New IT-based insurance for construction risks
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.
Stuttgart, Germany, 21 May 2014. The innovative solution, targeted at project owners, combines the RIB iTWO Technology (new thinking, new working method, new big data IT) with Munich Re's risk know-how. The new iTWO big data technology (new IT) and iTWO Lab 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 and Munich Re's risk transfer solution, 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.
At the beginning of the 20th century, German Bauhaus technology (form must follow function) changed architecture and urban planning. One-hundred years later, at the beginning of the 21st century, the German iTWO technology (physical must follow virtual) has the potential to have a similar impact on living and working, on architecture and standards. The iTWO and iTWO LAB technology is set to lead to the next generation of smart, green, sustainable buildings and infrastructure.
Global leading experts like Prof. Martin Fischer from Stanford University has analysed the potential benefits that can be generated from the Big Data BIM 5D technology. Fischer expects up to 30% benefits and cost savings in construction and building costs from using the new technology.
About Munich Re
Munich Re stands for exceptional solution-based expertise, consistent risk management, financial stability and client proximity. The Group combines primary insurance and reinsurance under one roof. It operates in all lines of insurance, with almost 45,000 employees throughout the world. With premium income of around EUR28bn from reinsurance alone, it is one of the world's leading reinsurers. Especially when clients require solutions for complex risks, Munich Re is a much sought-after risk carrier.
About RIB Group
RIB Software AG is an innovator in construction industry. The company designs, develops, and offers iTWO technology for the construction industry worldwide. iTWO is the world's first Cloud-based Big Data BIM 5D enterprise solution for construction industry. Since its inception in 1961, RIB Software AG has been the pioneer in construction innovation, exploring and bringing in new technology, new thinking and new working method to enhance construction productivity, and transforming the construction industry into the most advanced and digitalized industry in the 21st century. RIB is headquartered in Stuttgart, Germany, and listed in Prime Standard Frankfurt Stock Exchange since 2011. With about 600 talents located in over 30 offices worldwide, RIB is serving 100,000 clients including construction contractors, developers, owners, investors and governments, in the field of building construction, infrastructure, EPC sector, etc.