TOPICS. RISK SOLuTIONS. Remedy for production failure. Insurance solutions for industry Issue 2/2014

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1 TOPICS Insurance solutions for industry Issue 2/2014 RISK SOLuTIONS Remedy for production failure New product closes insurance gap for life science companies. PAGE 4 Flooding New flood models for the USA and Canada Power outages Predictive model cuts costs Column Smart home toys are no pure joys

2 EDITORIAL Dear Reader, The insurance industry is at times accused of doing too little in the way of innovation. In this issue, I am pleased to be able to cite further counterexamples: One of these is especially important for the life science branch, because, with this product, we are undeniably extending the limits of insurability: For the first time, we are able to offer coverage for the risk of business interruption with no prior property loss. Now, companies can insure the financial risk of a supplychain breakdown caused by changing regulatory provisions and protect their balance sheet, share price and rating. The two other innovations primarily involve risk management. NATHAN offers flood models of a precision that is unique on the market and HSB makes it easier to calculate the power outage risk. Read about it yourself. Munich, April 2014 Yours sincerely, Torsten Jeworrek Member of the Munich Re Board of Management and Chairman of the Reinsurance Committee NOT IF, BUT HOW

3 Contents Healthful gingko Extracts from gingko leaves are used in many pharmaceuticals and food supplements. Both the production process and the individual products are subject to strict controls. Contamination of any kind can lead to an interruption in production and result in financial loss. Page 4 News 2 NATHAN offers new flood models 3 LIFE SCIENCE More regulation, less risk 4 New product covers the risk of business interruption with no prior property loss Made-to-measure insurance protection 8 RISK MANAGEMENT Calculating power outages more accurately 10 New HSB model makes calculation of blackout risks easier Column Smart homes 16 New home control systems can be expensive Imprint and preview 17 Munich Re Topics Risk Solutions 2/2014 1

4 news Watkins New CFO Munich re New CEO WAtkins Top ranking Greg Guelfand has been appointed Group Chief Financial Officer of Munich Re Holding Company (UK Ltd), also known as Watkins Syndicate, with effect from April He has held CFO roles in London since 2007 for Great Lakes and Munich Re UK General Branch. He joined Munich Re in Sydney, Australia, in 1999 and had a five-month secondment to the Head Office in CEO Mark Watkins: I m delighted that Greg is joining us. He understands Munich Re s people and systems very well and has a track record of leading finance departments which add value to a business. >> More information at Philipp Wassenberg has been appointed President and CEO of Munich Re of Canada and Temple Insurance of Canada with effect from 1 April He will succeed Kenneth Irvin, who will retire after having successfully filled this role for more than twelve years. Philipp Wassenberg has performed a variety of executive functions at Munich Re s Head Office, where he has been in charge of underwriting for clients, Lloyds and the US and Bermuda markets. Munich Re is a leading provider of property and casualty reinsurance in Canada. Temple Insurance underwrites large industrial and commercial accounts involving both casualty and property business, including oil and gas installations and wind farms. >> More information at The Gracechurch Report has named two colleagues from Watkins Syndicate in its ranking of London s Leading Underwriters Dominick Hoare was accorded the top spot for the leading Energy Underwriters and also appears in joint second place overall. In the category of Accident and Health Underwriters, Jonathan Thomas also made the top five. The recognition is a personal honour as well as an asset in the London market, where the Gracechurch rating is highly respected. Conducted in mid-2013 for the third time, the yearly report draws on two representative and independent surveys in the London market. >> More information at blog/londons-leading-underwriters / The RIMS 14 Annual Conference & Exhibition, Denver Munich Re will be present with its own stand and we are very happy to welcome you as our visitors in our exclusive lounge the TA(L)KING RISK FORUM at the Denver Convention Center. The RIMS takes place from 27 until 30 April, Munich Re Topics Risk Solutions 2/2014

