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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
5IMIA Conference 2018
Image: Heiko Wannick, MR
4 September 2018
Projects What was on in 2017–2018?
6IMIA Conference 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
Projects What was on in 2017–2018?
7IMIA Conference 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
8IMIA Conference 2018
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
9IMIA Conference 2018
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
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 10
Trends in Operational Power Next Generation “G, H, J” Class Combustion Turbines are Online
11IMIA Conference 2018
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
4 September 2018IMIA Conference 2018 12
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)
4 September 2018IMIA Conference 2018 13
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
15IMIA Conference 2018 4 September 2018
Power to X
16IMIA Conference 2018
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
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 17
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
4 September 2018 19IMIA Conference 2018
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
21IMIA Conference 2018 4 September 2018
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
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 22
NatCat
Cyclone MekunuOman
Hurricanes HIM
Wildfires California
Earthquake Mexico
4 September 2018IMIA Conference 2018 23
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
26IMIA Conference 2018 4 September 2018
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
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 28
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
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 32
NatCatWildfires California
33IMIA Conference 2018
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
34IMIA Conference 2018
Global wildfire hazard and significant loss events
4 September 2018Source: Munich Re NatCatSERVICE
Munich Re Topics Geo 2017
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 35
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
38IMIA Conference 2018
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 %
40IMIA Conference 2018 4 September 2018
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 41
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
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 43
Coal vs RE Past and future
44IMIA Conference 2018 4 September 2018
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
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 46
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
48IMIA Conference 2018 4 September 2018
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
49IMIA Conference 2018
Image: Hari Radhakrishnan
4 September 2018
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 50
Starting position: A changing energy landscape Fundamental paradigm shifts in the whole energy sector
4 September 2018 51IMIA Conference 2018
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 $268 bn or 96% of total renewable energy investment in 2017
Beside an increase of 18% in the solar sector, all other renewable energy sectors saw a decline in investment
Global annual investment in renewable energy
4 September 2018 52IMIA Conference 2018
Investment by technology 2004–2017 (US$ 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
4 September 2018 53IMIA Conference 2018
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
4 September 2018 54IMIA Conference 2018
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
4 September 2018 55IMIA Conference 2018
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.
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 56
New TechnologyPlant and Machinery
Source: S. Lämmle, MR Source: S. Lämmle, MR Source: S. Lämmle, MR
57IMIA Conference 2018 4 September 2018
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
58IMIA Conference 2018 4 September 2018
Contemporary Innovations
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
Contemporary Innovations
Image: Presentation Dr. Russel Loveridge, NCCR Digital Fabrication, eth – ITA @ Partner RE 06/2018 60IMIA Conference 2018 4 September 2018
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 61
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
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Are data an insured property?
4 September 2018
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 64
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
65IMIA Conference 2018 4 September 2018
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
4 September 2018IMIA Conference 2018 66
Know your risks … and safe landings
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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
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694 September 2018IMIA Conference 2018