Image: chinaface - Getty Images / iStockphoto Our core beats digital. Solutions to serve our clients. Baden-Baden | 21 October 2019 Doris Höpke
A world of risks, a world of opportunities Challenges we are facing as an industry – We address them to serve our clients POLITICAL UNCERTAINTIES OLD RISKS NEW RISKS GEOPOLITICAL CLIMATE CYBER VOLATILITY RISKS CHANGE TRADE NEW WARS DIGITALISATION FORMS OF ENERGY NEW FORMS OF MOBILITY 2
Our core beats digital – Solutions to serve our clients Our Tech Trend Radar shows technology-driven trends that are particularly relevant for the global insurance sector Wildfire Risk Aqualytix Score Realytix The Box Remote Cyber Industries Solutions Parametric Solutions 3
Our core beats digital – Solutions to serve our clients Tech Trend Radar shows technology-driven trends – Connected World Wildfire Risk Aqualytix Score Realytix The Box Remote Cyber Industries Solutions Parametric Solutions 4
Our core beats digital – Cyber Solutions Evolution and exponential growth in cyber incidents Major cyber incidents 2016 Yahoo (500m records) 2007 2011 2013 DDoS on Estonian Sony PSN Yahoo! 2015 2017 data breach govt. sites (3bn records) Anthem WannaCry 2014 (80m records) 2017 Sony Picture 2010 NotPetya hack Stuxnet 2018 Google+ (52m records) 2018 Marriott (500m records) 2005 2020 2018 Twitter (330m records) 2018 Facebook (90m records) 2017 2011 Uber (57m records) RSA SecurID infiltration 2014 2015 2016 Ebay US federal 1 2009 LinkedIn (112m records) (145m records) (21m records) 2012 DDoS attack on govt./financial Dropbox websites in South Korea 2016 (68m records) Bank of Bangladesh attack (estimated $81m stolen) 1 Sensitive personnel data stolen from US govt. employees gone through security clearance background checks 5
Our core beats digital – Cyber Solutions Recent market trends and developments Underscore the necessity and potential of cyber insurance GLOBAL IT SECURITY Cyber related losses INVESTMENTS WILL FURTHER GROW Growth of digital ▪ Most new buyers are SMEs business models (small sized: <€50m) ▪ Top buyers by industry ▪ Healthcare The new internet standard 5G ▪ Manufacturing ▪ Professional services Increasing legislation and internal ▪ Financial institutions governance requirements ▪ Top cover elements ▪ BI (growing importance) Board or senior management demands ▪ Data breach (remaining important) 6
Our core beats digital – Cyber Solutions Cyber insurance market with strong expected growth For Europe a CAGR of 37% is expected (2018 – 2025) GWPin $bn CAGR: 37% 5.0 3.8 2.9 2.2 1.6 1.1 0.8 0.6 2018 2019 2020 2021 2022 2023 2024 2025 UK Germany France Italy Rest of Europe Cyber is one of Munich Re’s main strategic growth areas. Source: Munich Re Economic Research / Corporate Underwriting 7
Our core beats digital – Cyber Solutions Munich Re’s cyber offering covers all areas of the value chain and reflects and active appetite for risk taking and driving innovation ▪ Wording and coverage ▪ Pricing Product development ▪ Product review and update ▪ Modular risk questionnaires ▪ Underwriting manual and guidance Underwriting ▪ Automated underwriting ▪ Flexible pricing tool ▪ Service provider check Services ▪ Further offerings under development ▪ Marketing support Sales and marketing ▪ Launch support ▪ Monitoring/KPIs ▪ Accumulation control Risk management ▪ Quota share reinsurance (multi-year) ▪ Service provider check Claims ▪ Breach response process assistance The one-stop solutions offer a clear cost advantage and take up significantly fewer of insurers’ resources. 8
Our core beats digital – Solutions to serve our clients Tech Trend Radar shows technology-driven trends – User-Centricity Wildfire Risk Aqualytix Score Realytix The Box Remote Cyber Industries Solutions Parametric Solutions 9
Our core beats digital – Realytix “ Realytix ” – Designing innovation from idea to market Development and distribution of non-life commodity primary insurance products ▪ Insurance carriers want to launch new products without costly delays often caused by tedious IT integration processes. CLIENT NEED ▪ Once new products are launched immediate reaction to the changing market environment is necessary. Realytix is a cloud-based rate/quote/bind platform for primary insurers, brokers and MGAs that does not require implementation into an existing IT infrastructure. Digital distribution channels can be easily facilitated via an API offering. SOLUTION The Realytix platform enables insurance carriers ▪ to market products in a few weeks and ▪ to adapt within a few minutes to changing market requirements. Reduced time to market, customisable and CLIENT BENEFIT flexibly implementable platform, digital and easily scalable distribution. 10
