Topics

Risk Solutions

Insurance solutions for industry

Issue 4/2013

Frosty times
Winter storms in North America and
their potential for causing damage PAGE 4

Cyberrisks
Tailor-made IT cover

Cargo
Moving loads

Piracy
New perils at sea

Editorial
Dear Reader,
Severe weather events are occurring with increasing
frequency all over the world. In fact, several dozen
storms hit North America every winter, causing ever
increasing amounts of loss-relevant damage.
The right insurance protection compensates financial
losses resulting from natural catastrophe damage.
Our engineers at Hartford Steam Boiler are also
experts in risk management and prevention. They
know how companies can prepare themselves for
storms and other natural hazards and do an ever better job of protecting their operational installations.
With rules that are as simple as they are effective.
That prevention pays off is also evident from the loadsafety training courses offered by KA Kln.Assekur
anz Agentur. Companies that invest in loading knowhow can minimise transport losses, increase client
satisfaction and reduce their insurance premiums.

Munich, September 2013

Yours sincerely,

Dr. Torsten Jeworrek

Member of the Munich Re Board of Management and
Chairman of the Reinsurance Committee

NOT IF, BUT HOW

Contents
When no power flows,
nothing goes
The 1998 ice storm in Ontario, Quebec and northern New England left
everything coated with a layer of ice
several centimetres thick, causing
trees to snap, high-voltage pylons to
buckle and power lines to tear. Parts
of the region were left without power
for weeks.

Page 4
News 2
IT risks
New CIP model closes gaps in cover
3
NATURal hazards
Winter storms in North America
Meteorological scenarios and the
loss potential they represent

How you can protect your company

10

Kln.assekuranz
Securing goods for transport
Why investing in loading know-how pays off

12

We benefit all along the line. 

Denis Kohlrusch, risk and insurance
manager at GEA, praises customised
training in load safety
Column
Pirates change their tactics
Mark Watkins, CEO of Watkins Syndicate,
with a plea that We insurers need to act
with foresight.
Imprint and preview

14

16

17

Munich Re Topics Risk Solutions 4/2013

NEWS

ACquisition

HSB

WATKINS Group

HSB expands range of

service for energy suppliers

Data security for small and

mid-sized companies

David Perfect new CEO at

UK boat insurer

HSB Solomon Associates, a subsidiary of Hartford Steam Boiler (HSB)

and a leader in improving the performance of the global energy industry,
is acquiring Ziff Energy Group, an
international energy consultancy
firm.

A recent study commissioned by

Hartford Steam Boiler (HSB) indicates that many owners of small and
mid-sized businesses fail to realise
both how serious the threat is and
what their legal obligations are in the
event that their data security is compromised. In the US, HSB is now
offering a range of products with
which small and mid-sized companies can protect themselves against
the risks involved in acquiring, handling and storing confidential data.

David Perfect took up the position of

CEO at Groves, John and Westrup
(GJW), part of the Watkins Group, in
April of this year. Mike Pope will
assume the role of Executive Chairman of the company until 1 April
2014.

We can now offer the worlds biggest energy suppliers a complete

range of benchmarking and consulting services along the entire oil and
gas supply chain, says Greg Barats,
CEO of HSB and Chairman of HSB
Solomon Associates.

HSBs Data Compromise Program

helps clients bear the costs resulting
from breaches in data security and
offers personal assistance. The program has been broadened to include
protection against data loss resulting
from known malware or breaches in
a third partys data security and to
pay the costs of the requisite professional public relations work.

GJW can trace their maritime insurance roots back to 1826. Today they
are one of the largest boat insurers in
the UK, offering cover for many types
of craft, including yachts, sailboats,
motor cruisers, inland waterway
craft, barges, houseboats, speedboats, fishing boats, commercial
boats and boats under construction
or being refitted. GJW offer some of
the most competitive policies on the
market. Brokers can talk to experienced underwriters and claims
specialists with a reputation for fast
and fair claims settlement that is
unrivalled in the industry.

>> M
 ore information:
www.solomononline.com

>> More information:

www.hsb.com

>> M
 ore information:
www.gjwltd.co.uk

With branch offices in Houston, USA,

and Calgary, Canada, the Ziff Energy
Group focuses on conducting exploratory and production studies in over
40 countries.

