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IMIA Conference 2016What happened in the Engineering Insurance Market in the last 12 Months
MX3D/Joris Laarman Lab
Doha, Qatar 10/2016Stephan Lämmle
Agenda
1. Engineering market – Today & Tomorrow Large Construction Risks Power in Transition Infrastructure Incentives / Infrastructure Projects Development Infrastructure Potential
2. “The future started yesterday” - New Trends in Engineering Cyber Risks Smart Cities, Smart Construction New Technologies: Industry 4.0, IoT, Sensors, Drones
3. Climate Change & NatCat Developments
4. Engineering Insurance Market – Today & Tomorrow Market Performance IMIA Index Market Players Messages from the market
5. Outlook
October 2016Engineering Insurance 2016 / Stephan Lämmle 2
Superlatives in Engineering Projects
Khalifa International Stadium, Aspire Zone – World Cup 2022, Qatar
Image: Hartmut Reiner/ Munich Re
Engineering Insurance 2016 / Stephan Lämmle October 2016 3
Major renovation of 40 yearold national stadium
Capacity 50,000 with plans toexpand to 68,000
Climate controlled stadium
Visited by high rankingInsurance VIP delegation in October 2016
Image: Stephan Lämmle, / Munich Re
Superlatives in Engineering Projects
Third Bosphorus Bridge – Northern Marmary Motorway
Image: Hartmut Reiner/ Munich ReImage: Hartmut Reiner/ Munich Re
Engineering Insurance 2016 / Stephan Lämmle October 2016 4
130 km in lenght throughhilly terrain
1.4 km span bridge 329 m high pylons 59 m wide deck (widest
ever ) Heaviest bridge deck lift
ever ( 850 tons ) Combination of
suspension and cablestayed
TCV 3 bn Record construction time
36 months
Challenging Traffic Tunnels
Eurasia Tunnel Turkey TCV 2 bn
Very abrasive geology
Up to 13 bar pressure
Hyperbaric divers forrepairs
Completion on time
Single bore multi levelconfiguration
Demanding slurrytreatment
Opens Dec 2016Photos Hartmut Reiner MR Photos Hartmut Reiner MR
October 2016Engineering Insurance 2016 / Stephan Lämmle 5
Challenging Traffic Tunnels
October 2016Engineering Insurance 2016 / Stephan Lämmle 6
Opening Ceremony 01.06.2016
Longest train tunnel of the world
20 years construction time
Est. Value 12 bn CHF
57,1 Total Length(+ Zimmerberg 20 km+ Ceneri 15 km)
178 Cross Tunnels
10000 Lamps
Max. train speed 250 km/h
28 mio t excavation material (3 Cheops Pyramids)
Gotthard Basistunnel - AlpTransit Gotthard AG (SBB)
Photos Stephan Lämmle MR
October 2016Engineering Insurance 2016 / Stephan Lämmle 7
Logistics facilities
New Doha Port TCV 4 bn
Built „ in land „ ; flodded thereafter
Terminus for Saudi Arabianpeninsula
Basin 2.8 km long 17 mtrs deep
Mixed use ( RoRo, livestock, container )
Big nature protection programmainly for mangrooves and birds
Source H.Reiner MRSource H.Reiner MR
Superlatives in Engineering Projects
Metro’s
Ʃ USD > 120 bn*Image: DEA PICTURE LIBRARY/ Getty Images
* Top Metro Projects past 36 months
1. Doha = USD 30 bn2. Moscow = USD 10 bn3. Mecca = USD 9 bn4. Sao Paulo = USD 8 bn5. Riyad = USD 23 bn6. Quito = USD 1.3 bn7. Lima = USD 4.4 bn8. Hanoi = USD 1.3 bn9. Fortaleza = USD 0.9 bn10. Delhi = USD 0.8 bn11. Singapore = USD 7.5 bn12. Kuala Lumpur = USD 6 bn13. Ho Chi Min City = USD 1 bn14. Los Angeles = USD 1 bn15. Panama = USD 2 bn16. Oman Rail = Suspended17. Mekkah Metro = 2.6 bn18. Mumbai Metro = 3.5 bn19. Dubai Metro = 1.6 bn20. Algiers Metro = 0.7 bn21. PRC various cities > 50 bn
Engineering Insurance 2016 / Stephan Lämmle October 2016 8
Agenda
1. Engineering market – Today & Tomorrow Large Construction Risks Power in Transition Infrastructure Incentives / Infrastructure Projects Development Infrastructure Potential
2. “The future started yesterday” - New Trends in Engineering Cyber Risks Smart Cities, Smart Construction New Technologies: Industry 4.0, IoT, Sensors, Drones
3. Climate Change & NatCat Developments