5 Precision flood risk calculation Munich Re s expertise in geo risks research rests on decades of experience and data on cyclones, hurricanes, earthquakes and other natural hazards that have been systematically evaluated over the past 40 years. We bundle our know-how in the NATHAN Risk Suite. NATHAN stands for Natural Hazards Assessment Network. It is a packet of geo tools that makes possible address-based assessment of natural hazards for individual risk locations and also of entire risk portfolios worldwide. Since the beginning of 2014, we have integrated into NATHAN the most recent flood zones, achieving a previously unattained level of accuracy market-wide. The new maps of high-hazard flood zones, standardised worldwide, make consistent and better evaluation of risk locations possible. The principal advantages of flood zones are the global scope, consistent use of a digital terrain model with a resolution of 30 metres and also the high-quality, hydrological basic data. The highly precise data for the USA (Image: New Orleans), Canada, Central America, the Caribbean, Asia and Oceania are now completely up to date. NATHAN supports underwriters and risk managers evaluation of natural hazard risks in insurance and reinsurance, and helps to answer the following questions: Where do I have significant exposures in my portfolio and how severe are they? Where can I write new business without significantly increasing the portfolio s potential for flood losses? Where must I avoid writing any new or additional business? Does my portfolio contain any flood risks that might require more detailed assessment? >> Further information can be obtained from your Client Manager or online at connect.munichre.com. Munich Re Topics Risk Solutions 2/2014 3

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7 Life Science More regulation, less risk The new product fills an insurance gap for the life science sector: It covers the risk of business interruption with no prior property loss. Neil Campbell and Jenny Yu The complex anatomy of supply chain risks has been discussed within the insurance industry over the past few years, not least due to the occurrence of major supply chain business interruption events resulting from both natural and man-made catastrophes. Recently the debate has extended to include the lessunderstood area of non-damage business interruption. These risks have historically been uninsured, but represent a key strategic business risk, particularly in the highly regulated life science sector. We explain the unique risk exposures that occur in the life science sector arising from its regulation and the solution that has been created by Corporate Insurance Partner to close this significant gap in available insurance cover (for details, see page 8). The worries of life science companies Business models in the life science sector rely heavily on the outsourcing of key elements of production. In fact, some companies rely on an entirely virtualised manufacturing process. Inevitably, such supply chains are more complex and fragile and any major outage in the components of the chain can result in severe financial consequences. Where a critical process is outsourced to a third party, a large proportion of the risk is transferred outside the control of the company and even the best due diligence cannot fully eliminate this exposure. Raw materials and ingredients for drugs are subject to strict supervision. Any irregularities constitute a hazard, not only for pill production. Munich Re Topics Risk Solutions 2/2014 5

8 Life Science Regulatory risks in the life science sector A key non-damage risk for life sciences companies is the action of regulators. Our research findings show that the life science industry has sustained losses amounting to billions of dollars from business interruptions directly attributable to regulatory events impacting the supply chain where there has been no actual property damage. This exposure is compounded by the fact that regulation in this sector is extremely stringent. The FDA and other regulators have the power to inspect all parts of the manufacturing supply chain, from active pharmaceutical ingredients through to final fill and finish. The manufacturing process must adhere to agreed good manufacturing practice (GMP) and regulators generally have the power to order closure of a facility where GMP manufacturing deficiencies are identified and not adequately corrected, order product recalls from the market, ban the import of a product if the manufacturing site falls outside domestic jurisdiction. These extensive powers mean that entire facilities can be forced to stop production through a rapidly escalating process of enforcement if a regulatory inspection shows that manufacturing fails the required GMP regulations. It also means that alternative sources cannot be rapidly re-established due to the lengthy regulatory revalidation requirements. These factors, when combined, can create very significant supply outage times and exposures. More often than not, the company itself will suspend production before the regulator forces action, both to evidence a proactive stance to the regulator and to protect its brand in the market. A case study As stated above, such product outages can lead to tremendous financial loss for life science companies. Consider the following recent chain of events at a multinational pharmaceutical company.* The problems began in November 2011 when the FDA issued a warning letter to the company following an inspection, citing deficiencies at three plants it owned in the US and Canada. The company reacted swiftly and, one month later, one of the plants in the US was voluntarily closed in order to address problems that had led to multiple recalls of the company s over-thecounter products. This plant also manufactured products for third-party customers who were thus dependent on the company for a flow of their products for sale. Further recalls had to be undertaken over the following months. The regulator continued to push the company to take further measures, as it was not satisfied with the initial response from the company, namely an investment of some US$ 350m in modernisation of the plant. Inevitably, product shortages emerged in the market and both the US and the UK regulators took the un - usual step of licensing the import of a product from a competitor to fill the gap. In the meantime, the event had not only caused a loss of profits and substantial costs for the owner of the company, it had also resulted in significant loss in revenue and market share for two of the world s largest pharmaceutical companies which used the site for contract manufacture. When physicians prescribe and consumers buy medicines, they do so based on their trust in the brand to maintain excellent standards of quality and product efficacy. Product quality failures, product recalls and product shortages will undermine confidence in the brand and can erode the company s stock price. Inevitably, as bad news followed bad news, analysts reacted and the company s stock price dived. Analysts today estimate that the company suffered up to US$ 750m in lost profits, this loss relating only to the plant in the US that the company had closed for half a year. The overall bill is estimated at close to US$ 1bn, and the problem has not yet been solved. The company ultimately announced the closure of the main US plant. This actual case serves to illustrate the potential costs of supply chain disruptions in the life science sector. * While this case study is based on actual events, it should not be relied on as a factual representation of any specific entity or incident. 6 Munich Re Topics Risk Solutions 2/2014

