin-ery and plant in question must be in working order and inperfect technical condition. A prerequisite for cover is thattrial operation must have been completed satisfactorily.The insurance of old machinery and plant must be consid-ered very carefully, as many machines may have reachedtheir planned service life, and their condition can vary fromcase to case.

An item of machinery or technical plant may contain com-ponents or elements that cannot be insured againstmachinery breakdown. Mostly these will be wearing partsand materials that are subject to heavy wear and tear, orcomponents that are not insurable because of the materialsfrom which they are made.

Machinery insurance

Unexpected damage to machinery and equipment can pose a threat to a company’s very existence. Munich Re has there-fore developed new insurance products which completelycover the entrepreneurial risk arising from the total or partialfailure of machinery and equipment.

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Munich Re, Machinery insurance Machinery insurance

These include:

– All types of exchangeable tools– Sieves, engraved cylinders, moulds, dies, ropes, chains,

belts– Glass, ceramics, rubber tyres– Operating media of any kind, such as fuels, gases,

coolants, catalysts, lubricants (oil in transformers andcircuit-breakers is included, however, since it is not only a coolant but also serves as an insulating agent)

What protection does machinery insurance offer?

Machinery insurance is “accident” insurance formachinery, and thus covers sudden and unforeseenphysical damage that limits the operability of the insured item and therefore necessitates its repair orreplacement.

Modern paper-making machines have veryhigh values. Due to highly advanced printingtechnology, rolls of paper can be produced atamazingly high speeds, which leads to a hugerise in productivity.

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Munich Re, Machinery insurance Machinery insurance

Claims under machinery insurance mostly arise from one of the following causes:

Faulty design, calculation, plan, specification, manufactureor workmanship and defects in casting and materialFrequently such faults are only discovered during opera-tion when the manufacturer’s liability has expired and thereis no longer any possibility of recourse against the manu-facturer. Even if first-class testing methods are used, thesefaults cannot always be avoided.

Operating error, lack of skill, negligence, malicious acts,faulty maintenanceDespite all precautionary measures, operating andmaintenance errors can occur at any time and lead to sub-stantial loss or damage. Losses arising from these causesare steadily increasing.

Tearing apart due to centrifugal forcesCentrifugal forces can cause serious damage to machinery,as well as to buildings and machinery in the immediatevicinity.

Short circuit and other electrical causesElectrical equipment may suffer serious damage due toshort circuit, overvoltage, defective insulation, coronadischarge or mechanical stress emanating from the flow ofcurrent.

Shortage of water in steam generatorsOperating errors, faulty displays on measuring instru-ments, or failure of the boiler feed system and warningsignals can cause a shortage of water in steam generators.This in turn can result in the overheating and wearing-outof pipes, and even in the destruction of a boiler’s entirepiping system.

Physical explosionAs gases or vapours tend to expand, the wall of a pressurevessel can be ruptured to such an extent that a suddenpressure release is caused by escaping gas, steam or liquidfrom the vessel to its surroundings.An explosion caused by a chemical reaction does not comeunder this heading. Chemical explosions are usually coveredunder fire insurance, except for flue-gas explosions inboilers, which may be covered under machinery insurance.

Windstorm, frost, ice motionMachines located in the open air are, of course, mostexposed to the elements. However, even those installedinside a building may be damaged by a windstorm thatdestroys the roof of the building, or by frost. In this connec-tion, special reference is made to the damage that may becaused by windstorms to loading cranes, overhead lines,cableways and the like. Where a windstorm assumes themagnitude of a natural disaster, it is insurable under a firepolicy and is not therefore to be covered under themachinery policy.

Vibrations, for example due tobroken off turbine blades, canhave very serious consequences.

What does the insurance not cover?

The causes of non-indemnifiable losses are named in thepolicy as exclusions. Essentially, these are:

– Perils coverable under another policy, e.g. fire, lightning,chemical explosion, burglary and theft

– Inundation, flood, earthquake, subsidence, landslide andimpact of land-, air- and watercraft

– Wear and tear as a result of ordinary use or operation, aswell as cavitation, erosion, corrosion (e.g. rust) and boilerscale. These are not fortuitous occurrences. This exclu-sion relates, however, only to the parts immediatelyaffected, whereas unforeseen, sudden loss or damage toother parts of the machine caused indirectly by wear andtear is covered.

