Example Of Munich Re-Terrorism-Related Risk Management And Ecological Issues Essay
Political Risk Signals Bringing About Terrorism
The world trends on terrorism are on the increasing edge since each and everyday cases of such heinous activities are reported in different parts of the world. The most adversely affected sectors are the state corporations and organization, business entities, and other sectors of the country's economy. Terrorist acts are a threat to the country’s security and hence adversely affects the economic growth of such countries.
Terrorism discourages investors from establishing their companies as they fear about the disruption of their businesses. The 2001 Washington DC bombing was a major blow to the most powerful nation in the world on its security systems. Unless strategies are laid down to combat this acts of cowardice, terrorism will ultimately render the states insecure and hence affect the international market. (Michel‐Kerjan et al., 2014)
There are several political indicators that may trigger terrorism activities. Political instability in any country can lead to loss of properties for companies and the sales hence lowering the economic growth pace of any country. One of the risk signals is the economic performance of the country. The poor economic performance of any country could lead to unrests in the country.
Conflicts in various countries could also be attributed to the internal diversity and incongruent interests. The ethnic and diversity and incongruent interests may ultimately lead to conflict and distrust and hence simmer terrorism acts. Companies can adopt various strategies to avert the adverse effects of the terrorist activities, as this could lead to massive losses and hence business closure. Companies can train their employees in terrorism avoidance as this could reduce the likelihood of becoming victims. Companies can also perchance insurance against the terrorist acts of the private insurance companies.
Changes to the Munich Remarketing Mix As A Result of the September 11 Terrorist Attacks
Munich Re relies on other insurance firms to reduce the insurance losses. The 2001 terrorism acts at the USA caused huge losses to many insurance companies reducing their capital considerably, as such Munich Re reinsurance companies resolved to change its marketing risk in order to alleviate the effects of future bombings (Foley et al., 2012)
Munich Re Company decided to exclude the terrorism acts from their policies as this could cost them a lot in future occurrences. However, they did not eliminate the insurance on the life and personal accident due to terrorism. In addition to that, the Munich Company considered some exclusion in property damage insurance and resolved partnering with local governments to provide the coverage because of that.
Munich Re Coverage of Environmental Risks
Terrorism activities result in the release of emissions and other dangerous substances that may lead to global warming. The release of, for instance, the nuclear emissions to the atmosphere has adverse effects on the human population and animals. As such, strategies to combat such environmental degradation are very paramount. It is crucial to note that the indirect impact of the global warming may further culminate into adverse weather patterns that may render the earth inhabitable. As such, clear policies on how to deal with such cases. The EU directive on environmental damage states that anyone involved in destroying the environment should be responsible. He or she is hence required to clean up the mess. Such policies have been imbued by other reinsurance companies on how to combat the environmental risks.
Munich Re has done extensive research on the environmental risks related to terrorism activities. As such, they have developed very innovative financial products like mortality bonds and weather derivatives that will ultimately help in responding to the terror risks. Munich Re is doing information and risk modeling to ascertain how the insurers should be paying for the reinsurance.
Munich Re in reaction to the European environmental liability extending their insurance to environmental hazards changed their coverage to cover adequately for the risks to the environment. In order to fully achieve this, Munich Re requires underwriting, risk assessment and damage remediation to be performed. As such, only qualified engineers, scientists, and specialist underwriters are deployed to make the company remain profitable in the environmental sector.
Terpstra, V., Foley, J., & Sarathy, R. (2012). International marketing. Naper Press.
Michel‐Kerjan, E., Raschky, P., & Kunreuther, H. (2014). Corporate demand for insurance: New evidence from the US terrorism and property markets. Journal of Risk and Insurance.