The five largest natural catastrophes

in the first half year 2013

Floods causing billions of dollars

in losses dominate the natural
catastrophe statistics for the first
half of 2013.

Ranking by overall losses

June

Floods in Europe

>16,000*

~3,900*
20 April

Earthquake in China
25

June

Floods in Canada
>3,000*
>1,000*

1820 May

Severe Storms/Tornados USA

3,100
1,575

January

Floods in Indonesia
3,000
300

6,800

Munich Re Topics Risk Solutions 4/2013

Insured losses totalled

approximately US$ 13bn
(ten-year average: US$ 35bn).
Overall losses (US$ m)
Insured losses (US$ m)

Source: Munich Re, Geo Risks

Research, NatCatService
* Loss estimation in progress.

CYBERRISks

Made-to-measure IT covers
The spectrum of hazards considered to be IT risks
is broad indeed. Many of these hazards are not at all
apparent and come to light only as a result of incidents. This is true of companies such as online shops
and telecommunications firms, but also of manufacturing industries. For example, many production
plants use software to manage the logistics of their
supply chains and production lines. A faulty or missing data record could bring the entire operation to a
halt, causing losses for the company and for third parties losses which a traditional property or liability
policy would either not cover at all or would cover only
inadequately.
Business interruptions, supply bottlenecks and product defects may mean not just a loss of turnover, but
also an impairment of image. Even so, many companies underestimate the consequences. Sony, for
example, put a figure of US$ 170m on the loss it suffered as a result of a hacker attack on its Playstation
network. The company was insured, but its policy
failed to cover even 10% of this loss.
This is where the new cyberrisk solution offered by
Corporate Insurance Partner (CIP) can make a difference a made-to-measure package consisting of
analysis, consultancy and insurance protection.
First, IT security experts and insurance specialists
analyse a prospective clients existing IT risks, check
its security systems and offer recommendations for

optimising its security. Only then do they assess the

actual risk and offer the appropriate policies.
As Nils Diekmann explains, With our client-specific
consulting, we draw our clients attention to specific
hazards and can thus ensure the best possible protection against IT risks, both during ongoing operations
and in the event of a loss.
CIPs model includes insurance protection against
business interruption, liability claims, purely financial
losses, reputational damage and the costs of data
and/or system recovery. Existing property and/or liability covers that have gaps with regard to IT risks can
be rectified without over-insuring.

our Expert
Nils Diekmann
Underwriter Cyberrisks
ndiekmann@munichre.com

Munich Re Topics Risk Solutions 4/2013

Natural Hazards in North America

Snow, freezing rain and

Arctic temperatures
Winter can be unpleasant even for companies. What sorts of scenarios you have
to expect in the USA and Canada and how
you can prepare your company.

Mark Bowe

Encompassing several types of weather systems and

hazards, winter storms are one of the few perils that
impact every region of the United States and Canada.
The term winter storm is a bit misleading, however,
as the mid-latitude and polar cyclones that generate
these events occur year-round. But it is during the
winter months that these storms are at their strongest, when temperature gradients between the tropics
and polar regions are at their maximum. The types of
hazards produced by winter storms vary greatly by
region, but all can produce extensive insured property
damage, most notably from high winds, very cold
temperatures, and excessive frozen and liquid precipitation.

Genesis and characteristics

Winter storms, also known as extratropical cyclones,
rely on temperature gradients between different air
masses to develop. The larger the contrast between
the air masses, the stronger the storm can become.
Since temperature gradients in the mid-latitudes are
much larger during winter than summer, extratropical
cyclones are more powerful during the winter months.
The formation of an extratropical cyclone begins with
two air masses, one warm and moist, the other cold
and dry. The winds from these air masses can cause
perturbations in the boundary between them, and
some of these perturbations can grow into a centre of
low pressure. When an area of low pressure develops,
it forces warm air ahead of it northward and cold air
behind it southwards. This movement of air masses
forms warm and cold fronts, generating rain, thunderstorms, and frozen precipitation at these boundaries.
The earths Coriolis force makes the storm rotate, giving the cloud distribution of the extratropical cyclone
a comma-shaped appearance.

