German reinsurance firm Hannover Re and primary commercial specialists HDI Global SE are to join forces in search of growth in specialty lines under the banner of a new joint venture, HDI Global Specialty.
Both part of the Talanx group, Hannover Re and HDI Global already have expertise in the specialty lines arena, but with this joint venture are looking to leverage their combined ability to source and underwrite specialty lines insurance business.
The initiative will be focused on high growth and margin specialty business, underwriting agency and specialty business across lines including Errors & Omissions liability insurance, directors’ and officers’ (D&O) liability insurance, legal expenses insurance, sports and entertainment, aviation, offshore energy and animal insurance.
HDI Global SE is set to acquire the majority of the shares in International Insurance Company of Hannover SE (Inter Hannover), a subsidiary company of the reinsurance firm, paying around EUR 100 million, as the first step towards the joint venture.
Inter Hannover will then be renamed to HDI Global Specialty SE and HDI Global SE will transfer its specialty lines portfolio to the new company. HDI Global SE will hold 50.2% of the new entity, while Hannover Re will have 49.8% of the shares.
HDI Global Specialty will be launched with a premium volume of over EUR 1 billion and with a mandate to achieve substantial organic growth.
Given the growth opportunities and expectations, both companies involved in the JV expect earnings in the first year to far outstrip what would have been achievable as individual entities.
“This step strengthens our roots as an industrial insurer. The joint venture enables us to bring together the cross-business segment expertise we have in the area of specialty in one place within the Group and concentrate our know-how. This allows us to focus on particularly profitable and high-growth market segments. The move creates a company that has an outstanding position in the specialty market and enjoys excellent growth perspectives,” explained Torsten Leue, Chairman of the Board of Management of Talanx AG.
“We have a number of reasons for bringing together the agency and specialty primary insurance business of Inter Hannover in the joint venture. This strengthens the focus on our core business in accordance with our strategy of “Creating value through reinsurance”. At the same time, reinsuring the portfolio enables us to derive even more benefit from the growth opportunities available in specialty business. We can then make use of the capital that becomes available as a result to grow the business further,” added Ulrich Wallin, Chairman of the Executive Board of Hannover Re.
“The bundled know-how of the new joint venture will help us to expand our position in the specialty market. We are creating a very strong company in line with our strategy of profitable growth. It has a highly competent team with a focused profile and the company will be operating worldwide,” Dr Christian Hinsch, Chairman of the Board of Management of HDI Global SE stated. “The speciality business has attractive above-average margins and is growing faster every year than classic industrial business. This highlights the demand and we want to benefit from that. We will provide our customers and broker partners with even more comprehensive service based know-how.”
The new company, HDI Global Specialty SE, is expected to begin underwriting on a joint basis as of January 2019.
The move further signals the importance of being able to access primary sources of risk for the major reinsurers.
With competitors achieving growth in these specialty and commercial areas of the market through their corporate or commercial arms, Hannover Re is now putting in place a strategy that will position the new JV as a competitor to many of these efforts owned by other re/insurers.
As an owner of the specialty lines underwriter and with the ability to reinsure the portfolio as well, Hannover Re will be making the most of its capacity, extending the efficiency of its capital and earning a greater margin on this business at the same time.