4. Engineering Insurance Market – Today & Tomorrow Market Performance IMIA Index Market Players Messages from the market
5. Outlook
October 2016Engineering Insurance 2016 / Stephan Lämmle 9
Power in Transition
Key Aspects
• COP 21
• Renewable Energy
• Fracking & Shale Gas
• Decarbonization
• Aging Equipment & Tight Budgets
• Smart Grid
• HVDC
October 2016 10Engineering Insurance 2016 / Stephan Lämmle
Trends in the Electricity Market
2015 investment in the electricity sector (generation and grid) rose to a record of USD 690 billion *)
Monetary investment in Renewable Energy is stable for the last 5 years, but annual increase of capacity is up because of declining hardware prices *)
Systems are being adapted to the new energy mix with more renewables
Shift of remuneration models from payments for actually produced energy to availability based PPAs and incentives for contribution to grid stability (e.g. capacity markets, ancillary services like frequency response, MVArs, time bids and offers)
Around 95% of power short generation investments rely on vertical integration, long-term contracts (PPAs) or price regulation to manage risk *)
Regulations create incentives for availability in periods of high demand by new revenue (e.g. utilization payments in addition to availability payments) and penalty schemes (e.g. PJM and UK)
Changes of net topology (new backbones and bidirectional feed-in/out)
No important role of storage capabilities and demand side management in grids up to now*) Source: IEA International Energy Agency
October 2016 11Engineering Insurance 2016 / Stephan Lämmle
Change of ParadigmsRegulated vs. Liberalized Market Environment
Criteria Old World New WorldEfficency Technically feasible Economically justifiable
Reliability Maximised Balanced vs. financial impact
Dispatch Technical / ecological criteria Merit Order
Revenue Regulated for portfolio mix Competitive driven by lowest variable costs
Maintenance efforts Revenues = f (cost) Cost = f (revenues)
PPA mechanism Production based Availability based
Consequences of non-availability Lost production during outage Penalty schemes (e.g. PJM)
Coal Base load Mid to Base load
CCPP No major role (expensive gas)
Perfect fit for cyclingbut not competitive
Renewables Investment incentives Driving fossil fuels out of business
October 2016Engineering Insurance 2016 / Stephan Lämmle 12
Trends in the Electricity MarketChanging Insurance Needs
October 2016 13
IPPs having contractual supply obligation
Energy markets with penalties mechanisms(e.g. negative billing; for unavailability in gridemergency situations)
Anciliary services (frequency response, reactivepower, helpful imbalance, etc.) determining netprofit of operation
LTMAs, LTSAs, Force-Majeure relief in PPAs, etc.
Low-efficency generating capacity kept as non-spinning reserve
Costs for replacement power from spot marketsinstead of standing charges plus net profit
Outage insurance covering peak exposures
Cover for hard-to-predict short-term opportunities
Covers taylormade to residual risk for insured
Cover for residual economic value from capacitypayments instead of repair
Trend Change in Insurance Needs
Engineering Insurance 2016 / Stephan Lämmle
Change of ParadigmsPJM Capacity Market Changes
October 2016Engineering Insurance 2016 / Stephan Lämmle 14
Plants must be capable of sustained, operation available throughout the entire delivery Year to provide energy and reserves whenever an emergency condition exists.
Resources that fail to perform are subject to Non-Performance Penalties triggered during all PJM Emergency Actions
“Fuel Gas Curtailment” is no longer a Force majeure, only excused if PJM lines are down (i.e.: Ice Storm)
A plant could lose its capacity payment for the year and reduce future Capacity payments due to 5 yr look ahead formula. In 2016 a 500 MW plant can lose $ 1 Mio per hour.