– War or warlike operations, civil commotion of any kind, aswell as acts on the part of strikers or locked-out persons

– Wilful acts or gross negligence on the part of the insuredor of his responsible representatives

– Faults or defects that already existed at the time the insur-ance was arranged, and of which the insured was orought to have been aware

– Faults or defects for which the supplier or manufacturer iscontractually or legally liable (losses covered by war-ranty)

– Loss or damage caused by asbestos contamination or theformation of mould; loss or damage caused by nuclearenergy

How high should the sum insured be?

The sum insured should always be the new replacementvalue of the insured machinery. This includes the value ofthe new item, customs duties, transportation and installa-tion costs. The current market value is not a suitable value,as it constantly changes, and different valuation criteriaand methods are possible.

Repairs account for by far the biggest proportion of claims.The actual value of older machines may increase substan-tially as a result, as machinery insurance indemnifies the fullrepair costs without making any deduction for old partsbeing replaced by new ones. If the sum insured is insuffi-cient, however, i.e. lower than the new replacement value,the indemnity is reduced in proportion to the underinsur-ance.

Where the values of the insured objects increase, the suminsured must also be increased in order to avoid underin-surance. The insured must notify the insurer that the valuesinsured have increased as a result of price rises or theacquisition of new objects.

How are premium rates calculated?

Premium rates are calculated separately for each type ofmachine, working statistically on the basis of many years’experience. The rates are applied to the machines’ valuewhen new. In times of high wage and price increases, it isimportant also to raise premiums in order to ensure thatthey remain commensurate with the risk. Wage costsaccount for a high proportion of repair costs but are nottaken into account by the adjustment to the sum insured.Experience shows, however, that repair costs, whichinvolve high labour costs, are subject to a higher rate ofincrease than manufacturing prices, which frequentlydepend on the market.

What kinds of indemnity are there?

In the case of partial damage or damage that can berepaired, indemnity is paid by reimbursing the cost of repair-ing the damage. In the case of total losses, the actual value(current market value) of the destroyed plant is indemnified.

In the case of partial damage, the insurer indemnifies theexpenses that have to be incurred in order to restore thedamaged machinery to the condition it was in prior to the damage. Repair costs break down into dismantling and reassembly costs, repair work, spare parts, ordinaryfreight charges, customs duties and similar items includedin the sum insured.

The cost of any servicing or maintenance of insuredmachinery that is carried out on the occasion of a repair isnot reimbursed. In the case of provisional repairs, the costsare only indemnified if the total amount of repair costs isnot increased thereby. Any increase in value due to repairsthat benefits the insured does not reduce the indemnity.

In the case of total losses, where repair is no longer pos-sible, the indemnity is based on the machine’s actual valueon the day before the loss occurred. A total loss is alsoassumed if the estimated repair costs equal or exceed thedamaged machine’s actual value. The residual value of anyscrap or remaining parts of the destroyed machine isdeducted from the amount of indemnity.

Extra charges for overtime and express/air freight are onlyindemnified if expressly included in the insurance.

What kind of deductible applies?

It is not the insurer’s intention to handle every tiny claim.The insured therefore participates in each loss through adeductible, which is expressed in the policy as a fixedvalue. This deductible can be increased in order to reducethe premium. However, the insured’s special requirementscan be taken into account.

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Munich Re, Machinery insurance Machinery insurance

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Munich Re, Machinery insurance

The scope of cover of machinery business interruption insur-ance includes the proven business interruption loss trig-gered by property damage that is indemnifiable undermachinery insurance. Business interruption losses are alsoindemnifiable where the property damage is smaller thanthe deductible agreed in the property policy. A businessinterruption loss essentially includes lost gross profit includ-ing continuing fixed costs or specified standing charges.

Lost gross profit is the profit from the sale of the goodsmanufactured or traded in the insured enterprise, or from its services.

Where a business shuts down or is adversely affected,some or all of the standing charges continue to be incurred.These include:

– Wages and salaries, including social security benefitswhere these still have to be paid during the businessinterruption

– Interest– Depreciation– Fixed charges for the purchase of energy from outside

suppliers– Expenditure on ongoing maintenance of buildings and

machinery – Rents, taxes and other levies that are not dependent on

turnover– Costs of maintaining patent rights– Insurance premiums– Other business costs, e.g. guaranteed commission

The following, however, are not deemed to be standingcharges: turnover taxes and expenditure on raw materialsand consumables/supplies, as well as on goods purchased,provided they are not used for maintaining the business;also excise, freight charges, turnover-related royalties andinventors’ fees, and similar expenses.

