Annual Report 2010 - Hannover Re

Credit and surety
Breakdown of gross written premium in credit/surety
In worldwide credit and surety reinsurance Hannover Re ranks
among the market leaders. As in previous years, we concentrated
exclusively on the core business of the credit and surety
lines. We do not write financial guarantees or credit default
swaps.
8.4% Political risk
33.4% Surety
58.2% Credit
While the situation in credit and surety insurance had been
challenging in the previous year, it eased in the year under
review. Although most of the industrial nations have put the
recession behind them, the environment remains volatile.
Countries with high levels of sovereign debt recorded significantly
slower growth, whereas emerging markets – in particular
– returned to their strong growth rates. Export-oriented
nations such as Germany profited from this development.
Claims rates in credit insurance, which had been driven up
sharply by the economic crisis, reached their peak at the beginning
of 2010. They then subsided appreciably; since mid-
2010 claims rates have reverted to pre-crisis levels or in some
cases even lower. In the surety and political risk lines claims
rates remained on a good level. Most notably, results in surety
business escaped the crisis virtually unscathed.
The economic crisis had prompted many competitors either
to heavily curtail their involvement or entirely withdraw from
credit business in 2009 and 2010. Hannover Re, on the other
hand, made the most of the capacity squeeze and the accompanying
substantial price increases to selectively enlarge its
portfolio. This brought about further expansion of our already
robust market position. Our premium growth in the year under
review amounted to around 20%; the bulk of this derived from
the reinsurance of trade credit business.
The picture in credit reinsurance was a similar one to that in
the primary sector: here too claim rates improved markedly.
Reinsurance rates were also very pleasing, rising significantly
for 2009 and 2010. From the middle of the year under review
onwards rates held stable, only coming under pressure in isolated
cases.
In surety reinsurance the situation remains favourable; claims
rates were stable on a good level. Rates increased only slightly
here on account of a favourable loss experience.
The experience of our political risks business was also satisfactory.
Rates in this segment peaked at the beginning of
2010; modest rate erosion then ensued over the course of the
year, albeit still on a good level.
All in all, the development of credit and surety reinsurance
was satisfactory. The decision to selectively enlarge our portfolio
in the challenging crisis year of 2009 proved to be correct:
in non-proportional business the portfolio was virtually
loss-free. On the proportional side claims rates improved
markedly in the credit line, while in surety and political risks
business the claims situation was also highly gratifying. Once
again, we did not incur any major losses – i.e. losses in excess
of EUR 5 million – in the year under review.
The combined ratio moved back under 100% in the year under
review. It stood at 97.8%, after 104.2% in the previous
year.
Structured reinsurance
We are satisfied with the development of structured reinsurance
products, which offer our cedants risk equalisation over
time and serve to reduce their capital requirements. Whilst the
premium income contracted due to our discontinuation of certain
high-volume arrangements, the operating profit nevertheless
showed a very pleasing increase.
Hannover Re is one of the two largest providers of structured
reinsurance solutions in the world and can draw upon many
years of experience as regards actuarial balance sheet, accounting
and underwriting expertise. Our range of products
is geared to optimising our clients’ cost of capital.
Management report
In the year under review we further intensified cooperation
with our treaty departments writing traditional reinsurance,
thereby enabling us to offer our clients the full spectrum of
our company’s products and its extensive range of services.
Hannover Re Group annual report 2010
Non-life reinsurance Management report
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