9 Life Science Increased regulatory activity The above example may sound extreme, but it is by no means an isolated incident. Similar production outages due to regulatory interventions have occurred at other life science companies and contributed to the crisis in Europe and America when product shortages of medically critical drugs reached a peak. The regulators were accused of being overly punitive in their enforcement actions. While the supply chains of life science companies are becoming more vulnerable, the regulatory environment has become more stringent, with heightened activity in both regulatory inspection and enforcement. In recent years, as a result of high-profile quality failures such as the Heparin scandal, the FDA in particular has been allocated additional resources to ensure quality compliance both for US and especially overseas operations. This has led to an increased number of foreign inspections and warning letters, and domestic recalls. Where the US goes, we can normally expect European regulators to follow. This combination of risk factors means that the likelihood of a major non-damage-related business interruption has increased significantly in recent years. These risks are not covered by the standard business interruption policies available in the market. Based on our research, we estimate that, in the past twelve years, non-damage business interruption losses may have cost the life science sector in excess of US$ 8bn. Warning letters and shutdowns on the rise The increase in regulatory inspections and interventions coupled with more complex and vulnerable supply chains means that the likelihood of a major non-damage related business interruption has grown significantly. The chart illustrates a general upward trend over the past five years in all areas of FDA activities Total cgmp FDA warning letters for drugs Total drug and biologics shutdowns Source: Analysis of FDA data Steady trend: increased recalls and defects European GMP inspections, number of quality defects reported and recalls are all on an upward trend. Of the 375 GMP inspections in 2011, only 245 were planned. The remainder were additional For Cause inspections in response to reported quality/gmp problems. No. of GMP inspections No. of quality defects reported No. of recalls Source: EMA Annual Report Compliance & Inspections Munich Re Topics Risk Solutions 2/2014 7