1. For the first time, an international climate agreement specifies the goal of holding global warming well below 2°C, aiming for 1.5°C above pre-industrial levels (note: current levels at approx. 1°C)
• To achieve this, the COP parties have agreed upon a net-zero emissions aim during the second half of the century
• “Nationally determined contributions” (NDCs) are established as the main vehicle for reducing global GHG emissions;
• Parties commit to report regularly on their emissions and “progress made in implementing and achieving” their NDCs, as well as submitting new NDCs which “represent a progression” every 5 years
2. Parties also commit to extend the current goal of mobilizing $100 billion a year by 2020 through 2025, with a new, higher goal to be set for the period after 2025.
3. Extend a mechanism to address “loss and damage” resulting from climate change, which also includes a provision about climate insurance.
UN COP 21 – Outcomes
October 2016Engineering Insurance 2016 / Stephan Lämmle 15
Renewable Energy
October 2016 16Engineering Insurance 2016 / Stephan Lämmle
At the end of 2015, 23.7% ofglobal electricity demand was covered by renewable energysources, with hydro power accounting for the largest share(16.6%).
Renewable Energy share of global electricity production at the end of 2015
17
Hydro power is the main RE electricity source
Source: REN21 „Renewables 2016 Global Status Report“
Fossil fueland nuclear
76%
Hydropower17%
Wind 4%
Other RE 3%
Renewable Energy
24%
October 2016Engineering Insurance 2016 / Stephan Lämmle
At the end of 2015, solar PV and wind reached newrecords of total installedcapacity: 227 GW PV and 433 GW wind.
Together, wind and PV accountfor 113 GW or 77% of newcapacity additions in 2015.
Some 3.4 GW offshore capacity was connected to thegrid during 2015, accountingfor a total offshore wind capacity of 12 GW at last year‘s end.
Cumulative global installed renewable energy capacity
18
Installed capacity 2015 – Total: 1,849 GW
Source: REN21 „Renewables 2016 Global Status Report“
* Does not include pumped storage capacity
October 2016Engineering Insurance 2016 / Stephan Lämmle
Global annual investment in renewable energy Comparison investment by technology and region in 2015
Investment by technology (US$ bn) Investment by region (US$ bn)
95% of total renewable energy investment in 2015 was made in the solar and wind sector.
China alone accounted for 36% of last yearsinvestment in renewable energies.
Source: BNEF / UNEP „Global Trends in Renewable Energy Investments 2016“
Europe48.8
United States44.1
China102.9
India10.2
Asia & Oceania (excl. China and India)
47.6
Brazil7.1
Latin America & Canada (excl. US and Brazil)
12.8
Middle East & Africa12.5
Wind110
Solar161
Biomass + Waste
6
Geothermal2
Small Hydro4
Biofuels 3
October 2016Engineering Insurance 2016 / Stephan Lämmle 19
Global annual investment in renewable energyComparison developed / developing countries
October 2016Engineering Insurance 2016 / Stephan Lämmle 20
For the first time, investment in developing countries ($156 bn) topped those of the developed economies ($130 bn).
Developing countries have increased their investment in RE almost in a straight line since 2004, with a little decline in 2013.
Within the developing economy, China, India, and Brazil saw investment rise 16% to $120.2 bn in 2015 with China making the largest amount ($103 bn).
Investment in developed / developing countries 2004-2015 (US$ bn)
Developed countries Developing countries
Source: BNEF / UNEP „Global Trends in Renewable Energy Investments 2016“
3753
83108
123 114
164191
151136 142
130
9 20 2946
60 64 7587
106 98
131156
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
US Power in Transition
October 2016 21Engineering Insurance 2016 / Stephan Lämmle
Age structure of the current operational NA power generation assets [MW]
October 2016 22Engineering Insurance 2016 / Stephan Lämmle
North American power generation fleet
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
COAL HYDRO URAN GAS/OIL CC* GAS/OIL SC/TH* WIND SUN
Capacity >40 years:HYDRO: 54%
COAL: 52% GAS / OIL SC: 38%
Source: Platts data base from McGraw Hill
Nearly half of US electricity comes from coal
138 coal plants closed since 2011 (10.2 GW)
150 more scheduled for closure in near future
329 additional plants identified for retirement
Closure due to EPA regulations to curb pollution
Growing renewable energy infrastructure (wind & solar)
Lower energy demand due to down economy
October 2016Engineering Insurance 2016 / Stephan Lämmle 23
Ageing coal power plant retirements in US
Changes in US Power Landscape
Key plant equipment Aging equipment issues
High total combustible gases, insulation deterioration, FuransBushings
Obsolence, sequential tripprotective device testing / OSTDC ELOP testing
