With the recent completion of its fifth catastrophe bond transaction, Hannover Re has helped its clients to secure more than US $1.5 billion of reinsurance capacity from the capital markets over 2018.
The company’s latest transaction was a $125 million cat bond covering San Diego-based energy infrastructure company Sempra Energy against third-party liability from wildfires.
By the end of this year, the Hannover Re expects the market for insurance-linked securities (ILS) to reach a total volume of close to $100 billion, up to two thirds of which will come from collateralised reinsurance.
“This year, we have once again provided protection for our clients against a multitude of risks,” said Henning Ludolphs, Managing Director for retrocession and capital markets at Hannover Re.
“The variety of cedants and risks as well as the record number of issuances underscores our ability to close insurance-linked securities transactions successfully,” he continued.
Hannover Re’s biggest transaction this year was the $500 million FloodSmart Re 2018-1 cat bond that provided protection for the Federal Emergency Management Agency (FEMA) against the risk of flooding resulting from a named storm.
Earlier in the year, the company also helped cover the Texas Windstorm Insurance Association and American Integrity Insurance Company of Florida, Inc. against named storms and severe thunderstorms through a $400 million cat bond and $79 million cat bond, respectively.
Additionally, Hannover Re transformed $400 million of California and Pacific Northwest earthquake risk for Oak Tree Assurance, Ltd.
“With this year’s issuances, we have been able to maintain existing partnerships and attract new clients,” said Jürgen Gräber, Hannover Re’s executive board member responsible for the coordination of property and casualty reinsurance and ILS.
“Through our activities in the insurance-linked securities market, we are able to generate margins that are both low-risk and attractive.”
Ludolphs added: “Collateralised reinsurance will continue to grow strongly. For investor and cedants, collateralised reinsurance is attractive because of its broader range of risks and simpler structure. Collateralised reinsurance has become a success story in itself and we remain strongly committed to it.”
Hannover Re placed the world’s first risk securitisation in 1994 through its KOVER transaction and has become one of the top three fronting companies in the collateralised reinsurance market over recent years.
GC Securities, a division of MMC Securities LLC, served as the sole structurer and bookrunner for all of Hannover Re’s transactions, with Aon Securities acting as joint bookrunner on the FEMA cat bond.