10 Life Science Non-damage business interruption cover tailored to life science companies Any insurance is only a part of the risk solution, and the life science industry does try to manage these risks proactively. Clear risk management strategies and controls, such as supplier auditing, will help to mitigate potential events and consequent losses. However, with outsourcing a key business enabler, some risks remain outside the direct control of the life science company, making it impossible to eliminate every scenario. As part of our insurance solution, we support the first major steps of mapping, analysis and quantification of non-damage business interruption risks. This both enables clients to understand their key exposures and gives them the necessary data to make considered decisions about how to protect against them. It also provides us with the necessary risk information to assess the risk from an insurance standpoint. With this partnership approach we are able to offer topquality clients innovative insurance solutions with sufficient cover and capacity to address this critical risk area. Advantages for our clients Our newly developed non-damage business interruption cover is the result of extensive research into the industry profile and historical event frequency. The cover indemnifies the insured for financial losses that arise from a supply chain business interruption due to manufacturing quality defects that are governed by the relevant external regulator regime, including the forced or voluntary suspension of manufacture due to a major manufacturing defect or deficiency at a site owned or supplied by the insured the supply of off-specification materials used for production from third-party suppliers a product recall event due to a manufacturing defect, but also including malicious product tampering, product extortion and counterfeiting. How our solution protects our customers How could our life science non-damage business interruption policy have supported the company in our case study? The following elements would have been insured The loss of gross margin as the result of the suspension of manufacture at a regulated company or supplier facility due to a major manufacturing defect Reasonable and necessary remediation and start-up costs associated with getting facilities back on line and restoring the product supply to customers The costs of recalling any affected products from the market, including pre-recall investigation and additional labour costs to facilitate the recall as well as third-party expenses in removing products from the warehouses or from shelves and returning them for destruction Ongoing loss of market share and extra expense once production has been re-established at the affected sites (up to the maximum indemnity period of the policy, which is a generous 24 months) Immediate crisis media management funds to deal with customer communication and help mitigate loss of market share Steps to strong supply chain risk management Monitor status of most critical sites and suppliers Identify critical products and suppliers using criticality criteria Justify mitigations and buy the optimum insurance Quantified SCRM Quantified SCRM Map critical internal and external supply chain relationships Focus on BI/CBI impact quantification to generate a hit list Identify major threats and overlay onto supply maps 8 Munich Re Topics Risk Solutions 2/2014

11 Life Science In our example, some life science customers were unable to manufacture their products as they relied on supplies from the affected sites. These downstream companies could have purchased a nondamage BI policy to protect their own value streams. They would have had the benefits of all the relevant covers listed above and thus be insured against the loss of profits that arose. Conclusion and outlook As outsourcing of manufacturing gathers pace in the sector and companies become more sophisticated in risk prevention or protection against physical damage events (e.g. fire, explosion, and windstorm), attention is turning to non-physical damage risks which are being seen as more critical than traditional property damage events. Companies are beginning to address these risks, which are already inherent in their business model, and properly evaluate their risk transfer options in the same way they assess the value of their more traditional insurance programmes. Our expertise in risk transfer and our deep understanding of the life science sector enables us to support life science companies in these emerging risk areas. Our solution secures cash flow and earnings, provides financial support to get the company s production back up and running and helps protect shareholder s financial interests and returns. Since capital is freed up, life science companies can continue to focus on their core business activities without being affected by these non-core catastrophe risk events. As we further enhance the product in order to fully support life science companies across the range of NDBI risks, we are also developing solutions for cyber risks, including cyber hacking, cyber extortion, denial-of-service attacks and the destruction of digital assets. Additionally, as part of the package, we can provide reputational risk media management costs to help restore the confidence of end customers and minimise loss of profits following a supply chain interruption. Key non-damage supply chain risks for life science companies Closure of the company s own manufacturing site or the site of a critical supplier due to significant manufacturing deficiencies The supply of off-specification or contaminated raw materials or contamination leading to production disruption An import ban preventing the sale of products in a specific jurisdiction Product recall due to manufacturing defect, malicious tampering or counterfeit products in the market Trade disruption on key supply routes Damage or destruction of digital assets including resultant business interruption to production systems 0ur Experts Neil Campbell Life Science Consultant neil.campbell@epicrisk.co.uk Jenny Yu Underwriter Special Enterprise Risks jyu@munichre.com Munich Re Topics Risk Solutions 2/2014 9

12 Risk management HSB predicts electrical blackout exposure In a world that depends on electricity, a widespread power disruption can be a calamity. HSB and Verisk Climate have developed a new tool that helps predict heightened levels of risk. A winter storm with snow, frost and ice can cause billion-dollar losses, particularly in conjunction with power disruptions. 10 Munich Re Topics Risk Solutions 2/2014