Fuel isolation, boiler explosionwater chemistry excursions, scaling, corrosion pitting, improper lay up,
Distribution transformers, storm hardening designs
Boilers
Control systems
GSU transformers
Turbines and generators
Grid
24
Aging blades & rotors, fatigue, stress corrosion cracking, loose wedges, and end windings, corona damage
Trends in the Electricity MarketAging Equipment
October 2016Engineering Insurance 2016 / Stephan Lämmle
Expected Rise in Power Generation Capacity 2015 - 2030
Coal31%
Gas26%
Nuclear5%
Hydro18%
Wind7%
Solar4%
Others7%
Flexible Capacity
2%
October 2016 25Engineering Insurance 2016 / Stephan Lämmle
2015 – 6,418 GW 2030 – 13,464 GW
Coal16%
Gas15%
Nuclear4%
Hydro12%Wind
13%
Solar28%
Others4%
Flexible Capacity
8%
Source: Bloomberg New Energy Finance
Agenda
1. Engineering market – Today & Tomorrow Large Construction Risks Power in Transition Infrastructure Incentives / Infrastructure Projects Development Infrastructure Potential
2. “The future started yesterday” - New Trends in Engineering Cyber Risks Smart Cities, Smart Construction New Technologies: Industry 4.0, IoT, Sensors, Drones
3. Climate Change & NatCat Developments
4. Engineering Insurance Market – Today & Tomorrow Market Performance IMIA Index Market Players Messages from the market
5. Outlook
October 2016Engineering Insurance 2016 / Stephan Lämmle 26
Stimulus Programs
Germany 2009: € 50 bn Stimulus Plan
USA 2009: $US 214 Stimulus Plan
Australia Stimulus Plan
October 2016 27Engineering Insurance 2016 / Stephan LämmleSource: Spiegel Online
Worldwide spend of infrastructure amounts to USD 2,8tr
The quality and extensiveness of infrastructurenetworks significantly impact economic growth and reduce income inequalities and poverty in a variety of ways
Advanced industrial economies like the United States and Western Europe are focusing on repair and replacement of their aging infrastructures
The developing world faces the more daunting task of creating new transportation, communication, water, and energy networks to foster economic growth, improve public health systems, and reduce poverty
In 2015 global spending of economical infrastructure amounts to USD 2,8tr and USD 0,6tr on social infrastructure
Global spent on infrastructure 2015
Sector Examples Spend in 2015 [USD tr]
Transport Highways, rails, tunnels bridges
Energy Energy production, power distribution
Telecom Communication networks
Water Plants for management of the water cycle
EconomicalInfrastructure
2.8
Educational buildings Universities, schools
Healthcare buildings Hospitals
Institutional buildings Social housing, prisons
Social Infrastructure 0,6
Source: CONSTRUCTION INTELLIGENCE CENTER; SFR1.4; RID
October 2016Engineering Insurance 2016 / Stephan Lämmle 28
$US 2,800,000,000,000
Agenda
1. Engineering market – Today & Tomorrow Large Construction Risks Power in Transition Infrastructure Incentives / Infrastructure Projects Development Infrastructure Potential
2. “The future started yesterday” - New Trends in Engineering Cyber Risks Smart Cities, Smart Construction New Technologies: Industry 4.0, IoT, Sensors, Drones
3. Climate Change & NatCat Developments
4. Engineering Insurance Market – Today & Tomorrow Market Performance IMIA Index Market Players Messages from the market
5. Outlook
October 2016Engineering Insurance 2016 / Stephan Lämmle 29
Cumulated needs 2015-30 [USD tr] To estimate demand by region, historic spending levels are considered and projected
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
October 2016Engineering Insurance 2016 / Stephan Lämmle 30
In the past 3,7% of global GDP has been spent on infrastructure, suggesting investment demand of ~USD 65-70tr through 2030
Global infrastructure needs 2015-30 [USD bn] Comments
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
Source: GD VERA data; CONSTRUCTION INTELLIGENCE CENTER; SFR1; RID
Economy Demand 2015-30
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%
Agenda
1. Engineering market – Today & Tomorrow Large Construction Risks Power in Transition Infrastructure Incentives / Infrastructure Projects Development Infrastructure Potential
2. “The future started yesterday” - New Trends in Engineering Cyber Risks Smart Cities, Smart Construction New Technologies: Industry 4.0, IoT, Sensors, Drones
3. Climate Change & NatCat Developments
4. Engineering Insurance Market – Today & Tomorrow Market Performance IMIA Index Market Players Messages from the market
5. Outlook
October 2016Engineering Insurance 2016 / Stephan Lämmle 31
Cyber
Hacking or malware attacks: Such attacks have been growing steadily in scale and frequency. In the US alone, 193.5 million customer records have been stolen in large breaches involving more than 10 million records apiece in the past two years.
