Hannover Re's fifth cat bond transaction raises total issuance for clients to USD 1.5 billion in 2018
"This year, we have once again provided protection for our clients against a multitude of risks," said Henning LUDOLPHS, managing director of 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."
The company's biggest transaction this year was a USD 500 million cat bond providing protection for the Federal Emergency Management Agency (FEMA) for floods in the 50 US states, the District of Columbia, Puerto Rico, and the US Virgin Islands resulting directly or indirectly from a named storm. The transaction marked the first time FEMA transferred risks to investors through a cat bond.
Hannover Re's latest transaction was a USD 125 million cat bond covering San Diego-based energy infrastructure company Sempra Energy against third-party liability from wildfires.
Earlier this year, Hannover Re completed three further transactions for existing clients. It helped cover the Texas Windstorm Insurance Association against named storms and severe thunderstorms through a USD 400 million cat bond and the American Integrity Insurance Company of Florida, Inc. against named storms and severe thunderstorms through a USD 79 million cat bond. In addition, Hannover Re has transformed USD 400 million of California and Pacific Northwest earthquake risk for Oak Tree Assurance, Ltd.
GC Securities, a division of MMC Securities LLC, served as the sole structurer and sole bookrunner for all transactions except the FEMA cat bond. In this case, GC Securities was the sole structurer and acted as a joint bookrunner with Aon Securities.
"With this year's issuances, we have been able to maintain existing partnerships and attract new clients," said Jurgen GRAEBER, Hannover Re's executive board member responsible for coordination of property and casualty reinsurance and insurance-linked securities. "Through our activities in the insurance-linked securities market, we are able to generate margins that are both low-risk and attractive."
ILS market volume to reach record USD 100 billion in 2018
By the end of this year Hannover Re expects the market for insurance-linked securities (ILS) to reach a total volume of close to USD 100 billion. As much as two thirds of that amount will come from collateralized reinsurance, which consists of private contracts between cedants and investors that are backed by collateral held in trusts. Reinsurers such as Hannover Re front some of these dealings.
"Collateralized reinsurance will continue to grow strongly," Henning LUDOLPHS said. "For investors and cedants, collateralized reinsurance is attractive because of its broader range of risks and simpler structure. Collateralized reinsurance has become a success story in itself, and we remain strongly committed to it."
Hannover Re has established itself as one of the top three fronting companies in the collateralized reinsurance market over recent years. It placed the world's first risk securitization in 1994 through its KOVER deal, making it the longest-serving partner in the transfer of insurance risks to capital markets.