Annual Report 2010 - Hannover Re
Annual Report 2010 - Hannover Re
Annual Report 2010 - Hannover Re
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Demand for structured reinsurance covers remained strong in<br />
the year under review, despite the fact that primary insurers<br />
were able to rebuild the capital that they had lost in the economic<br />
crisis; in the previous year this had served to drive demand<br />
for surplus relief contracts.<br />
In keeping with our strategy of regional diversification, we<br />
further stepped up our activities in Europe. Yet we were also<br />
able to enlarge our client base in Latin America. In the United<br />
States we continue to target smaller and mid-sized companies<br />
with our surplus relief contracts. Our business opportunities<br />
in Asia are improving as some countries have implemented<br />
solvency requirements based on a risk-based capital framework.<br />
We do not anticipate any strains on our structured reinsurance<br />
covers from major losses occurring or reported in the year<br />
under review.<br />
We also continue to take the role of investor by ourselves investing<br />
in catastrophe bonds. In this context, the natural disasters<br />
recorded in <strong>2010</strong> did not cause any losses.<br />
The declining rate level in large areas of traditional reinsurance<br />
business is also causing prices to fall in the ILS market.<br />
The development of our ILS activities in the year under review<br />
was very favourable overall.<br />
United Kingdom, London market and<br />
direct business<br />
Traditional reinsurance<br />
We are satisfied with the business that we write in the United<br />
Kingdom and on the London market. Against a backdrop of<br />
broadly stable rates and conditions, developments in the various<br />
lines were on the whole gratifying.<br />
Insurance-linked securities<br />
As anticipated, demand for insurance-linked securities continued<br />
to grow in the year under review; this sector, which<br />
had contracted in the wake of the financial market crisis, has<br />
recovered.<br />
Investor demand thus comfortably outstripped supply when it<br />
came to our “K6” transaction. The portfolio assembled for this<br />
securitisation consists of non-proportional reinsurance treaties<br />
in the property catastrophe, aviation and marine (including<br />
offshore) lines. The “K6” quota share, which had originally<br />
been launched in 2009, was boosted by USD 152 million in<br />
<strong>2010</strong> to the desired volume of more than USD 300 million,<br />
specifically, to USD 329 million. The additional shares in the<br />
“K6” transaction were written as new three-year treaties,<br />
which means that henceforth only a portion of the total volume<br />
will be renewed at year-end.<br />
We make use of the capital market not only to protect our own<br />
property catastrophe risks, but also to structure and package<br />
risks for our cedants. When it comes to innovations and bespoke<br />
solutions we are a market pioneer.<br />
Our “FacPool <strong>Re</strong>” project, which in 2009 for the first time<br />
transferred a portfolio of facultative risks to the capital market,<br />
was continued. What is more, we significantly expanded our<br />
business relations with individual investors by enabling them<br />
to enjoy optimised access to (re)insurance risks.<br />
The cold spell in January <strong>2010</strong> and poor results in motor business<br />
prompted rate increases in the United Kingdom in both<br />
homeowners and motor insurance. These did not, however,<br />
affect our reinsurance business, since for the most part we<br />
write the middle and higher layers of programmes and hence<br />
we had not been impacted by the disappointing results of the<br />
previous year.<br />
In the casualty sector we again benefited from our very good<br />
rating and were able to expand our portfolio. Although we<br />
maintain a small number of long-term participations, we generally<br />
pursue a strictly profit-oriented underwriting policy in<br />
the London market. Our premium volume grew appreciably in<br />
the year under review.<br />
Direct business<br />
Through two of our subsidiaries, International Insurance Company<br />
of <strong>Hannover</strong> Ltd. (Inter <strong>Hannover</strong>) in the United Kingdom<br />
and the South African company Compass Insurance Ltd.,<br />
a subsidiary of <strong>Hannover</strong> <strong>Re</strong> Africa, we write direct business<br />
that complements our principal business activity as a reinsurer.<br />
This essentially involves acceptances concentrated on<br />
tightly defined portfolios of niche or other non-standard business.<br />
Our expectation of increased premium growth for <strong>2010</strong> was<br />
fulfilled: we were able to substantially enlarge our premium<br />
volume in direct business. The stepping up of our involvement<br />
in professional indemnity lines in the UK, especially in connection<br />
with liability policies for the legal profession, was also<br />
a factor here. Nevertheless, our premium volume written in<br />
South Africa similarly increased in the year under review.<br />
30 Management report Non-life reinsurance<br />
<strong>Hannover</strong> <strong>Re</strong> Group annual report <strong>2010</strong>
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