Distributed denial-of-service (DDoS) attacks: Half of all major US companies sustained a denial-of-service attack to their websites last year, and more than 10% of these attacks interrupted the companies’ web-based service capabilities. The potential for significant business interruption losses from a successful DDoS attack is high.
Cyber extortion: So-called ransomware attacks have recently intensified. Those that have been disclosed have generally been small in scale. But the potential undoubtedly exists for far larger cyber extortion attempts.
Property damage and bodily injury exposures deriving from malicious cyber attacks: With the increasing interconnectivity of systems, the potential impact of an attack on the smooth functioning of plant and machinery and the safety of employees is becoming more and more severe.
System failure: An IT failure could result in business interruption, delayed services for customers, reputational loss and recovery costs.
October 2016 32Engineering Insurance 2016 / Stephan Lämmle
Prognosis: Cyber insurance market
October 2016 33Engineering Insurance 2016 / Stephan Lämmle
So far, 90% of cyber premiums coming from North America due to
Tight data breach regulation
Large incidents (e.g. Target)
Only recently few higher loss events
Fast development in other markets (due to changing regulation, in Asia/ Australia, planned EU Directive)
Overall strong growth expected
Accumulation risks as major issue for reinsurers and primary insurers (virus, cloud outage, etc.), capacity becoming more important
Estimated Primary Insurance Cyber Market Cyber Market Developments
0123456789
2013 2014 2020US market Rest of the world
~ 2
Source: MR market estimate based on different external sources (Marsh & McLennan, Advisen, Barbican Insurance, Allianz)
~1,2-1,4
~0,11,3-1,5
6,0-8,0
~5,0
~ 1,0-3,0
2,1-2,3
~ 2,0
~ 0,1-0,3
(2013, 2014 & 2020, in USD bn.)
High ambiguity of estimated market sizes from different sources
October 2016Engineering Insurance 2016 / Stephan Lämmle 34
Future of Cyber in Insurance
Exclusion Coverage
?
Agenda
1. Engineering market – Today & Tomorrow Large Construction Risks Power in Transition Infrastructure Incentives / Infrastructure Projects Development Infrastructure Potential
2. “The future started yesterday” - New Trends in Engineering Cyber Risks Smart Cities, Smart Construction New Technologies: Industry 4.0, IoT, Sensors, Drones
3. Climate Change & NatCat Developments
4. Engineering Insurance Market – Today & Tomorrow Market Performance IMIA Index Market Players Messages from the market
5. Outlook
October 2016Engineering Insurance 2016 / Stephan Lämmle 35
Smart Construction
36Engineering Insurance 2016 / Stephan Lämmle
Smart Construction - Complex Design & Equipment
October 2016 37Engineering Insurance 2016 / Stephan Lämmle
Hong Kong MTR Station Variable density TBM
Photos H.WannickMR Photos H.Reiner MR
Smart Cities
October 2016 38Engineering Insurance 2016 / Stephan Lämmle
City Predesign & IoT Connections Building Technology Urban assets Energy & Ressources management (Smart Grid, RE, Water) Mobility incl. roads & transport IT & Comm. Economy, Trade
Examples: Masdar City, SA Songda City, SK Lusail City, Qatar
Applications:- Ongoing tracking of material delivery- Coordination of delivery with ongoing
assemble activities- Time-adjusted re-planning, ordering and
shipment processes- Flexible shipment routing to avoid delays
IoT for Smart Logistics and Fleet Management
October 2016 39Engineering Insurance 2016 / Stephan Lämmle
Applications:- Ongoing progress tracking- Just-in-time deviation management- Just-in-time alternative suggestions- Just-in-time deviation consequence
modeling- Just-in-time effort planning (manpower, time,
machines, staff,…)
IoT for Smart Planing
October 2016 40Engineering Insurance 2016 / Stephan Lämmle
Applications:- Management of Building construction
modeling- Full integration of construction planning- Full integration of construction process
and activities- Ongoing monitoring of conditions- Transfer / Migration to Building