Loss-minimisation costs are also indemnified as long asthey reduce the amount of indemnity for which the insureris liable. These include expenditure to prevent a businessinterruption loss, reduce its extent or end it early once aloss involving property damage has occurred. Loss mini-misation is of decisive importance in machinery businessinterruption insurance and includes, for example, the fol-lowing measures:

– Purchase/sale of semi-finished products– Early maintenance– Purchase of non-identical (but compatible/adaptable)

machinery, express freight, airfreight– Overtime, special shifts, Sunday working to speed up

repairs in order to reduce the business interruption loss– Hiring of machines (e.g. transformers, boilers,

compressors)– Taking into operation of existing old plants– Transfer of work to other factories– Recovery of lost production following resumption

of operations

Machinery loss of profits or business interruption insurance (MLoP or MBI)

Damage to machinery and equipment inevitably leads tobusiness interruptions, the consequences of which can causecompanies considerable expense due to lost production.With its machinery business interruption insurance, MunichRe offers a policy that minimises the BI risk for companies.

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Munich Re, Machinery insurance Machinery loss of profits or business interruption insurance (MLoP or MBI)

Where it is already clear at the insurance proposal stagethat businesses can continue to operate following propertydamage (e.g. by obtaining electricity from outside follow-ing the failure of their own power generation units, hiringmachines or switching to other processes, as well as buy-ing in semi-finished and/or finished goods), it is advisableto arrange increased-cost-of-working insurance in respectof the plant in question as an alternative to machinery busi-ness interruption on a full costs basis.

Period of indemnity and time excess

In order to make risks calculable for insurers, it is necessaryto set a time limit for the indemnity. This is done by fixing aperiod of indemnity.

Period of indemnityUnlike losses involving property damage, business inter-ruption losses are time dependent, i.e. the longer a busi-ness is interrupted or adversely affected, the bigger theloss. It is therefore necessary to limit the insurer’s period ofliability for business interruption losses. This is done withthe help of the period of indemnity stipulated by the policy-holder. This is the maximum period of time for which theinsurer is liable for any business interruption loss arising.

The period of indemnity runs from the moment in time atwhich the property damage has occurred or has beenestablished, based on the state of the art, but not later thanfrom the start of the business interruption loss. The periodof indemnity is usually fixed at three, six, nine or twelvemonths. A period in excess of twelve months may bearranged if required. The criterion for fixing the period isthe time required to rectify the damage leading to the busi-ness interruption. This is obtained from the time needed forrepairs or – in the case of a possible total loss – for replace-ment of the damaged items of equipment, installation andtest operation. A higher premium must be paid for longerperiods of indemnity.

Large steam turbines represent an extremelyhigh concentration of value. They are speciallyprone to major losses.

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Munich Re, Machinery insurance Machinery loss of profits or business interruption insurance (MLoP or MBI)

Time excessBusiness interruption losses of short duration, i.e. lastingonly a few days, can usually be borne by the insured or canbe made good again. These small losses are excluded fromthe cover by the agreement of a time excess. This meansthat the policyholder bears the part of the business inter-ruption loss that results from multiplying the indemnifiabledaily loss by the number of days corresponding to theagreed excess (proportional time excess).

The time excess is dependent on the size and condition ofthe machine; the lowest limit is two days. The choice ofappropriate time excess is determined by the quantity ofstored end products, the possibility of making good the lostproduction, and the size of the financial burden that thebusiness is able to bear itself. Longer time excesses reducethe premium considerably.

Sum insured – Explanatory comments

Sum insuredThe sum insured is made up of the gross profit, includingcontinuing fixed costs arising over a period of twelve con-secutive calendar months (usually the business year). In thecase of contracts with indemnity periods exceeding twelvemonths, it is adjusted accordingly.

Value insuredThe value insured is made up of the actual gross profit,including continuing fixed costs that the policyholderwould have made/incurred during the assessment period in the absence of indemnifiable business interruptions.

Assessment periodThe assessment period is twelve months and ends oncethere is no longer any loss due to business interruption(lost gross profit or specified standing charges), but no laterthan on expiry of the period of indemnity.

UnderinsuranceThe terms “sum insured” and “value insured” allow checksfor underinsurance to be made in the event of a loss: when-ever the sum insured is lower than the value insured, thereis underinsurance. In order to avoid underinsurance, whendetermining the sum insured in the case of longer periodsof indemnity, it is particularly important to ensure thataccount is taken of the likely trend in the business yearfollowing the policy year. If only the trend during the policyyear were to be taken into account, substantial underinsur-ance could arise in the case of losses occurring towards theend of the year.

Machinery business interruption insurance offers a premiumreturn to avoid policyholders having to pay premiums thatare too high because the sum insured has been fixed verycautiously. Following expiry of each policy year, it guaran-tees a premium refund for that part of the sum insuredexceeding the value insured over the past business year.