Winter storms can paralyse virtually every

means of transport and block overland routes in
particular for days on end.
Munich Re Topics Risk Solutions 4/2013

NATURAL HAZARDS North America

Several dozen winter storms impact North America
every year, though only a few cause severe damage.
However, severe winter storms have a much greater
geographical footprint than other meteorological perils. Frontal systems associated with a winter storm
can stretch for thousands of miles, causing a variety
of weather along its length. Heavy rains and severe
thunderstorms can develop along a cold fronts southern section, spawning tornadoes and hail, while a
large swath of snow, sleet, and freezing rain can occur
further north. Damaging winds may develop around
the low-pressure centre, particularly if the storm is
trailed by a strong high-pressure system. As the
storms move, the impacted area can stretch for over a
thousand miles before the storms weaken or head out
to sea.
Hazards
Winter storms produce several hazards that are
unique to the peril. These include:
Snow
Snow is frozen precipitation composed primarily of
small, hexagonal ice crystals. Snow occurs when precipitation develops in an atmospheric environment
that is below freezing during its entire descent. Surface temperatures can be slightly above freezing during snow, but it will likely not accumulate on the
ground. A blizzard is one of the most severe types of
snowfall events: a combination of gale-force winds
and falling and blowing snow that reduces visibility to
a quarter mile (400 m) or less.
Sleet
Precipitation composed of frozen raindrops is called
sleet. Sleet occurs in a winter storm when there is a
deep layer of freezing air near the earths surface and
a layer of warmer air above it. The warmer air causes
precipitation to start off as rain, but when the raindrops enter the colder layer below, they freeze in midair before reaching the ground.
Freezing rain
Arguably the most hazardous form of winter precipitation, freezing rain occurs when there is a very shallow layer of freezing temperatures near the earths
surface, but a large column of warmer air above it.
Like with sleet, the warmer air aloft causes precipitation to fall as rain. However, unlike sleet, the shallow
layer of cold air near the surface does not give the rain
enough time to freeze before reaching the ground.
Instead, the rain freezes after coming in contact with
frozen surfaces, glazing whatever it touches in ice. A
large freezing rain event with heavy ice accretions is
often called an ice storm.

Munich Re Topics Risk Solutions 4/2013

Freeze
Unlike other winter storm hazards, deep freeze events
are not caused by low-pressure systems, but by
strong areas of arctic high pressure that often move
into a region after a winter storm has passed through.
These very cold air masses can cause temperatures to
remain far below freezing for several days.
Other hazards not exclusive to winter storms can be
generated as well. These include winds that can reach
hurricane force in intensity and excessive rainfall that
can trigger flooding and landslides. Winter storms
also often cause the development of severe thunderstorms along their frontal boundaries that can generate tornadoes, straight-line winds, and heavy hail.
Regional winter storm impacts
Though the impacts of winter storms vary widely
across North America, different regions of Canada
and the United States typically see similar hazards
from event to event. Generally speaking, these are the
dominant winter storm hazards by region:
Alaska and Arctic Canada
Severe winter conditions are typical in this region,
including bitter cold temperatures and months of
accumulating snowfall, though heavier snowfalls typically do not occur in the middle of winter, as cold air
temperatures limit the amount of moisture the air can
hold. Hurricane-force winds are also a threat in
coastal regions. Further south, winter storms in the
Alaska panhandle commonly bring high winds and
intense rains along the coast, with heavy snowfalls at
higher elevations.
Pacific coast states and British Columbia
Along the west coast of North America, winter storms
are primarily strong wind and severe rain events in
coastal regions, with heavy snowfalls at higher elevations. Occasionally, heavier snows can fall at lower
elevations where major cities are located, particularly
in the Pacific Northwest region. Torrential rains from
winter storms in Southern California often trigger
devastating mudslides and flooding as well.
Intermountain West
Heavy snowfall is the primary hazard over the Intermountain West. Colder temperatures at higher altitudes are quite common, but arctic outbreaks of frigid
air typically cannot pass over the mountain ranges of
the region, and instead funnel into the Great Plains.
Northern Great Plains
In the northern sections of the Great Plains of North
America (north of about 37 northern latitude), snow
and arctic air outbreaks are the primary winter storm
hazards. Other forms of frozen precipitation can also
occur, especially toward the southern edge of the
region. High winds are a common threat from powerful winter storms, but are typically not as severe as
winds associated with coastal storms.