Management System when going live
BIM Building Management System
October 2016 41Engineering Insurance 2016 / Stephan Lämmle
Applications:- Overlapping aerial images of buildings are
used to generate a three-dimensional model of the scene
- Compare real and BIM planning data in 3-D- Construction Process Optimization- Site Security and Fire Prevention- Logistics for Laydown Areas- Wind Turbine Blades Inspections- Solar Panel Field Hotspot Detection
Drones
42October 2016Engineering Insurance 2016 / Stephan Lämmle
Source: Stephan Lämmle, MR
Examples
Infrastructure
Buildings
Machine parts
Medical Applications
3D Printing
October 2016 43Engineering Insurance 2016 / Stephan Lämmle
MX3D/Joris Laarman Lab
Agenda
1. Engineering market – Today & Tomorrow Large Construction Risks Power in Transition Infrastructure Incentives / Infrastructure Projects Development Infrastructure Potential
2. “The future started yesterday” - New Trends in Engineering Cyber Risks Smart Cities, Smart Construction New Technologies: Industry 4.0, IoT, Sensors, Drones
3. Climate Change & NatCat Developments
4. Engineering Insurance Market – Today & Tomorrow Market Performance IMIA Index Market Players Messages from the market
5. Outlook
October 2016Engineering Insurance 2016 / Stephan Lämmle 44
Applications:- Drivers / workers fatigue recognition- Health measurements (heartrate, blood
pressure, breath rhythm,.... Stress symptoms)- Workers condition forecasting- Warnings for dangerous situations coming
closer- Recognition of wrong workers´ behaviour- Automatic identification system to monitor time
of PPE use
IoT for Smart Occupational Safety and Health (OSH)
October 2016 45Engineering Insurance 2016 / Stephan Lämmle
Applications:- Augment reality with planned assembling locations
- Display machine tracks on site
- Display warnings in the glasses
- Navigation
- Display construction plan on site…
- Just-in-time translators (acoustic, visual) for different nationalities on the site – avoiding misunderstandingsamong workers
- UAV 3D Scanning and surveillance
IoT for Augmented reality construction site
October 2016 46Engineering Insurance 2016 / Stephan Lämmle
Applications:
- Material has tags which allocate it to the right place
- Combined with augmented reality, the worker seeswhen the material is right or wrong at the place
- Also timely allocation (One part has to be mountedfirst before the other part can be mounted
- Location Tracking of tools
- Condition tracking of tools
- Monitoring if right tool according to material
IoT for Smart Material Management & Prefabriqued off-site construction
October 2016 47Engineering Insurance 2016 / Stephan Lämmle
Applications:- Ongoing geolocation tracking of
machines- Arrival and departure tracking- Just-in-time supply chain planning- Ongoing machinery status monitoring- Predictive maintenance- Performance Warranty- Anti-collision protection
IoT for Smart Machinery Management
October 2016 48Engineering Insurance 2016 / Stephan Lämmle
Agenda
1. Engineering market – Today & Tomorrow Large Construction Risks Power in Transition Infrastructure Incentives / Infrastructure Projects Development Infrastructure Potential
2. “The future started yesterday” - New Trends in Engineering Cyber Risks Smart Cities, Smart Construction New Technologies: Industry 4.0, IoT, Sensors, Drones
3. Climate Change & NatCat Developments
4. Engineering Insurance Market – Today & Tomorrow Market Performance IMIA Index Market Players Messages from the market
5. Outlook
October 2016Engineering Insurance 2016 / Stephan Lämmle 49
Natural loss events worldwide 2015 Geographical overview
October 2016 50Engineering Insurance 2016 / Stephan Lämmle
Weather-related loss events worldwide 1980 –2015Number of relevant events by peril
October 2016 51Engineering Insurance 2016 / Stephan Lämmle
Weather-related loss events worldwide 1980 –2015Number of severe catastrophes by peril
October 2016 52Engineering Insurance 2016 / Stephan Lämmle
