Log in
E-mail
Password
Remember
Forgot password ?
Become a member for free
Sign up
Sign up
Settings
Settings
Dynamic quotes 
OFFON

4-Traders Homepage  >  Equities  >  Xetra  >  Hannover Rückversicherung    HNR1   DE0008402215

SummaryQuotesChartsNewsAnalysisCalendarCompanyFinancialsConsensusRevisions 
News SummaryMost relevantAll newsSector newsTweets

Reinsurers design tailored deals in search of higher returns

share with twitter share with LinkedIn share with facebook
share via e-mail
0
03/20/2017 | 07:03am CET
The logo of Swiss insurer Swiss Re is seen in front of its headquarters in Zurich

Reinsurer Swiss Re (>> Swiss Re AG), usually involved in mega-deals on natural disaster coverage, is branching out on its own to do individually tailored schemes to boost returns, such as one in China to protect farmers against floods or drought.

Reinsurer Swiss Re (>> Swiss Re AG), usually involved in mega-deals on natural disaster coverage, is branching out on its own to do individually tailored schemes to boost returns, such as one in China to protect farmers against floods or drought.

This tailor-made approach is part of Swiss Re's response to fierce competition in the reinsurance industry, where companies are being forced to find new ways to make money as their traditional model of clubbing together to backstop risks generates increasingly slim returns.

"We feel very strongly that our ability to figure out solutions to the problems that our clients have means they will give us opportunities," the head of Swiss Re's core reinsurance business, Moses Ojeisekhoba, told Reuters in an interview.

Reinsurers usually pool resources in syndicates to underwrite the risk taken on by front-line insurers. But low interest rates and competition from a host of so-called "alternative providers" such as pension funds has eaten into their profits.

Up to 20 percent of the reinsurance market is now occupied by alternative providers, insurance industry experts estimate, a trend that began to take off in the years following the 2008 financial crisis.

Insurance rating agency A.M. Best has estimated $75 billion in alternative - or so-called "convergence" - capital entered the business in 2016.

This has put pressure on the market. Industry prices for the traditional property and casualty (P&C) business, for example, fell again in January, the important policy renewals season, albeit at a slower rate than in the past few years.

To combat the difficult climate, Swiss Re, the industry's number two, has pioneered the concept of tailor-made reinsurance, negotiating on its own with insurers to offer bespoke deals.

Last year, for example, it set up deals with local Chinese insurers and provincial government to reinsure parts of two provinces against natural disaster risks. The schemes - which included China's first anti-poverty insurance deal to protect farmers against flooding and drought - use a combination of satellite and weather data to trigger payouts of up to roughly $350 million in each province.

Swiss Re devised the pilot schemes and acted as sole reinsurer, rather than working in a syndicate to spread the risks.

COMPETITION

But this specialised business is facing competition from rivals such as Munich Re (>> Muenchener Rckvrsrngs Gsllschft Mnchn AG), Hannover Re (>> Hannover Rueck SE) and Scor (>> SCOR SE).

"There are more people coming into this space," Ojeisekhoba said.

Munich Re has emphasised tailor-made products in niche areas such as aerospace and cyber risk. It has also said it would step up investment into so-called "insurtech" start-ups like app provider Wrisk, which offers insurance via smart phones. Munich Re said this would help it to offer more customised products.

Large, tailored transactions drove Munich Re's P&C premium growth in 2016, representing 23 percent of just under 18 billion euros ($19.36 billion) in the P&C division's gross written premiums, the German company said in annual results earlier this month.

But Ojeisekhoba, who took over Swiss Re's reinsurance business last July, said the tailored business was set to keep growing this year despite the competitive pressures.

Reinsurers are also using bespoke deals to help insurance companies to manage tougher capital requirements under Europe's new Solvency II regime. These deals allow the insurers to free up capital they must hold under the new rules to buffer against unexpected claims and financial losses.

Demand for Hannover Re's bespoke offerings, particularly capital relief, helped the group to book 7 percent premiums growth in January.