NATURAL HAZARDS North America

A noreaster destroyed two

beach houses at Saco,
Maine, in April 2007.

Southern Great Plains

For the southern Plains, heavy rainfall and severe
thunderstorms are the most common hazards associated with winter storms. Due to their location, heavy
snow events are rare, but severe ice storms can occasionally paralyse the region. Cold air outbreaks are
also possible, as arctic air masses move southward
out of Canada.
Southeast United States
Similar to the southern Great Plains, heavy rainfall
and severe thunderstorms are the typical winter
storm hazards in the southeast. Thanks to ample
moisture from the Gulf of Mexico, severe freezing rain
events are possible, but heavy snowfalls are infrequent. Freezes can reach this region as well, and even
southern Florida is not immune to occasional subfreezing temperatures. Developing coastal storms in
the Gulf can also produce high winds, but these are
typically not as strong as seen along the eastern seaboard.
Northeast United States and Canada
The northeastern United States and Canada are
exposed to all forms of frozen precipitation, particularly heavy snowfalls and high winds associated with
powerful coastal winter storms called noreasters.
Arctic outbreaks of cold air and severe freezing rain
events are also possible, as are heavy rain events
when temperatures are not cold enough to support
snow.

Munich Re Topics Risk Solutions 4/2013

NATURAL HAZARDS North America

Natural catastrophe statistics for North America

Damaging winter storms from 1980 to 2011
Winter storms comprise noreasters, snowstorms and
blizzards. They can occur despite their name year-round
and include various hazards: wind, snowfall, ice and freeze.

Number of damaging events

20 Number

16

12

The average number of loss-relevant

winter storms has tripled in the
second half of the last 32 years
compared to the first. However, this
number has remained fairly stable
in the last 17 years, with some winters
standing out.
Source: Munich Re,
NatCatSERVICE

0
1980 1985 1990 1995 2000 2005 2010

Overall and insured losses (in 2011 values)

5 US$ bn

Overall losses
Insured losses

Source: Munich Re,

NatCatSERVICE

0
1980 1985 1990 1995 2000 2005 2010

Like the number of damaging events,

the overall and insured losses do not
reveal a distinct trend over the past
decades. High loss peaks are mostly
produced by individual extreme
storms. For large events the insured
portion of losses tends to be lower.

Munich Re Topics Risk Solutions 4/2013

NATURAL HAZARDS North america

Damage
Frozen precipitation can damage property in several
different ways. While light accumulations of freezing
rain, sleet, and snow will typically not damage buildings, they can cause damage to automobiles by creating hazardous driving conditions that often lead to
traffic accidents. Heavier accumulations of snow and
sleet can damage buildings in two ways. The first, ice
damming, occurs when snow and ice prevent melt
water from draining from a rooftop. The water can
back up under shingles, damaging the roof structure,
insulation, and drywall below. Very large snow loads
can lead to partial or total roof collapses, particularly
on flat roofs with little drainage and few underlying
supports. However, thanks to good regional building
codes that consider snow loads, instances of roof collapse are relatively rare, even in heavy snowfall events.
Large accumulations of freezing rain, however, can
create much greater and more widespread amounts
of damage than snow and sleet. Freezing rain adds a
tremendous amount of additional weight to the
objects it collects on, and often leads to tree limbs
and power lines snapping. In severe events, the
glazing can become several centimeters (more than
one inch) thick and can bring down larger structures,
like high-voltage transmission towers.
Aside from being a risk to health and agricultural
interests, prolonged cold air outbreaks can inflict
property damage by rupturing water pipes. Since
water expands when it freezes, extended sub-freezing
temperatures can cause improperly insulated pipes to
burst, flooding buildings with water which can freeze
to ice.

