Hannover Re taps capital market to generate capacity

Hannover Re is once again drawing on the capital market to obtain underwriting capacity for catastrophe risks, boosting the volume of last year’s “K5” risk securitisation to US$520 million.
The reinsurer’s latest transaction was placed with institutional investors in North America, Europe and Japan.
Both new and existing investors provided the capital, which has been increased by US$106 million. Existing investors primarily used the opportunity to reinvest their profits from the previous year.
The envisaged term of the transaction is until Dec. 31, 2008.
In addition to this form of risk transfer to the capital market, Hannover Re has extended its traditional protection covers used to protect against peak exposures such as natural catastrophes. In the future, therefore, there will be no need to make use of structured covers, the company announced online.
“With these latest transactions, we have made our portfolio even more weather-proof,” CEO Wilhelm Zeller said in a press release. “We are optimally placed to benefit from the further profitable market opportunities that will open up in worldwide catastrophe business going forward.”
The portfolio assembled for the “K5” securitisation consists of non-proportional treaties for property catastrophe, aviation and marine (including offshore) reinsurance. Altogether, around 42% of this business is passed on to the investors.
Since 1994, Hannover Re has successfully placed 13 such securitisations in total.