Just a week ago, German reinsurer Hannover Re completed their latest catastrophe bond transaction, Eurus III Ltd. Hannover Re have been a regular issuer of cat bonds and have also used the capital markets for a number of other insurance securitization transactions, including life securitization in the past. So they are not a newcomer to the sector and this latest transaction replaced some of the cover from their recently matured Eurus II deal.
Eurus III secured Hannover Re a €100m of European windstorm retrocessional reinsurance for three named subsidiaries of the Hannover Re group; Hannover Rückversicherung AG, E+S Rückversicherung AG and Hannover Re (Bermuda) Ltd. The risk period runs from the end of September 2012 to the end of March 2016, so giving Hannover Re a fully collateralized source of cover for four windstorm seasons in Europe. Protection is on a per-occurrence basis and the cat bond features an industry loss trigger based on a PERILS index of loss estimates.
We reached out to Hannover Re for a statement. A spokeswoman told us that with Eurus III Hannover Re pursues its strategy to use, besides the traditional reinsurance markets, also the capital markets to transfer catastrophe risks. “The transaction enhances the diversification of our retrocession program”, the spokeswoman told us. “Eurus III also strengthens our risk management and protects our capital against severe windstorm events in various European countries over the next four storm seasons.” The spokeswoman also told us that the cat bond had been placed with institutional investors in both Europe and North America.
So Hannover Re appreciate the diversity that issuing cat bonds brings to their retro coverage. As long as conditions are right we expect Hannover Re to continue to pursue this strategy of seeking out retro from both traditional and non-traditional sources in the future.
You can read more details about Eurus III, and almost every other cat bond or ILS transaction, in our Deal Directory.
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