In addition to severe freezing rain events, other winter

storm hazards have the potential to cause as much, if
not more, property damage. Heavy rainfall associated
with winter storms can cause severe flooding, particularly if the rain contributes to snowmelt or the ground
is frozen. Heavy rains can also cause landslides on
unstable terrain, particularly in California. High winds
in winter storms tend to cause a large amount of
indirect wind damage via tree and power line damage,
but this is generally lighter in severity than wind damage seen in tropical cyclones.
Loss potentials
Despite the number of different hazards and large
geographic scope of winter storms, loss potentials are
typically not as severe as those from tropical cyclones
and thunderstorm perils.
Since 1980, the largest insured winter storm loss was
US$ 1.75bn (Can$ 2.2bn), resulting from the 1993
Storm of the Century noreaster that generated hurricane-force winds along the US east coast and left
over 1 foot (30 cm) of snow from Georgia to Maine.
While indeed a severe event, insured losses from
thunderstorm outbreaks and hurricane landfalls have
greatly exceeded this amount several times over the
past 40 years. Winter storm losses over the ten-year
period 20022011 averaged US$ 1.8bn (Can$ 1.8bn)
per year. During the same period, losses from tropical
cyclones averaged US$ 15.3bn (Can$ 15.6bn) and
US$ 9.3bn (Can$ 9.5bn) from thunderstorms (figures
in 2011 dollars).

The roof of the Metrodome

in Minneapolis collapsed in
December 2010 following a
severe winter storm.

Munich Re Topics Risk Solutions 4/2013

NATURAL HAZARDS north america

Even though, historically, winter storm losses have
been relatively low, there is potential for much greater
losses from future events. The most likely scenario
regarding a major, multi-billion-dollar insured loss
would be similar to the 1998 ice storm (freezing rain)
in Ontario, Quebec, and northern New England.
During the event, several centimeters of freezing rain
fell on the area, causing trees, power lines, and highvoltage transmission towers to collapse, leaving parts
of the region without power for weeks. US$ 950m
(Can$ 1.4bn) in insured losses was incurred in Canada, particularly around Montreal, and an additional
US$ 200m (Can$ 293m) in the United States.
Although this was the worst winter storm loss in
Canadian history, a similar event over densely populated regions of the United States such as the northeast corridor or over Midwestern cities like Chicago
and Detroit could cause losses several times greater
than the 1998 event, potentially exceeding US$ 10bn
(Can$ 10bn).

Our Expert
Mark Bove, meteorologist in
Underwriting/Risk Accumulation
at Munich Re, specialises in the
modelling of natural catastrophe risks
in the United States.
mbove@munichreamerica.com

How to protect your equipment

from freezing weather
Any interruption of electrical power during cold weather
is a freeze hazard. In addition, ice and snow from winter
storms can cause severe equipment and property damage
during the storm and from flooding when the temperatures rise. The engineers at Hartford Steam Boiler recommend that you plan ahead and consider taking these steps
in advance of a storm:
Building closures. Make sure all doors, windows, shutters
and dampers that can be closed are in place and secured
to minimise heat loss.
Snow and ice removal. Check snow removal equipment
and have contracts or arrangements with reliable snow
removal contractors.

>> O
 ur publication Severe
Weather in North America
sheds light on the physical
principles that give rise to
natural hazard phenomena,
explains their occurrences
and effects, and analyses
the resulting loss events.
If you want to order the
publication, please contact
your client manager.

>> F
 or more information about
natural hazards, risks and
insurance, see
www.munichre.com/
touch/naturalhazards

Collect and circulate a list of emergency telephone

numbers. Distribute this emergency information to everyone in the organisation who needs it. Have a backup communications strategy, such as using mobile phones and
laptop computers and tablets, in case power and regular
phone service is lost.
Heating systems. If backup electrical power is not avail
able, make arrangements in advance to obtain portable
heating units which do not require electrical power.
Protect piping. Piping systems which could freeze must
be checked. Be sure that heat tracing is energised. Be prepared to supply backup power to electrical heat tracing
systems or drain the piping. Pay particular attention to
sprinkler fire protection systems. Any change in the readiness status of your sprinkler systems should be reviewed
by your local fire department.
Anticipate flooding. If the premises may be flooded as a
result of severe cold weather or storms, take precautions.
Move exposed equipment or stock to alternate locations if
possible. Check operation of pumps or other dewatering
equipment. Do not energise equipment which has been
flooded until it is properly cleaned, dried out, and until
insulation has been tested.
>> F
 or more information visit
www.hsb.com/HSBGroup/Weather_Alerts.aspx

10

Munich Re Topics Risk Solutions 4/2013

Is your business geointelligent enough?

