the construction and subsequent occupancy of high- high-rise buildings which can only be appraised by an
5.4 Underwriting considerations
Different construction methods, different finishings and the exposure to external influences demand careful analy-sis of the resultant risks. For this reason, only approximate rates can be specified for insuring the construction and operational phases of high-rise buildings, despite the availability of statistical analyses extending over many years.
5.4.1 Contractors’ and erection all risks insurance
When determining the premium rate, different degrees of exposure during construction of the high-rise building (foundations, structural works, finishing) must be taken into account in the same way as the proportion of tem-porary auxiliary structures (e.g. retaining walls) and their exposure during use. The following documentation should normally be available:
– General drawing and layout plan of the site with an overview of the immediate surroundings
– Technical details concerning the construction method, progress made and materials used
– Breakdown of the contract price according to the most important parts (foundations, structural works at under-ground levels/floors above under-ground, finishing)
– Schedule of construction work, particularly in conjunc-tion with regularly recurring natural phenomena (e.g.
monsoon)
– Expert report on soil conditions
– Description of the foundation method, retaining wall, possible lowering of the groundwater table
– Layouts, longitudinal and transverse sections of the building in different planes, details of the most import-ant structural parts (e.g. facade connections).
The premium rates required for underwriting are deter-mined on the basis of an assessment of these documents and of the structural analyses. Premium rates are not
specified here on account of the considerable scope for variation and additional, highly commercial influences pre-vailing in the various markets.
Where the deductible is concerned, difficult soil conditions and the exposure to windstorm due to structural reasons or progress in construction must also be taken into ac-count in addition to the long time frequently required for the construction work.
If necessary, it must be possible to calculate the risk by including suitable special terms, limits of indemnity or exclusions. This applies particularly to high-rise buildings over 500 m, as their exposure to windstorm has not yet been sufficiently investigated, and when using inadequately tested materials and construction methods.
5.4.2 Contractors’ plant and machinery
When determining the premium rate, the number and period in use of the highly exposed cranes must be taken into account in addition to the scope of cover. Elevators for transporting materials to great heights are less ex-posed to loss, since they are firmly connected to the shell on the outside or are located inside the high-rise building.
5.4.3 Decennial liability insurance
The level of premium rates for this cover is also largely dependent on the specific market, the market situation and scope of cover. For this reason, the premium rate can range between 5‰ and 15‰ for the ten-year period. In addition to the premium, the principal must also bear the costs of technical inspections; these costs vary in line with the size and complexity of the project.
The waiver of a deductible is prescribed by law in some markets; as a rule, however, the long term of this cover should be taken into account when determining the amount of excess.
5.4.4 Insurance of buildings, fire insurance
As with all risks, the terms, quality of the risk and price are components which must be taken into account when underwriting high-rise buildings.
Where the terms are concerned and particularly in con-junction with the scope of cover, the statements made in Section 5.1.5 apply, with “named perils” and “all risks” as the two main forms of cover.
All the criteria listed in Section 4.2.4 must be considered in order to determine the quality of the risk. Under no circum-stances should the underwriter assume that all statutory measures have been taken or that the quality of the risk is satisfactory simply because of compliance with the regulations. As the cases outlined in Section 4.2.3 have shown, the standard of protection applying when the high-rise building was erected may well be far below the stand-ards required today. It therefore follows that the struction practice and standard of protection must be con-sidered individually. Particular attention must be paid to
Page 155 5 Insurance
structural fire protection, as well as sprinkler protection commensurate with the risk.
Although quantitative statements cannot be made, the probability and frequency of a loss occurring and the amount of loss to be expected will be lower if the quality of the risk is “good” than in the case of inadequately pro-tected buildings. Higher shares can therefore be written in the case of “good” risks.
In the case of extended basic cover, the risks due to sup-plementary perils, e.g. earthquake, windstorm, hail, flood-ing, water damage and glass breakage, must naturally also be taken into account in the underwriting. The same also applies to all-risks covers, special attention being de-voted to the exclusions (see Section 5.1.5).
General statements cannot be made here with regard to the price, i.e. premium rate. Claims experience and local exposure play a vital role in pricing, as do commercial considerations. Above all, the premium calculation also has to take into account supplementary perils such as natural hazards and political risks on the basis of individ-ual loss exposure.
The quality of the risk is naturally also reflected in the price; in other words, appropriate protective measures or generally “good” quality of the risk will result in a corres-pondingly lower premium rate.
