Annual Report 2003 - Hannover Re

Management report
property and casualty reinsurance
Geographical breakdown of property and
casualty reinsurance in % of gross premium
Rest of Europe
12%
Asia
6%
United Kingdom
14%
Australia
3%
Africa
3%
Latin America
3%
Germany
21%
contractually agreed priorities. Our account suffered
only two natural catastrophe losses running
into double-digit millions: a series of tornadoes
in the Midwest in May 2003, costing
Hannover Re EUR 16.3 million, and Hurricane
"Fabian", which hit Bermuda in September. The
latter is forecast to produce a maximum burden
North America
38%
of EUR 12.6 million for Hannover
Re. The other catastrophe
losses and major claims in the
year under review are all expected
to remain within the
single-digit millions at most.
Thanks to our conservative
reserving policy and our reduced
participation in the soft
market years, we are pleased
to report that we had no need
to establish additional reserves
for past underwriting years in
the year under review. This is in stark contrast to
many of our competitors. Nor has our exposure
to the World Trade Center loss event developed
unfavourably. As far as asbestos-related claims
are concerned, we continue to profit from our
relatively "tender age", as a consequence of which
we only began to write significant volumes in the
United States from the 1980s onwards; hence,
our share in the industry's total asbestos losses
is marginal.
A very hard market sets the tone in credit
and surety reinsurance. The adverse developments
of previous years – in part attributable
to cyclical factors – led to a drastic tightening
of reinsurance terms and conditions for ceding
companies. Although a radical rehabilitation of
credit and surety insurance appears to have been
successful, capacity shortages still made themselves
felt in the market – triggered primarily by
the withdrawal of American reinsurers from
surety business. The gaps were not entirely filled
by new capacity, such as that provided by Bermuda-based
companies. No conspicuous major
claims were reported in the year under review
and the burden of basic losses also declined, thereby
enabling credit and surety reinsurance in
North America to close with a significantly better
result than in the previous year. In view of this
favourable market situation we opportunistically
stepped up the volume of our acceptances – especially
in non-proportional business – in order
to profit from the prevailing attractive market
environment.
Rates and conditions in marine reinsurance
were flat, albeit on a relatively high level. In this
segment we continued to profit from the significant
rate rises of the last two years as well as a
reduction in the scope of cover. On the claims
side, while 2003 recorded a normal frequency
of small and mid-sized claims the year was spared
any major losses. Capacities in all segments of
marine reinsurance were adequate.
Established in 2001, our subsidiary Hannover
Re (Bermuda) Ltd. writes a steadily growing
share of the worldwide catastrophe reinsurance
business accepted within the Hannover Re Group.
The USA is by far the largest single regional market
in this line. Both, there and globally, our company's
participation in this business has proven
an outstanding success. In a stable market climate
Hannover Re (Bermuda) Ltd. generated
gross premium income of EUR 150.2 million from
natural catastrophe reinsurance in the year under
review. It should be noted in this context that
the bulk of the programmes and limits of indemnity
are written on a non-proportional basis. Although
rates in the USA fell by 5 to 10% in 2003,
Hannover Re (Bermuda) Ltd. remained highly
satisfied with the profitability of its market segment.
On the American continent the company
benefited especially from the fact that in 2003
most relevant natural catastrophe events did not
exceed the insurers' retentions. As a further factor,
the pressure exerted by the rating agencies
and the relatively low levels of investment income
had a disciplining effect on underwriting
practice in the reinsurance market for catastrophe
business.
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