October 2016 53Engineering Insurance 2016 / Stephan Lämmle
The average temperature of all Jan-Sept periods over the past 136 years. Source: NOAA
Climate changeEmerging issues in natural catastrophe risk
Agenda
1. Engineering market – Today & Tomorrow Large Construction Risks Power in Transition Infrastructure Incentives / Infrastructure Projects Development Infrastructure Potential
2. “The future started yesterday” - New Trends in Engineering Cyber Risks Smart Cities, Smart Construction New Technologies: Industry 4.0, IoT, Sensors, Drones
3. Climate Change & NatCat Developments
4. Engineering Insurance Market – Today & Tomorrow Market Performance IMIA Index Market Players Messages from the market
5. Outlook
October 2016Engineering Insurance 2016 / Stephan Lämmle 54
IMIA Statistics Engineering
October 2016 55Engineering Insurance 2016 / Stephan Lämmle
2009 - 2014
Based on IMIA Figures 2009-11 and 2012-14
Engineering marketLarge losses overview >100m 2015Status: 16 August 2016
October 2016 56Engineering Insurance 2016 / Stephan Lämmle
Energy1
Country Cause of loss Occupancy/object built (Initial) reserve (€)2
USA Explosion Oil & Gas > 200,000,000USA Fire Mining > 130,000,000Saudi Arabia Wrong filter design Power plant > 180,000,000Czech Republic Fire Oil & Gas > 500,000,000USA Fire Power plant > 125,000,000The Netherlands Fire Fertilizer > 100,000,000Australia Machinery breakdown Mining > 130,000,000Brazil Landslide Mining > 530,000,000Australia Tornado Desalination plant > 300,000,000Energy total 2,200,000,000
Engineering3
Country Cause of loss Occupancy/object built (Initial) reserve (€)2
France Fire Office > 30,000,000France Derailment Railroad > 33,000,000Engineering total > 65,000,000
1 Offshore excluded 2 Reserves are initial and may not have been updated.3 For engineering, losses incurred >25m are listed too, as >100m is very rare.
Source: Bowring Marsh
Engineering marketLarge losses
October 2016 57Engineering Insurance 2016 / Stephan Lämmle
Energy1
Country Cause of loss Occupancy/object built (Initial) reserve (€)2
USA Explosion Oil & Gas > 200,000,000USA Fire Mining > 130,000,000Saudi Arabia Wrong filter design Power plant > 180,000,000Czech Republic Fire Oil & Gas > 500,000,000USA Fire Power plant > 125,000,000The Netherlands Fire Fertilizer > 100,000,000Australia Machinery breakdown Mining > 130,000,000Brazil Landslide Mining > 530,000,000Australia Tornado Desalination plant > 300,000,000Energy total 2,200,000,000
Engineering3
Country Cause of loss Occupancy/object built (Initial) reserve (€)2
France Fire Office > 30,000,000France Derailment Railroad > 33,000,000Engineering total > 65,000,000
1 Offshore excluded 2 Reserves are initial and may not have been updated.3 For engineering, losses incurred >25m are listed too, as >100m is very rare.
Operational Power
Source: Bowring Marsh
While claims activity inevitably varies, there is an upward trend in the scale of individual power losses. For example, in 2001 the largest three claims were US$13 million, US$11 million, and US$7 million; more than 10 years on, in 2014, the scale of claims had risen dramatically to US$233 million, US$70 million, and US$55 million.Source: Marsh Report 2016
Market Capacity: 4.000 MSUDAnnual Premium: 1.500 to 2.000 MUS$Incurred losses: 2009 > 2.100 MUS$
2010 > 2.200 MUS$2011 > 2.300 MUS$2012 > 2.660 MUS$
Engineering market
October 201658
Large1 Losses – market viewEnergy/Engineering
Man-made and natural catastrophe losses1
Energy/Engineering
1 xs €20mSource: Munich Re
58%
97%
54%
71%
43%
90%
88%
94%
42%
3%
46%
29%
57%
10%
12%
6%
0% 20% 40% 60% 80% 100%
2008
2009
2010
2011
2012
2013
2014
2015
Man-made Nat Cat
0
1,000
2,000
3,000
4,000
5,000
6,000
2008 2009 2010 2011 2012 2013 2014 2015
Oil & Gas
Power Plant
Mining
Civil (Bridges,Tunnels, Roads,etc.)Buildings
Manuf.
€bn
Engineering Insurance 2016 / Stephan Lämmle
Change in Market Rate LevelVarious Analysis – Similar Trends
59
0
50
100
150
200
2008 2009 2010 2011 2012 2013Market ratesWording/DD effectSublimits
Common view?
