New IT-based insurance for construction risks
12:00 AM CEST 2014/05/26
Munich Re and RIB have signed an exclusive agreement to jointly develop the first global IT-based insurance product for large construction projects that covers elements of unplanned increase in construction cost.
Munich. The innovative solution, targeted at project owners, combines the RIB iTWO Technology with Munich Re’s risk know-how. The new IT-technology of RIB divides the construction process into two phases. During the virtual construction phase, all processes, interfaces, time aspects and costs are made transparent. This is the basis for the insurance cover, which mitigates risks related to cost and time elements and provides investors with more cost certainty. The physical construction phase starts only after successful completion of the virtual construction phase.
Thomas Wolf, Chairman and CEO of RIB Software AG: “The core principle of the IT-based solution is to provide a maximum of transparency in the design and execution of construction projects in order to mitigate the risk of an unplanned increase in construction cost. In the case of adverse occurrences during the construction phase, it provides financial protection by indemnifying an amount of such cost. It will help governments and investors to manage the risk of cost overruns in future.”
Christoph Hoch, Chief Underwriting Officer Engineering, Corporate Insurance Partner, Munich Re: “Risk transparency, risk mitigation and risk transfer are key elements for investors in their desire to achieve a high degree of cost certainty for their investments. Munich Re’s risk know-how combined with the IT and construction expertise of RIB were the cornerstones for the development of this new solution. We are thus able to offer risk transfer for certain risks that were not previously insurable. We are confident that owners, developers and investors will benefit from this new insurance solution.”
According to global studies, the range of unplanned increases in construction cost is in the order of 20% to 30% of the overall project building cost. Investors fear the uncertainties related to a large number of inherent construction risks: insufficient planning may have a material impact on costs and deadlines during the construction process. By using RIB technology the risk of such an increase in construction cost can be reduced significantly. In addition, the IT-based insurance product provides the client with predefined financial protection in the case of an actual unplanned increase in construction cost at the end of the construction period.
This press release contains forward-looking statements that are based on current assumptions and forecasts of the management of Munich Re. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forward-looking statements or to conform them to future events or developments.