HANNOVER, Germany, Feb. 26, 2007 (PRIME NEWSWIRE) -- Following successful securitisations in property/casualty and life/health reinsurance business, Hannover Re has now for the first time transferred the risks deriving from so-called "reinsurance recoverables" to the capital market.
Reinsurance recoverables, in other words outstanding claims held by reinsurers against their retrocessionaires, traditionally constitute a substantial item on Hannover Re's balance sheet -- both in relation to its competitors and the company's shareholders' equity. These recoverables are of a high credit quality and their level per company has always been strictly limited. Nevertheless they adversely affect the assessment of the Group's solvency by rating agencies, primary insurers and brokers. Therefore monitoring these balances forms an integral part of internal risk management.
With the present securitisation Hannover Re is substantially reducing the default risk associated with reinsurance recoverables. "We assume that the rating agencies of relevance to our industry, will consider this transaction -- in quantitative and qualitative respects -- positively," Chief Executive Officer Wilhelm Zeller emphasised: "With this transaction Hannover Re has effectively immunised itself against a potential credit risk."
The underlying portfolio has a nominal value of EUR 1 billion; it is comprised of exposures to insurers and reinsurers that are classified according to risk classes. The securities issued as collateral through a special purpose entity are split -- in accordance with Standard & Poor's rating categories -- into four tranches "AAA," "AA," "A" and "BBB." A payment to Hannover Re -- after allowance for its deductible -- is triggered by the insolvency of a retrocessionaire.
Since as long ago as 1994 Hannover Re has played a pioneering role in the securitisation of risks for the capital market. This latest example marks another innovation inasmuch as it involves a fully secured synthetic CDO structure applied for the first time to a portfolio of credit risks associated with insurance and reinsurance enterprises.
Hannover Re, with a gross premium of approximately EUR 10 billion, is one of the leading reinsurance groups in the world. It transacts all lines of property/casualty, life/health and financial reinsurance as well as specialty insurance. It maintains business relations with more than 5,000 insurance companies in about 150 countries. Its worldwide network consists of more than 100 subsidiaries, branch and representative offices in around 20 countries with a total staff of roughly 2,000. The rating agencies most relevant to the insurance industry have awarded Hannover Re very strong insurer financial strength ratings (Standard & Poor's AA- "Very Strong" and A.M. Best A "Excellent").
Disclaimer:
Some of the statements in this press release may be forward-looking statements or statements of future expectations based on currently available information. Such statements are naturally subject to risks and uncertainties. Factors such as the development of general economic conditions, future market conditions, unusual catastrophic loss events, changes in the capital markets and other circumstances may cause the actual events or results to be materially different from those anticipated by such statements. Hannover Re does not make any representation or warranty, express or implied, as to the accuracy, completeness or updated status of such statements. Therefore, in no case whatsoever will Hannover Re and its affiliate companies be liable to anyone for any decision made or action taken in conjunction with the information and/or statements in this press release or for any related damages.