A first for Hannover Re: $100m+ Bermuda property sidecar

Hannover Re’s Bermuda property sidecar, first used at the 1/1 renewals this year, was valued in the “lower three-digit millions”, Hannover Re P&C board member Silke Sehm said, commenting that he was pleased it had gained investor traction despite abundant market capacity.

“In a world where we had significant oversupply on the natural capacity business globally, we are very pleased to report that we could write the business plan, so we could deploy the capital that was given to us,” he said.

More broadly, Hannover Re sponsored $3.4 billion of catastrophe bonds last year and has launched a further $2.3 billion this year, completing eight transactions.

Althoff said US casualty was still feeling the after-effects of the Covid pandemic, which has disrupted loss projections: “We obviously have the Covid break, and that is distorting the triangles.”

Althoff remained cautious on US casualty despite rates starting to increase, driven by long-term loss trends. The class accounts for 8–10% of Hannover Re’s book, but the reinsurer does not believe “there are any levels of excess profitability at this stage”, he said.

Early data from more recent US casualty years also points to greater loss frequency than Hannover Re originally expected.

“We cannot afford as an industry that we drop below the long-term loss trends,” Althoff warned.

There is nothing yet, however, to indicate Hannover Re needs to move into cycle management, he stressed.

Heading into renewals, most of Hannover Re’s portfolio remains well priced despite rate softening, with intact retention levels and stable terms and conditions.

Losses so far this year have been relatively normal, including its exposure to the Middle East conflict. Hannover Re has set aside $200 million in reserves for shipping damage, but has yet to earmark reserves for “blocking and trapping” losses from vessels caught in the Strait of Hormuz.

With natural catastrophe losses largely driven by lower-cost, higher-frequency events, Althoff expects additional reinsurance supply at 1/1, putting further pressure on pricing.

Summing up, Hannover Re CEO Clemens Jungsthöfel said: “We live in a more complex world, but we still see opportunity for profitable growth. You always invent a new peril with each innovation…”

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