Our core beats digital – Wildfire Risk Score “Wildfire Risk Score” – Enhancing external data with our claims experience and scientific assessment of the impact of climate change Primary insurers writing residential business but also commercial businesses need a better understanding of their CLIENT NEED exposure in wildfire prone regions as losses caused by wildfire have increased significantly. New Munich Re Munich Re internal and Wildfire Risk enriched external data New Hazard Zones Score Map SOLUTION External data Big range of proprietary modified by Munich Re information & data Scores can assist insurers with risk assessment and premium calculation and CLIENT BENEFIT improve risk awareness in the affected regions. 11
Our core beats digital – Solutions to serve our customers Tech Trend Radar shows technology-driven trends – Artificial Intelligence Wildfire Risk Aqualytix Score Realytix The Box Remote Cyber Industries Solutions Parametric Solutions 12
Our core beats digital – Aqualytix “ Aqualytix “ enables the primary insurer to significantly optimise its homeowner portfolio management Clients require a better understanding of the causes of tap water damages, as for more than ten years, tap water damage has accounted for around 50 % of losses in traditional German CLIENT NEED homeowner insurance. Primary MACHINE INSIGHTS AND insurance ANALYSIS LEARNING ASSESSMENT company Munich Re DATA SOLUTION Risk know-how Validation of Dashboard External Munich Re risk drivers Aqualytix enables clients to identify critical risks by improved data quality and CLIENT BENEFIT more accurate risk assessment. 13
Our core beats digital – The Box “The Box” allows primary insurers to improve their motor portfolio performance CLIENT NEED SOLUTION CLIENT BENEFIT Portfolio/data selection by client IMPROVED LOSS RATIO External data enrichment by Munich Re (2 – 4% pts) Model configuration by client ▪ Pricing parameter selection Full transparency How to improve loss ▪ Model selection ratio and pricing for Quantified biz impact motor business? Model result visualization by Munich Re Increased accuracy ▪ Model performance Easy and fast adaptation ▪ Business impact analysis Model deployment by Munich Re We improved the pricing of a large UK motor insurer via Munich Re’s machine learning software. 14
Our core beats digital – Solutions to serve our clients Tech Trend Radar shows technology-driven trends – Disruptive Technologies Wildfire Risk Aqualytix Score Realytix The Box Remote Cyber Industries Solutions Parametric Solutions 15
Our core beats digital – Remote Industries “Remote Industries” – algorithm-based, automated claims processing for natural catastrophes ▪ Natural catastrophes generally result in wide-scale losses that require enormous Client need effort and resources to settle. ▪ Insurers’ claims departments are stretched to the limit for weeks before and after an event and struggle to cope. Munich Re is developing an automated claims processing from aerial imagery: Solution ▪ Solution offering as a service insurance and claims expertise, along with solutions for remote identification of damage ▪ Vision to handle all of an insurer’s claims management for natural catastrophes from the office Client benefit Automated claims processing from aerial imagery leads to lower claims handling costs, faster reaction times and better fraud detection possibilities. 16
Our core beats digital – Parametric Solutions Parametric solutions – New forms of data analysis and real-time monitoring allow structuring of new solutions While parametric trigger solutions enable unbureaucratic and rapid payout, clients would Client need benefit from tailored solutions that address the actual loss more accurately. Solution Pre-agreed payment structure Payment triggered by event based on event parameter or occurrence exceeding index value parametric threshold Use of technology (sensors, satellite-based sensing, drones) contributes to a more precise Client benefit design of triggers, improving the likelihood of covering the actual loss. 17
Our core beats digital – Solutions to serve our clients Munich Re is investing in digital solutions beyond traditional (re)insurance At our core, we are in the people business. When the worst happens our job is to serve our clients in new, smarter, better ways. 18
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