Swiss Re does not break out figures for the amount of so-called large and tailored business it writes, but has said recent premiums growth was driven by such transactions.

The reinsurer has committed $250 million in annual R&D spending to develop advanced risk models that help it to estimate risks ranging from the potential cost of heavy rainfall in Malaysia through to predicting what might become the industry's next 'asbestos'.

These modelling tools also enable Swiss Re to construct specialised deals to help a customer estimate exposure and locate new risks, protect against earnings volatility and free up capital to pay dividends or buy back shares.

"It's not something you simply take off the shelf and apply to a particular situation," Ojeisekhoba said.

"You require deep skill sets. You require strong balance sheets. You require relationships and knowledge of the counterparty's portfolio and their financials, and you clearly require an unambiguous understanding of the regulatory regimes."

But with little disclosure from the reinsurers on how they define bespoke business, Mediobanca analyst Vinit Malhotra said it was hard to assess how it will help to shore up individual players' profitability.

Some relief may come from an inevitable uptick in standard business as prices drop below profitable levels. "I think we are not that far away from the bottom. Nobody wants to push their luck that much," Malhotra said.

(Additional reporting by Carolyn Cohn in London. Editing by Jane Merriman)

By Brenna Hughes Neghaiwi and Paul Arnold

share with twitter share with LinkedIn share with facebook
share via e-mail
0
Latest news on HANNOVER RÜCKVERSICHERUNG
12/08DJInsurance Australia Inks Quota-Share Deals with Three Reinsurers
11/10 HANNOVER RÜCKVERSICHERUNG : Re records Group net income of 549 million euros in ..
11/08 HANNOVER RÜCKVERSICHERUNG : Re records solid Group net income despite substantia..
11/03HANNOVER RUECK SE : quaterly earnings release
10/26 HANNOVER RÜCK SE : Preliminary announcement of the publication of quarterly repo..
10/23 HANNOVER RÜCKVERSICHERUNG : Re subsidiary expects modest premium growth in the G..
09/29 HANNOVER RÜCKVERSICHERUNG : German insurer Talanx to miss 2017 earnings goal aft..
09/29 Beazley expects $150 million hit to profits from hurricanes, Mexican earthqua..
09/21 PUBLICATION OF AN AD HOC DISCLOSURE : Hannover Re expects its large loss budget..
09/21 HANNOVER RÜCK SE : Hannover Re expects its large loss budget to be exceeded
More news
News from SeekingAlpha
12/15 Reinsurance Renewal Rates To Trail Expectations At January 2018
12/13 ALTERNATIVE CAPITAL WILL MAINTAIN IN : Fitch
12/07 FEMA To Collect On NFIP Reinsurance, Expects Full $1.024bn
12/07 ILS Funds Average 0.35% In October, 10 ILS Funds Have Negative Month
12/07 THIRD-PARTY CAPITAL WILLING TO RELOA : Morgan Stanley
Financials (€)
Sales 2017 17 333 M
EBIT 2017 1 156 M
Net income 2017 794 M
Debt 2017 -
Yield 2017 4,50%
P/E ratio 2017 15,82
P/E ratio 2018 11,90
Capi. / Sales 2017 0,75x
Capi. / Sales 2018 0,72x
Capitalization 12 928 M
Chart HANNOVER RÜCKVERSICHERUNG
Duration : Period :
Hannover Rückversicherung Technical Analysis Chart | HNR1 | DE0008402215 | 4-Traders
Technical analysis trends HANNOVER RÜCKVERSICHERUNG
Short TermMid-TermLong Term
TrendsBearishBullishNeutral
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus HOLD
Number of Analysts 28
Average target price 109 €
Spread / Average Target 2,0%
EPS Revisions
Managers
NameTitle
Ulrich Wallin Chief Executive Officer
Herbert K. Haas Chairman-Supervisory Board
Roland Helmut Vogel Chief Financial Officer
Wolf-Dieter Baumgartl Member-Supervisory Board
Otto Müller Member-Supervisory Board
Sector and Competitors