Modern integrated risk management requires a detailed knowledge of

the geographical environment. Munich Res NATHAN (Natural Hazards
Assessment Network) 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
not if, but how

Munich Re Topics Risk Solutions 4/2013

11

CARGO

Moving loads
Judging by the considerable claims for goods damaged or destroyed,
as well as people injured or killed on the roads, professional know-how
is clearly needed when it comes to ensuring that loads are properly
secured for transport.

Rolling, rolling, incessantly rolling ... lorries

transport 70% of all goods shipped in Germany.

12

Munich Re Topics Risk Solutions 4/2013

CARGO

Jochen Hackstein

Of the 100 accidents involving lorries on German

roads every working day, around 20% are caused by
improperly secured loads, and more than a few entail
considerable damage to property, serious injuries or
even death.
The considerable physical forces needed to make
loads start sliding or tip over are seldom encountered
in everyday operations. That is why the people
involved in the carriage of goods often believe that the
weight of the goods is sufficient to keep them in place
on the floor of the lorry. However, if the traffic situation calls for sudden braking or rapid steering movements, it is virtually impossible to stop a load once it
has started moving on the floor of the lorry. According
to Section 22 of the German Highway Code (StVO),
such situations as slamming on the brakes and steering at the same time are perfectly normal driving
movements.
Who is liable for securing the load?
Common opinion holds that only the lorry driver and
no one else is responsible for ensuring that the load is
properly secured. Yet more than 30 years ago, German courts established that the person in charge of
the loading operation is also responsible for ensuring
that the load is properly secured, regardless of the
delivery clauses agreed in the contract of sale. Unless
this responsibility has been delegated unambiguously
and irrefutably in the company concerned, even its
management or directors may be fined or face prison
sentences if the worst comes to the worst.

Training helps to prevent losses and protect

reputations
Training tailored to the companys individual circumstances, i.e. the goods to be transported, is a major aid
in preventing losses, assuring quality and protecting
the companys reputation, particularly in view of the
growing volume of freight traffic not only within Germany and Europe, but also worldwide.
Such training does not turn the participants into
experts capable of calculating how to secure a load
with mathematical precision; instead, it creates a
basic understanding of the physical causes and
effects and most importantly provides the participants with the right tools for securing loads properly
and effectively. Each training course is adapted to the
needs of the company concerned, i.e. to the specific
goods which are to be transported. Every participant
should subsequently be able to secure their loads in
such a way that they are firmly anchored on the floor
of the lorry, even during such perfectly normal
manoeuvres as slamming on the brakes and simultaneously steering the vehicle.
.

Proper packing
Working in close collaboration with
our clients, Risk Service at KA Kln.
Assekuranz Agentur draws up customised guidelines for packaging the
goods in question. These guidelines
not only take account of the susceptibility of the goods or products to
mechanical and climatic stresses,
but also cover the relative routes and
type of shipment.
Due to the modular structure, the
various packaging steps can be individually brought into line with the
latest findings/conditions. The main
components of the packaging guideline (with and without products) are
drawn to scale in extremely illustrative 3-D views by our experts. The
guidelines prepared by our experts
include a general file in which the

Not an easy puzzle to solve: efficiently

loading and safely securing cartons.

costs per module can be entered,

for instance for a specific project.
Any claims can also be entered there.

Contact:
jochen.hackstein@
koeln-assekuranz.com

Munich Re Topics Risk Solutions 4/2013

13

Cargo

Actively managing risks together

Investments in training personnel how to load cargo securely
pay off. Reducing the frequency of losses leads to improvements in the supply chain and increases customer satisfaction, says Denis Kohlrusch, risk and insurance manager at
GEA Insurance Broker GmbH.