13 Risk management Robin Luo With losses running into the hundreds of billions of dollars each year worldwide, widespread power outages caused by storms, system equipment failures and excessive demand are catastrophes for millions of homeowners, businesses and communities. In the US alone, the economic costs of electrical blackouts reach US$ 100bn or more each year. Major outages have occurred in Europe, China, Brazil, India and other countries, and experts warn that power losses will become more frequent and more severe unless massive investments are made in the electrical infrastructure. The same factors that make it difficult to forecast blackouts, such as severe weather, stress on ageing electrical grids and people s increasing reliance on electronic equipment, also make it hard to plan and respond quickly to minimise the effects on businesses and people. This is an important issue for companies, governments and insurers, but how can they put a price tag on their potential exposure? In a world that depends on electricity, new tools are needed to help businesses, industry and society respond to this evolving/ mounting exposure. A new tool for insurers and risk managers Hartford Steam Boiler, in conjunction with the weather and environmental research firm Verisk Climate, has developed technology and consulting services aimed at helping clients predict the likelihood, severity and financial consequences of largescale electrical outages. The Blackout Risk Model, which incorporates data from and analysis by HSB and Atmospheric and Environmental Research (AER), a unit of Verisk Climate, is the first widely available tool to help calculate the financial consequences of electrical power disruptions. HSB recognised by Best s Review for technical innovation Hartford Steam Boiler has been recognised for insurance and technical innovation by Best s Review, which is published by A.M. Best Company. HSB s Blackout Risk Model was one of three HSB programmes recognised for unique, creative approaches to problem solving. The annual Best s Review Innovation Showcase is a forum recognising forward-thinking among insurance organisations. Programmes from twelve insurance companies were selected from submissions from North America, Europe and Asia. The HSB programmes cited were: The Blackout Risk Model developed by HSB and Verisk Climate. The technology enables firms, insurers and reinsurers to model risk exposures and develop markets and products which had previously been difficult to design, analyse and price, an industry expert wrote in a review of the programme. Dynamic Bias Outlier Reduction, a unique modelling method for predicting insurance risks where there is a need to remove outliers, utilises machine learning to scan the data and produce the best model. Asset Performance Insurance, a method of underwriting the performance of complex industrial projects. With API, HSB can underwrite the performance of projects such as energy-savings projects, which were previously difficult to evaluate. The Blackout Risk Model, which incorporates data from and analysis by HSB and Atmospheric and Environmental Research (AER), a unit of Verisk Climate, is the first widely available tool to help calculate the financial consequences of electrical power disruptions. Munich Re Topics Risk Solutions 2/

14 Risk management The new modelling technology integrates a database of possible weather conditions, satellite analysis of trees near distribution lines, proprietary knowledge of the electrical grid infrastructure and detailed economic data. It enables insurers to calculate their accumulated risk and loss potential, while retailers and manufacturers can prepare quantitative cost-benefit analyses of back-up power facilities and emergency response measures. Electrical blackouts are unpredictable Until now, it has been extremely difficult for risk managers to assess the potential accumulations of these unpredictable events. Unlike other large loss exposures, electrical blackouts have many possible causes and can lead to a wide range of losses. As the commercial sector accounts for 72% of all losses, insurers and businesses have a great deal at stake. Power outages may be caused by hurricanes, blizzards, thunderstorms or heat waves. The frequency of extreme weather events around the world has increased significantly over the past several decades, and this trend is expected to continue. Other possible causes of blackouts include failures of the electrical grid, stresses resulting from peak demand phases and human error. The loss of electrical power can impact any business and has multiple potential effects, including spoilage of perishable goods, business interruption, contingent business interruption and equipment breakdown. Fires may be caused by alternative lighting and heat sources, water damage by freezing pipes. There may also be general liability losses. Since critical infrastructure such as energy, transportation, communications, health care, water supply and sanitation systems depend on electricity, a power outage can also pose a danger to the public. Information about which areas may be worst affected and how long a blackout might last are valuable to public relief planners and emergency officials. The loss of electrical power can impact any business and affect multiple perils, including spoilage of perishable goods, business interruption, contingent business interruption and equipment breakdown. Fires may be caused by alternative lighting and heat sources, water damage by freezing pipes. There may also be general liability losses. In 2012, Superstorm Sandy cut power to more than eight million people and businesses across twelve states in the northeastern US, causing an estimated US$ 50bn in losses, with the costs still rising. Other blackouts over the past decade affected 97 million people in Brazil, 55 million in Italy, and a staggering 670 million people in India. Because power outages are unpredictable, insurers have been unable to gauge their exposures and establish pricing and underwriting standards. As a result, many companies have restricted or avoided coverage for risks which they did not understand, leaving businesses without affordable and effective insurance. Now, the Blackout Risk Model provides technology and services that can help insurers and reinsurers calculate the consequences of power outages with reasonable confidence. Insurers can assess the variability of blackout risks according to geographic region and grid area, help to gauge potential losses and charge risk-adequate premiums for current and future covers. Millions in the dark, billions in losses It was a cascading outage in the United States ten years ago that drew attention to the hazard. What started as a short-circuit when a tree branch brushed against a power line in Ohio quickly spread to eight other states and parts of Canada, knocking out power to 55 million people and causing as much as US$ 10bn in damage and losses. A city without power lies in the dark, with perhaps dramatic consequences for its people and infrastructure. 12 Munich Re Topics Risk Solutions 2/2014