Mills used in ore refining andcement plants operate under veryrough conditions that putconsiderable stress on bearings,gears and drives.

Premium calculation

Besides market-based conditions, another prerequisite forthe successful operation of machinery business interrup-tion insurance is a premium rate that is commensurate withthe risk. When calculating premiums, underwriters have totake the following factors into account:

– Risk inherent in the machinery that is to be insured– Risk inherent in the business– Impact of the failure of the insured machinery on the

business (relative importance factor)– Standby machines and spare parts– Potential for minimising loss– Economic and political conditions

Risk inherent in the machinery that is to be insuredThe general technical risk inherent in a machine is charac-terised by its average loss frequency and the average lossduration. These two characteristic values have to be deter-mined statistically. Assuming proper maintenance is car-ried out, these are essentially dependent on the type ofmachine and its size and/or capacity. The basic premiumrate obtained from these criteria applies to a machine ofmature design that is in good condition. These prerequis-ites often do not apply, however, in which case the specialtechnical risk must be taken into account by means ofloading factors when determining the premium.

Risk inherent in the businessThe moral hazard is connected with the qualifications ofmanagerial staff and operating personnel and local andregional conditions, as well as the company’s importanceto repair shops and manufacturers. The operating staff’straining is therefore of particular importance when it comesto assessing the risk.

The general technical risk inherent in a business is deter-mined by the following:

– Operational structure– Loss prevention measures such as regular maintenance,

systematic monitoring by means of measuring instru-ments that display and record operational data andprotective devices

– Non-destructive testing and repair possibilities in theplant or nearby

Should an inspection of the risk reveal that normal loss pre-vention measures have not been adopted, or that there arehardly any possibilities for repair in the country, cover canonly be granted against an appropriate premium increase.

Impact of the failure of insured machines (relativeimportance factor)How a machine’s failure impacts on gross profit and speci-fied standing charges will be determined by its relativeimportance factor. This corresponds to the portion of thespecified standing charges or gross profit that cannot beearned if the machine stands idle throughout the entireperiod of insurance. When determining the relative import-ance factor, one should initially take no account of anypotential for minimising loss, such as spare capacity. Themost practical way of determining the relative importancefactor is to use a production diagram presented in flow-chart form. Besides relative importance factors, the capaci-ties of the machines and any standby machines should beentered in this diagram. The relative importance factormust be determined and specified by the policyholdersthemselves, as only they have the detailed knowledgerequired for this. If the factor stated is too low, underinsur-ance may be invoked.

Standby machines and spare partsInformation about the standby situation is used to deter-mine the standby factor, which goes into the calculation ofthe premium rate as a deduction. The standby factor isalways smaller than 1, as any standby equipment reducesthe risk for the insurer. This factor is dependent on thenature and number of machines available, as well as on theratio of installed capacity to demand. Where spare parts areavailable, this is taken into account when calculating thepremium by including a corresponding spare parts factor,which is smaller than 1.

Potential for minimising lossThe success of machinery business interruption insurance is largely dependent on the extent of loss minimisation. It istherefore particularly important to assess the potential forminimising loss, e.g. the procurement of loan machines orthe carrying out of complicated repairs on site.

Economic and political conditionsBesides delays in repairs caused by geographical condi-tions, a country’s economic and political conditions canalso prolong the normal repair time – for example, theobtaining of import and export licences, shortage of foreignexchange, orders or requirements laid down by govern-ment agencies or other official institutions. Where it is notpossible to get a clear idea of the conditions in some coun-tries when arranging a policy, the risk for insurers must belimited by agreeing a clause covering delays in repairs. Theclauses to be applied here – Clause 891 and/or 1309 – allowfor a maximum delay of four weeks.

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Munich Re, Machinery insurance Machinery loss of profits or business interruption insurance (MLoP or MBI)

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Munich Re, Machinery insurance

One alternative to covering damage to machinery bymeans of machinery insurance, fire insurance, machineryloss of profits insurance and fire loss of profits insurance isto offer an “all risks” policy offering all this coverage in one.

Fire insurance was extended in response to frequentdemands from the market. However, these policies did not take account of the conditions required for machinerybreakdown insurance and were often rated inadequately.The special features of machinery insurance have thereforebeen properly taken into account in the new comprehen-sive machinery insurance (CMI).

Munich Re developed this cover in English specifically formajor international industrial risks. In the individualmarkets, however, it operates only in accordance with theusual rules and conditions applying there, and under certaincircumstances its use may not be possible or may besubject to certain restrictions.