5.5 Reinsurance
In the majority of cases, there should be no particular problems in reinsuring individual high-rise buildings, pro-vided that the necessary conditions have been met for the individual classes (contractors’ all risks, erection all risks, insurance of the building, fire insurance, decennial liability insurance, third-party liability insurance). On account of the different forms of cover, the main thing is to ensure that the policies in question are allocated to the appropri-ate classes, e.g. engineering insurance, third-party liability insurance and fire insurance (as described in detail in the preceding sections) and that the risk is properly assessed in line with the respective policy.
Special need for reinsurance may arise, however, in the case of individual major high-rise-building risks and exten-sive accumulation risks resulting from the concentration of numerous high-rise buildings within a small area. This is indeed the case with skyscrapers of record-breaking heights and sums insured due to the high fire PML or the risk of earthquakes or windstorm in areas particularly prone to such hazards. The need to insure these risks will normally exceed the capacity of the local insurance mar-ket. The same also applies with regard to decennial cover for such risks.
However, even reinsurers with the soundest financial back-ing cannot accept unlimited liability. In some cases, it will therefore be necessary to introduce a limit of liability which makes the risk more manageable and easier to cal-culate; this will also ensure that the available underwriting capacity can be fully utilized. The type of limits to be
speci-fied in the classes concerned should be decided in accor-dance with individual requirements.
In addition, limits of liability also facilitate matters for in-surers and reinin-surers; liability accumulations can be deter-mined and updated more easily and precisely. This is par-ticularly important in countries or regions which are con-stantly exposed to natural hazards, such as Japan or Cali-fornia, where comprehensive insurance cover is provided for a large number of high-rise buildings in an area of in-tense seismic activity and where there is consequently a substantial accumulation risk.
Even in these extreme cases, however, the demand for ad-equate insurance cover is and was satisfied by insurers and reinsurers working together as partners. This is par-ticularly true of insurance markets marked by high invest-ment and growth. The benchmark has been raised in terms of what insurers require and expect of reinsurers, especially with regard to know-how, professional compe-tence, market experience, innovativeness and ultimately also adequate capacity combined with long-term financial strength.
Munich Re is optimally positioned to meet these chal-lenges.
The lead it has built up globally over the decades in terms of experience and information is based on extensive data-bases. With the help of modern computer-based tools, the latest data can be rapidly made available to the insurers.
Comprehensive geo-scientific and underwriting analyses of these data by experts at Munich Re’s head office and in the engineering offices around the world ensure that nat-ural hazards and loss potential can be reliably assessed.
Experienced underwriters are available to our clients at more than 45 business units and subsidiaries in our inter-national organization, all of which are linked online to the head office. This enables us to advise prospective clients on assessing risk, defining the terms of insurance, and determining and providing the required reinsurance capacity.
During the period of cover, our specialists can actively participate in inspections, loss prevention or settlement of complex losses.
Extensive know-how and the courage to take innovative steps make it possible for our specialists to provide our clients with professional support in developing new concepts for cover or new insurance products.
We will gladly answer any queries by our clients, provide further information or outline possible solutions in con-nection with reinsurance and our range of services.
89 EXTERIOR HOIST
6 Summary and outlook
6
Page 157 6 Summary and outlook
Most of the statements made here, however, will continue to apply to future high-rise buildings. Despite certain reser-vations and all economic bottlenecks, the quest to reach for the sky and erect higher and higher buildings goes on, particularly in Asia.
For this reason, we as insurers and reinsurers will con-tinue to devote our attention to these projects in the new millennium. We are also confident that, thanks to our worldwide know-how and long-standing experience, we will be able to offer our clients solutions in line with the specific risks involved.
1 Die Bezeichnung höchstes Bauwerk der Welt bean-sprucht zur Zeit der Fernsehturm von Toronto, der neben dem Ontariosee 553 m in den Himmel ragt. Das zweit-größte Bauwerk ist der Fernsehturm von Moskau mit 537 m.
2 Eine Geschoßflächenzahl von 12 bedeutet, daß die Gesamtfläche aller Geschosse über Straßenniveau maxi-mal das Zwölffache der Grundstücksfläche betragen darf.
.
3 Bentonit ist ein spezielles Tonmineral, das das Mehr-fache seines Gewichts an Wasser absorbieren kann und dabei auf das 8–15fache seines Volumens anschwillt.
Es bildet an den Wänden des Schlitzes eine Schicht, wodurch dieser gegen Materialeinbruch stabilisiert wird, ohne den Aushubvorgang zu beeinträchtigen.
4 Weitere Details sind in unserer Brandschutztafel nach-zulesen.
5 Advance loss of profit.