Machinery insurance
Since industrialisation began, machines and technical equipment have grown steadily in number as well as in complexity and size.
In the industrialised countries in particular, people are heavily dependent on the smooth operation of technical equipment and machinery, a trend that gives rise to ever greater deployment of capital for acquisition, operation and maintenance.
Owing to high investment costs and businesses' growing dependence on technical equipment, machinery damage can lead to severe financial losses for owners and operators alike. This financial loss can arise as property damage or result from the stoppage or interruption of the business.
In the early 20th century, the insurance industry therefore started offering owners and operators insurance against machinery damage over and above that covered by fire policies, thereby assuming the financial risk that can arise as a result of sudden and unforeseen damage to machinery.
Having their technical equipment and machinery insured allows owners and operators to forgo establishing reserves for possible damage to their machinery. Their liquidity is thus unaffected in the event of any subsequent machinery damage.
Boiler insurance oldest form of engineering insurance
The oldest form of engineering insurance is boiler insurance, which was introduced following a spate of losses caused by exploding boilers. At the start of last century, Munich Re, together with a number of other German insurance companies, introduced machinery breakdown insurance, which covered all of a business's machinery and technical equipment.
In the 1920s, insurance for low-voltage installations was brought out, in particular to cover telephones and teleprinters. In the 1950s, this evolved into electronic equipment insurance as developments in the areas of computing, electromedicine and telecommunications required insurers to come up with modern coverage concepts.
Finally, as businesses became increasingly dependent on technical equipment and machinery and therefore more and more at risk from heavy financial losses caused by business interruptions, machinery business interruption insurance was introduced. This took account of the fact that the failure of an important production facility could mean bankruptcy for many enterprises.
Although they have been in existence for just over 100 years, engineering insurances still represent a dynamic young branch of the insurance industry that keeps pace with technical developments. Insurers of technical plant and machinery have to be versatile and constantly adapt their products to the changing technical environment. If they succeed in keeping up with technical advances, then - drawing on their experience from numerous losses - they can act as advisers to industry and influence future technical progress.
Munich Re has made it its business to follow technical advances closely with a large team of engineers, the aim being to use their experience to advise cedants and assist them in assessing various risks and stipulating adequate conditions. In this way, Munich Re is able to provide comprehensive customer service not only with regard to acquisition but also in the area of loss prevention and claims settlement.