Main features of comprehensive machinery insurance

The new policy offers “all risks” cover of a predominantlyengineering nature, particularly against machinery break-down, fire, lightning and chemical explosion, as well asnatural perils for the entire insured plant, with only a fewproperty exclusions and excluded perils. In addition,optional business interruption cover can also be granted inrespect of loss of profits, including increased cost of work-ing, or in respect of specified standing charges (Section 2 ofthe policy). The cover is clearly described and easy tounderstand thanks to its structured content and layout.Important definitions are given at the beginning. The scopeof cover is up to date and comprehensive, and can beadapted to the specific features of a risk by means of aseries of clauses.

Suitable objectsSuitable “objects” for this cover are the following:

– Power plants, transformer stations, power distributionsystems

– Equipment at open-cast mines and ore-dressing plants– Plants in the metalworking industry– Plants in the steel production industry– Cement factories, machines for the construction industry

and stoneworking– Breweries, bottling plants– Transport and traffic systems– Wastewater treatment plants– Water supply systems

Unsuitable or less suitable objectsLess suitable objects are plants and equipment for whichthe fire risk dominates:

– Refineries– Fertiliser factories– Plants/facilities in the textile industry– Warehouses– Printing works, bookbinding works– Microprocessor production plants– Shopping centres– Equipment in the automotive industry

Comprehensive machinery insurance (CMI)

The trend in recent years has shown that more and moreinsureds are looking for “all risks” cover. Demand for classic“all risks” insurance with different independent policies isfalling in the market as it offers insufficient clarity as far asgaps in cover and overlapping cover are concerned.

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Munich Re, Machinery insurance Comprehensive machinery insurance (CMI)

The cover of the Munich Re policy applies to mechanical andelectrical equipment, as well as to buildings, including theircontents, goods being processed, and stock. Cover isgranted at the business locations specified in the policy, andalso during transportation for the purposes of cleaning,renovation, repair or maintenance. Cover applies to thepolicyholders named in the policy: objects destroyed areindemnified at new replacement value. In the case ofmachines, these are indemnified at replacement value untilthey are five years old. Thereafter, indemnity for machines islimited to their current market value. The cover for businessinterruption provided under Section 2 of the policy essen-tially corresponds to the content of the machinery businessinterruption and fire business interruption policies.

Scope of comprehensive coverOver and above the cover provided by machinery insur-ance, comprehensive machinery insurance also covers thefollowing perils and costs:

– Fire, lightning and chemical explosion– Fire brigade charges– Impact of aircraft– Theft– Burglary– Collapse and subsidence of buildings– Flood, inundation– Earthquake (only as an optional extra)– Landslide– Hurricane– Volcanic eruption– Inland transits

Modern gas and steam combined cycle power plants represent a high risk in terms of machinery damage as well as fire andexplosion losses. Therefore, they requirecomprehensive insurance protection.

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Munich Re, Machinery insurance Comprehensive machinery insurance (CMI)

Premium calculationPremiums are calculated on the basis of the rating formachinery breakdown and machinery business interruptioninsurance. For coverage in respect of fire and natural perils,the corresponding extra premiums for property and busi-ness interruption insurance are added.

The premium determined by Munich Re experts is adaptedvery precisely to the risks in the various countries by takingaccount of all the factors of influence, thus providing asound basis for satisfactory operation and further expan-sion of this particularly risky class of business.

Rotary kilns in cement works aresubject to high thermal andmechanical stresses. Downtimefollowing machinery damage canlead to high business interruptionlosses.

Machinery insurance Comprehensive machinery insurance

Cover at the insured location Cover at the insured location and during inland transits

Insurance covers machinery and equipment Insurance covers machinery and equipment

plus

buildings, contents, stock, goods being processed, and also capitaladditions, increased costs of working, fire brigade charges, hazardoussubstances, experts’ fees, removal of destroyed material

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Munich Re, Machinery insurance Comprehensive machinery insurance (CMI)

Comprehensive machinery insurance takes accountof industry’s increasing demand for full-valueinsurance – as a result of technical and economictrends – by providing tailor-made cover.

Machinery insurance/CMI comparison

© 2004Münchener Rückversicherungs-GesellschaftKöniginstrasse 10780802 München GermanyTel.: +49(0)89/3891-0Fax: +49(0)89/399056http://www.munichre.com

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Munich Re, Versicherung von Maschinen Kapitel

© 2004Münchener Rückversicherungs-GesellschaftKöniginstrasse 10780802 München Germany

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