Transparency is key:IMIA Rate Index Survey
Source. MR, H. Reiner
October 2016Engineering Insurance 2016 / Stephan Lämmle
Agenda
1. Engineering market – Today & Tomorrow Large Construction Risks Power in Transition Infrastructure Incentives / Infrastructure Projects Development Infrastructure Potential
2. “The future started yesterday” - New Trends in Engineering Cyber Risks Smart Cities, Smart Construction New Technologies: Industry 4.0, IoT, Sensors, Drones
3. Climate Change & NatCat Developments
4. Engineering Insurance Market – Today & Tomorrow Market Performance IMIA Index Market Players Messages from the market
5. Outlook
October 2016Engineering Insurance 2016 / Stephan Lämmle 60
Quotes from the Market
61
We … must wake up and consider in a more active way
the consequences of our decisions … today on the future
results of our portfolios
if some of us are still making profit it can only be coming from the past
underwriting years
with a reduced activity and soft market we have a cocktail
for explosive situation
… although results are generally still positive the trends we see … are pretty clear and as soon as
project business written prior to will definitely expire the ULR is definitely going to get worse
Almost every insurer seems to be faced with constant
reorganisations to cut costs
Almost all complain about the market being softer than they
can ever remember. Interestingly however when I ask if they are
still making money, almost everyone says they are.
Maybe it's the calm before the storm however no one seems to anticipate a hard market in the
foreseeable future
many people are jumping into this class of business without a technical background, purely because of the premiums …, which has seen the price in
these types of projects reduce significantly.
The number of projects out there doesn’t seem to be a problem ... It’s the large big ticket items being delayed
Capacity still continues to grow in our market regardless of how soft
it is Level of talent coming into the
market is potentially diminishing transactional mentality wins over
technical mentality.
October 2016Engineering Insurance 2016 / Stephan Lämmle
Agenda
1. Engineering market – Today & Tomorrow Large Construction Risks Power in Transition Infrastructure Incentives / Infrastructure Projects Development Infrastructure Potential
2. “The future started yesterday” - New Trends in Engineering Cyber Risks Smart Cities, Smart Construction New Technologies: Industry 4.0, IoT, Sensors, Drones
3. Climate Change & NatCat Developments
4. Engineering Insurance Market – Today & Tomorrow Market Performance IMIA Index Market Players Messages from the market
5. Outlook
October 2016Engineering Insurance 2016 / Stephan Lämmle 62
Comparison Property vs. Engineering
63
Property
Turnaround Time
Engineering
Risk Selection
Portfolio Composition
[2 years] [9 years]
USD 10.5 bn(4,7 bn Projects)
2,3%
XL Annual
Q/S & XL Short & Longterm
Frequency &Volatility
Limitations
Small lines don’tgenerate sufficient incomeNo non-prop
No quick wins / fast effect Cycle Duration
No simple “No-go Industry”Segmentation
USD 450 bn
Engineering Insurance 2016 / Stephan Lämmle October 2016
Summary
1. Growing economies (rf. IMIA country reports)
2. High potential from infrastructure investments
3. Fast pace of new trends and changes require speedyadaption of insurance operations, products and services
4. IoT leads to increasing real time transparancy of risk qualitywith individualization of risks
5. Climate change prevails and reserves for NatCat required
6. Soft engineering insurance market and long developmentpatterns render profitabilty challenging
October 2016 64Engineering Insurance 2016 / Stephan Lämmle
Foundation for a bright future is all setProfessional UW, adequate terms & conditions and meeting changing clients‘ needs with innovative
solutions are key for sustainable success and profitability of the Engineering industry
October 2016 65Engineering Insurance 2016 / Stephan Lämmle
Way Forwrad
N o n e o f t h e s o l u t i o n s a r e e a s y : t h e o n e s t h a t l o o k e a s y d o n ‘ t w o r k , a n d t h e o n e s t h a t w o r k a r e n o t e a s y
B U T
T h e b e s t w a y t o p r e d i c t t h e f u t u r e i sT O C R E AT E I T
Thank you kindly for your attention
October 2016 66Engineering Insurance 2016 / Stephan Lämmle
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Engineering Insurance 2016 / Stephan Lämmle October 2016 67
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