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16 Risk management A significant advance in blackout risk assessment The blackout modelling tool can help businesses, industries and government agencies to identify highrisk areas and thus better manage their exposures and plan more effective responses when power is disrupted. Using the Blackout Risk Model, businesses can gain insight into the likelihood that their distributors and suppliers will lose power based on where they are located within the electrical grid. our Expert Robin Luo Vice President at HSB Inspection Insurance Company, Hartford. yuhan_luo@hsb.com The strategic alliance between HSB and Verisk Climate represents a significant advance in the blackout risk assessment field. By combining knowledge about weather, environmental conditions, equipment, the power grid, power engineering and other factors, they have developed a broad-based technical solution to help manage this increasing risk. The availability of electrical power shapes business decisions every day. With more confidence in its ability to evaluate loss potential, the insurance industry will be in a position to provide innovative coverage and services to make those decisions easier. In the USA and Canada, power is generally distributed via overhead lines that are exposed to natural hazards, making maintenance and repair expensive. 14 Munich Re Topics Risk Solutions 2/2014

17 Is your business geointelligent enough? Modern integrated risk management requires a detailed knowledge of the geographical environment. NATHAN Risk Suite optimises your assessment of natural hazard risks, from entire portfolios down to individual risks at address level worldwide. OUR SOLUTIONS YOUR SUCCESS NATHAN Risk Suite offers a range of advantages: Knowledge of individual locations for tailor-made rating Greater transparency of complexities ensuring clear-cut decisions Increased knowledge providing an optimal spread of risks For further information, please contact your Client Manager or go to connect.munichre.com New: Globally standardised flood hazard maps not if, but how Munich Re Topics Risk Solutions 2/

18 column Home smart home Technology gives rise to new exposures Jeffrey C. O Shaughnessy, Senior Vice President of Reinsurance Underwriting HSB jeffrey_o shaughnessy@hsb.com Home design, equipment and systems are changing. Today s homes include new technology that increases home values and exposures. Smart homes also consume more energy, so homeowners are looking for ways to improve efficiency and lower costs. It is a trend that will add to home risks and make energy efficiency increasingly important in tomorrow s insurance market. The insurance industry can help homeowners address these new exposures and provide tools and services to save money on energy. All appliances, including smart appliances that manage energy use with web-based home applications, are vulnerable to power surges and lightning strikes. They are interconnected, which means that damage can impact a home s entire electrical system. Homeowners, who want energy that is affordable and always available, are increasingly installing emergency generators that could cause property damage and injuries. The equipment may not be maintained properly, and fuel stored in the home may pose a fire hazard. Technology is driving these changes. Homeowners are embracing new technologies that allow them to program thermostats, wash clothes or dishes for less, or even get an alert when they forget to turn off the stove or kitchen lights. Devices in the home are able to think, talk and network in order to help save energy and reduce environmental impact. Energy costs and dependence on energy are influencing homeowners decision-making. Companies that insure homes and the agents who help homeowners select coverage will need to understand and anticipate these emerging technologies and trends. Two sides of the coin: new technologies give rise to heightened risks, but also to rising demand for insurance protection The fastest growth in smart appliances has taken place in the United States. As these applicances cost as much as three times more than conventional ones, homeowners investing in them will look for insurance to protect their investments. Smart appliance sales are expected to increase sharply, with some analysts predicting that the worldwide market will reach US$ 30bn or more by In the US, smart appliances and home systems will interface with smart electrical meters which are in turn linked to utilities to help manage energy use, lower energy costs and maximise efficiency. Solar, wind, geothermal and other renewable energygeneration systems will become more common in North American homes as families continue to seek ways to cut energy costs. Electric vehicles, including home charging stations, are also becoming more popular. In addition to adding value, electric cars and chargers can stress or overload a home s electrical system, causing breakdowns and property damage. Home medical equipment is another emerging exposure. As technology advances, an ageing population and rising medical costs will promote the installation of sophisticated electronic medical devices and monitors in private homes. What are the implications for property and liability exposures? New home technologies will increase the risk of many insurable perils. They also will create new demand for property-casualty products and services. The need for expanded green coverages, coverage that replaces damaged equipment with upgraded equipment which is more efficient and better for the environment, and home energy efficiency services are a few examples. We need smart insurance for smart homes, as technology, connectivity and energy will help to redefine the homeowners market in the years to come. The insurance industry can be a trusted source for homeowners, one that helps them keep up with evolving technologies and new coverage choices. 16 Munich Re Topics Risk Solutions 2/2014

