Annual Report 2010 - Hannover Re

Specialty lines
The development of our specialty lines was thoroughly satisfactory.
This segment of non-life reinsurance includes marine
and aviation business, credit/surety, structured reinsurance,
ILS (insurance-linked securities), the London market and direct
business. The premium volume climbed from EUR 2,233.9
million to EUR 2,371.9 million. The combined ratio improved
to 91.4% (96.5%). The specialty lines segment delivered an
operating profit (EBIT) of EUR 369.6 million (EUR 256.4 million).
Breakdown of gross written premium in specialty lines
Mexico and had thus already scaled back our exposure prior
to the loss of the “Deepwater Horizon” drilling rig.
Along with a number of basic losses in hull insurance as well
as cargo claims resulting from the earthquake in Chile, 2010
was dominated by the explosion on the “Deepwater Horizon”
drilling rig; in addition to the direct loss of the oil platform this
caused very extensive environmental damage. Given the
uncertainties still surrounding possible liability claims and the
complexity of this loss event, it will be years before it is settled.
The combined ratio stood at just 89.5% (78.1%) despite the
aforementioned loss expenditure.
16.3% Aviation
11.7% Marine
26.9% Structured
reinsurance
Aviation
In international aviation reinsurance we similarly rank among
the market leaders.
21.3% United Kingdom
& direct business
Marine
23.8% Credit/surety
Hannover Re ranks among the market leaders in international
marine reinsurance.
The recession triggered by the financial market crisis continued
to affect global trade in 2010. Although the premium volume
in cargo insurance reflected the economic recovery, this
has merely taken the form of stabilisation to date. Cargo volumes
and premiums are still well below the level prior to the
financial and economic crisis. Improvements were also evident
in freight charges and the values of vessels, with a flattening
trend and even increases in some areas.
Demand on the reinsurance side was largely stable, although
softening tendencies were noticeable at the beginning of the
year. This prompted us to consolidate our existing business
and write new business only where it served to further enhance
the diversification of our portfolio. Emerging markets
may be mentioned here by way of example.
Our underwriting policy focuses first and foremost on more
profitable non-proportional business. The primary objective
for 2010 was to defend the price level of the previous year –
which could be assessed as good owing to the repercussions
of Hurricane “Ike” in 2008. In the year under review, as in
2009, we further reduced our limits of liability in the Gulf of
Despite partial limitations on flight operations caused by snow
chaos and cancellations due to the volcanic ash cloud over
Europe, the economic situation for airlines improved in the
year under review. Passenger numbers rose, ultimately with
favourable implications for (re)insurers too. The entry into
service of the Airbus 380 “super jumbo” served to push up the
indemnity limits purchased by airlines.
It was also noticeable that insurers raised their retentions on
account of improved capital resources. As a result, the year
under review was notable for a number of basic losses, albeit
without major repercussions for reinsurers because for the
most part they remained within the retention carried by primary
insurers. For this reason, and also due to a further rise
in reinsurance capacities, the pressure on prices increased as
the year under review progressed. Against this backdrop our
goal was essentially to maintain our current market shares.
We are a market leader for non-proportional treaties in the
airline market, whereas in proportional business we write our
business opportunistically and concentrate for the most part
on niche segments. We maintained our involvement in nonproportional
reinsurance on a stable level; our gross premium
in the aviation line contracted marginally.
After the unusually heavy loss expenditure incurred in the previous
year, the major loss experience in the year under review
was on the moderate side. The largest single loss was a fire at
a spare parts storage facility of a Saudi Arabian airline, for
which we have set aside net reserves of around EUR 13 million.
The combined ratio improved to 75.3% (86.3%).
28 Management report Non-life reinsurance
Hannover Re Group annual report 2010