Annual Report 2010 - Hannover Re

Utilisation of the trigger system in %
190
170
150
130
110
90
70
50
Q1 2010 Q2 2010 Q3 2010 Q4 2010
Utilisation by Hannover Re Warning level 1 Warning level 2 Warning level 3
The model takes into account the following market risk factors:
• interest rate risk,
• credit spread risk,
• systematic equity risk,
• specific equity risk,
• commodity risk,
• option-specific risk.
As part of ongoing refinements, we optimised our VaR calculation
halfway through the reporting period, thereby enabling
us to make more precise allowance for certain scenarios from
market price risks associated with credit spreads. The values
for the period prior to this recalibration were adjusted accordingly
in the graph. In general terms, the market price risks
continued to decrease in the year under review as a consequence
of reduced volatility, and despite the move back into
equities the Value at Risk in relation to the portfolio of investments
under own management decreased year-on-year to
around 0.7% as at the balance sheet date.
Stress tests are conducted in order to be able to map extreme
scenarios as well as normal market scenarios for the purpose
of calculating the Value at Risk. In this context, the loss potentials
for fair values and shareholders’ equity (before tax) are
simulated on the basis of already occurred or notional extreme
Value at Risk 1 for the investment portfolio of the Hannover Re Group in %
1.10
1.00
0.90
0.80
0.70
Q1 2010 Q2 2010 Q3 2010 Q4 2010
1 VaR upper limit according to Hannover Re‘s investment guidelines: 1.5%
64 Management report opportunity and risk report
Hannover Re Group annual report 2010