Mr. Kohlrusch, as an insurance

manager, you have already implemented several risk management
measures for the GEA Group. What
do these measures involve in practice?
Where loss prevention is concerned,
we installed a Group-wide training
programme for securing loads in
2009. The GLSP programme (GEA
Load Securing Program & Certification) is available worldwide with the
support of our local firms at the GEA
Groups locations.
To ensure a uniform standard of
knowledge with regard to securing
loads, the loading staff in manufacturing plants receive training on
legal, physical and practical aspects.
The country in which a load is

secured must be irrelevant in this

context. All that counts for our clients is that faultless products be
delivered on schedule. Our aim is to
achieve precisely that goal with this
training programme. One of the biggest challenges encountered when
internationalising our training programme was to ensure that all training courses are continuously adapted
in line with local regulations and the
local infrastructure. Linguistic and
cultural differences must also be
taken into account in the basic concept specified for the course. In order
to comply with all these points, we
decided to collaborate with local
trainers in each country

GEA
With group sales in excess of 5.7bn in 2012, the GEA
Group Aktiengesellschaft is one of the largest system
suppliers for the food processing industry and a wide
range of other processing industries.
A technology company with international operations,
it concentrates on process engineering and components for demanding production processes in a
variety of end-markets. As at 30 June 2013, the company had a worldwide workforce of around 24,750
employees. The subsidiary GEA Insurance Broker
GmbH offers intragroup solutions in the area of risk
service and insurance. It steers and supports measures aimed at bringing about a sustainable reduction
in insurance-related risks, optimising conditions and
premiums and securing insurance contracts worldwide.

14

Munich Re Topics Risk Solutions 4/2013

What are the programmes core

elements?
On the one hand, the training is
intended to reduce and avoid damage to goods as well as potential
injury; however, it also helps to prevent possible delays in delivery and
potential loss of image. Transport is
one of the most susceptible elements
in the supply chain. Potential disruptions can have disastrous consequences for all parties, particularly in
project business with the client. As
an innovative technology company,
the GEA Group places great importance on sustainable quality so that it
can meet the markets steadily growing requirements.
Is it worthwhile to invest large sums
in training people to secure loads
properly?
In addition to minimising risks in the
supply chain and making a sustainable investment in personnel training,
a global training programme also
helps to reduce the number of losses
and claims. Even a cautious estimate
shows that more than 20% of all
transport losses in combined transport are caused by loads which have
not been properly secured. The considerable commitment invested in
the training programme by all concerned is clear when this figure is
considered in relation to the number
of losses incurred. After actively im
plementing this training programme
at our locations for more than four
years, it can definitely be said to have
had a positive effect on the development of loss frequency and hence on
the insurance premium.

cargo

What made you realise that GEA

employees take the subject of
securing loads seriously?
Numerous training modules have
been organised most successfully
with the support of all Group companies in Europe, North America and
Africa. Not only the loading staff, but
also our associated forwarders and
packers, have seized this opportunity
to recheck the legal and physical
course contents against their own
experience. There will naturally
always be interfaces which cannot
be influenced in this way, but just
one step in the right direction helps
to minimise the risks.
How did KA Kln.Assekuranz
Agentur contribute to the success of
this training programme?
In addition to accepting risk, of
course, Kln.Assekuranz is an innovative and constructive partner when
it comes to minimising risks. With
their far-reaching network, the
experts at Kln.Assekuranz were
able to help us not only in developing
this training programme on securing
loads, but also with the challenging
task of finding qualified instructors
and experts in all the various countries. In other projects, their wealth of
experience and know-how have
helped to secure supply chains on
several occasions. At GEA, we have
mainly utilised the offerings relating
to the production of graphical packaging and conduct guidelines and to
transport and process support. In my
opinion, any insurer interested in
active risk management must not
only know his clients, but must also
be able to understand and support
the latters processes. Without this
investment, the clients risks will not
be minimised in the desired manner.

