Canadian Underwriter

New high-speed transportation technology Hyperloop both “feasible and insurable”: Munich Re

October 17, 2017   by Canadian Underwriter

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Hyperloop technology – a form of transport in which passengers and goods travel in capsules at high speeds – is both “feasible and insurable in the medium term,” according to a new report from Munich Re.

Hyperloop pods will travel approximately 600 kilometres – roughly the distance between Los Angeles and San Francisco or Munich and Berlin – in just 30 minutes. Credit: Hyperloop Transportation Technologies.

The Hyperloop Transportation Technologies Risk Report, released on Tuesday, examined risk landscapes for Hyperloop Transportation Technologies (HTT), which has carried out a comprehensive risk analysis of its technology along with Munich Re. The report also looked at risk landscapes for the technology itself.

The report concluded with five key observations:

  • “Bringing to fruition the Hyperloop proposition is one of the few genuine activities at the edge of human endeavour.” Although it is unproven in full-scale testing, the technology is “likely to be viable, and represents a realizable integrated system”;
  • Hyperloop represents an insurable prospect that will embrace traditional risk transfer and yet-to-be-developed innovative responses to the HTT operating and capital model;
  • The nature of the challenge is extreme and the global resources required to harness the Hyperloop ambition demand the HTT innovation implicit in the crowd-sourcing model. “Munich Re recognizes this as genuine innovation on a global scale,” that will likely be an essential component of future large-scale infrastructure projects. Traditional approaches to risk management will need to adapt to the technology;
  • The technology will demand a “rigorous and structured” enterprise risk management (ERM) framework to ensure meaningful management against the reduction of the risk portfolio value that will change in the different stages of the project’s lifecycle; and
  • The venture depends on funding as well as “developing and satisfying challenging regulatory environments and establishing and sustaining the perception and trust of society.”

Dirk Ahlborn, CEO and co-founder of HTT, suggested in a press release from Munich Re that “as we approach the commercialization of our technology, the creation of a new regulative framework is the biggest challenge. Being able to offer an insurable system is a huge milestone for this groundbreaking technology.”

HTT’s Hyperloop 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, Munich Re explained in the release. The pods will travel approximately 600 kilometres – roughly the distance between Los Angeles and San Francisco or Munich and Berlin – in just 30 minutes. 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.

As a next step, HTT and Munich Re will enter into a strategic partnership to develop an insurance concept and integrate an ERM system that will allow HTT to actively manage enterprise risks, Munich Re reported in the release. “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, developing risk landscapes and writing a report on the risks.