19 Preview of issue 3/2014 Blistering danger On the morning of 15 February 2013, a bright light appeared in the sky over the Russian city of Chelyabinsk. A short time later, a loud explosion shattered hundreds of thousands of windows and caused losses in the millions. The cause was a meteorite weighing thousands of tonnes that burst as it entered the atmosphere Münchener Rückversicherungs- Gesellschaft Königinstrasse München Germany Tel.: Fax: Münchener Rückversicherungs- Gesellschaft (Munich Reinsurance Company) is a reinsurance company organised under the laws of Germany. In some countries, including in the United States, Munich Reinsurance Company holds the status of an unauthorised reinsurer. Policies are underwritten by Munich Reinsurance Company or its affiliated insurance and reinsurance subsidiaries. Not all coverages are available in all jurisdictions. Any description in this document is for general information purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any product. Responsible for content Group Communications Editor Regine Kaiser Group Communications (address as above) Tel.: Fax: rkaiser@munichre.com Picture credits Title: plainpicture Inside front cover: Robert Brembeck pp. 1, 4, 10, 13, 14 (2): Corbis pp. 2 (1, 3): Watkins Group pp. 2 (2), 9: Munich Re p. 3: NASA; esri, DeLorme, USGS, IFL, NOAA; JBA Risk Management Limited p. 4: Getty Images / vm p. 9 (1): epicrisk.co.uk p. 14 (1): hsb.com p. 15: NASA p. 16 Illustration: Kevin Sprouls Inside back cover: picture alliance Editorial deadline 3 April 2014 Printed by Color Offset GmbH Geretsrieder Strasse München Germany Corporate Insurance Partner CIP offers holistic insurance protection for industrial and corporate clients throughout the world. The portfolio includes coverage concepts for property, energy, engineering, casualty and special enterprise risks. corporate-insurance-partner@ munichre.com Hartford Steam Boiler Leading monoliner and inspection company for engineering risks. Apart from engineering covers, its range also in cludes specialty and engineering solutions, claims management and risk management services. Tel.: customer_solutions_center@hsb.com KA Köln.Assekuranz Agentur GmbH Internationally operating underwriting agency for industrial risks, specialising in marine and group accident insurance. Tel.: info@koeln-assekuranz.com Temple Insurance Company Temple Insurance Company underwrites large industrial and commercial risk management accounts. Our Technical and Special Risk Department provides property and casualty products directly through the Canadian broker network. Toll free (North America): Tel.: Fax: Watkins Syndicate 457 Lloyd s biggest marine insurer with an extensive portfolio of solutions for accident and health, liability, cargo, marine and logistics, offshore energy, space flight, and yachts. The Watkins Syndicate operates its own department for terrorism risks. Tel.: info@mrunderwriting.comww

20 2014 Münchener Rückversicherungs-Gesellschaft Königinstrasse 107, München, Germany Order number