The training course should be attended by all company employees who are actively involved in loading
and securing loads, i.e. employees in the warehouse
and shipping department, as well as the companys
drivers, or the drivers and staff of the companys regular forwarder and carrier. What is particularly important, however, is that the people responsible for these
areas also attend the course. Experience has shown
that employees pay more attention to safety if they
know that their superiors are also seriously interested
in the subject.
Structure of the training course and certification
Depending on the clients individual needs, the course
takes one or two days and focuses on the products
shipped by the client. The course content is based on
the VDI regulations 2700 et seq. and hence on the
standards currently applicable in Germany. The
instructors are certified by the VDI to hold such training courses. Practical tests complement the theory.
Following a final test, all participants receive a certificate documenting their attendance and the subjects
covered by the course. The company organising the
training receives a similar certificate documenting its
quality standards with regard to securing loads.
>> KA Kln.Assekuranz Agentur GmbH
Internationally operating underwriting agency for
industrial risks, specialising in marine and
group accident insurance. For further information,
see www.koeln-assekuranz.com

our Expert
Jochen Hackstein,
executive manager,
Risk Assessment/Risk Service
jochen.hackstein@
koeln-assekuranz.com

Munich Re Topics Risk Solutions 4/2013

15

Column

Piracy

Keeping ahead of the pirates

Mark Watkins, CEO Watkins Syndidate
mark.watkins@mrunderwriting.com

Since piracy was first commented on

in this publication at the beginning of
last year, the fast-paced changes in
this criminal world have meant that
the shipping and insurance industries have needed to review and
improve their practices.
A significant development seen during the past twelve months is the
increase in attacks off Africas west
coast, whilst such activity had previously been seen only off Africas east
coast. However, the nature of the
attacks in the western waters is significantly different. To date, west
African pirates have been more interested in cargo than the ships themselves. Nevertheless, there has been
growing evidence of crew kidnappings with ransoms being
demanded, especially in cases where
the attempt to steal the cargo on
board was thwarted. Usually, pirates
tend to hold a vessel for as long as it
takes to unload its cargo, as there is
no safe haven on the western coastline. The length of time a vessel is
held in this area ranges from five to
ten days, which is considerably less
than in the case of Somali pirates,
who are able to secure safe anchorage and extend negotiations to their
ultimate benefit.
The technology used by pirates is
also advancing. In the past, pirates
typically had a few small arms on
board, but now tend to carry rocketpropelled grenades (RPGs), AK-47s
and long-range machine guns.

16

The pirates tactics have become

more efficient following each successful attack. Previously, the pirates
operated out of mother ships, attacking in smaller skiffs disguised as
fishermen. However, this approach
has become less popular due to the
increased presence of naval patrols.
Instead, the pirates are now attacking predominantly in smaller skiffs
with large outboard motors that
allow them to travel faster and farther out to sea. Not only is the equipment becoming more sophisticated,
but pirates are also beginning to use
onshore, inside intelligence. As a
result, when a vessel leaves a port,
pirates often know what deterrents
the ship has and where its next port
of call is.

The market was nervous

about the use of armed
guards, but its efficacy soon
became clear.
So what preventative measures have
insurers developed to stay one step
ahead of these developments? My
colleague Emma Russell, Hull and
War Underwriter, explains: The best
preventative measure is following
the Best Management Practices
(BMP4)* recommendations such as
girding the vessel with razor wire or
having the crew withdraw to a citadel where they will hopefully be protected from harm until naval forces
arrive. However, taking additional
security measures such as having
armed guards on board is a major
contributing deterrent.

Munich Re Topics Risk Solutions 4/2013

Although the market was initially

nervous about taking this measure,
its efficacy soon became clear.
Shipowners, however, need to exercise prudence in selecting a security
firm and deciding on the number of
armed guards. Often, security companies recommend at least four
guards, whereas shipowners think
they can save money by making do
with only two.
The fight against piracy continues,
therefore, and if shipowners and
insurers can keep up with pirates
evolving tactics and take every practicable preventative measure, this
will help to reduce the number of
successful attacks. Insurers are
rightfully apprehensive about the
outcome of any successful attack, in
terms of the length of negotiations,
the outcome for the vessels crew and
the ransoms demanded for their
release.
* The Best Management Practice for protection
against Somalia Based Piracy (BMP4) is a
standard work for the shipping industry. Insurers stipulate that shipping companies follow
the BMP4 recommendations as a prerequisite
for the provision of insurance cover. Please visit
www.bimco.org.

Preview of Issue 1/2014

Project risk rating
Developed in a collaborative effort by Munich
Re and TV SD, project risk rating is a
new approach to identifying and evaluating
project risks in a structured, objective and
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decision-making and can be carried out at
any time in the course of a construction project.
>> T
 opics Risk Solutions is also available as an
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2013
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