October 18, 2017 by Jason Contant, Online Editor
The combination of known risks with a new technology is challenging, Christian Höft, client manager with Munich Re, told Canadian Underwriter one day after the (re)insurer released a comprehensive risk analysis of the Hyperloop technology.
Hyperloop Transportation Technologies’ (HTT) technology is a new form of transport which sees passengers and goods being transported in capsules travelling at high speeds in a low-pressure environment using electromagnetic propulsion. The pods will travel approximately 600 kilometres – roughly the distance between Los Angeles and San Francisco or Munich and Berlin – in just 30 minutes.
On Tuesday, Munich Re’s Hyperloop Transportation Technologies Risk Report determined that the technology is both “feasible and insurable in the medium term.” Thanks to a unique crowd-collaboration model, HTT is working with over 800 experts from around the world on the development and realization of the technology and a project team has been set up within Munich Re to consider the risks and challenges facing the technology.
From Munich Re’s perspective, it was important to understand the HTT business model and the approach HTT is taking to develop the Hyperloop technology, Höft told Canadian Underwriter in an email. “The technological development of the Hyperloop itself is continuously delivering internal and external challenges and uncertainties,” said Höft, who is based in Munich, Germany. “From our side, it is important that HTT has established processes in their operations that are identifying and handling these challenges. Many of them are not new to the insurance industry–but the combination of known risks with a new technology is challenging.”
One relevant influencing variable that Höft sees is the development and acceptance of a regulatory framework for the technology. “We anticipate that this will be a lengthy process,” he said. “Therefore, it will be important that we continuously assess the technology in conjunction with third party resources. HTT’s crowdsourcing approach is delivering an innovative and efficient approach to providing access to resources that are able to develop the Hyperloop technology.”
Every new technology is a challenge to insure as there is no experience or data to analyze, Höft said. “Instead you need a holistic view of the new technology from experts like engineers, natural scientists, insurance specialists, economists, etc. Munich Re is quite experienced in assessing and supporting new technologies,” he said, noting that the company insured satellites some 40 years ago and today covers renewable energies.
The crowd operating model in place is a significant advancement in harnessing capabilities beyond the reach of a convention organization, Höft suggested. “The scale, pace and agility this brings is profound, but raises new challenges for risk management in what is essentially a global, virtual organization,” he said. “HTT and its Hyperloop program is the first big and complex example of a truly digital organizational platform; we can be certain it won’t be the last.”
As a next step, HTT and Munich Re will enter into a strategic partnership to develop an insurance concept and integrate an enterprise risk management system that will allow HTT to actively manage enterprise risks, Munich Re reported on Tuesday. “It is anticipated that the services and solutions would include, among other topics, the development of a Hyperloop insurance concept,” the report said. The concept will likely “compromise not only traditional risk transfer for the relevant risk categories, but also risk-derived capital solutions to reflect the different stages of the HTT corporate development cycle and various challenges encountered in each phase of that lifecycle,” the report added.
HTT and Munich Re have partnered since 2016 with the goals of understanding the HTT business model and the functionality of the technology.