Global catastrophe business

The bulk of Hannover Re's catastrophe business is written out of Bermuda, which is considered the centre of competence for this line worldwide. Along with the expertise of our local team, our financial strength and excellent rating have made us a particularly highly sought-after partner for ceding companies and brokers for a number of years.

The strategy guiding our global catastrophe business in the year under review was to reduce peak risks and assume exposures in smaller markets as well as in regions where the risks are not as great. We successfully accomplished this goal.

We were broadly satisfied with the treaty renewals as at 1 January 2009. Price increases were obtained in many markets. Rates in Europe rose by an average of 5% to 7.5%. Business that had suffered losses in 2008, such as in the United States, recorded rate increases sometimes running into double-digit percentages.

The movement of the yen was one of the major factors shaping the situation on the Japanese market. Many reinsurers responded to its resurgence by scaling back their involvement there, as a consequence of which reduced capacities ultimately pushed rates higher. For the purposes of our own risk management we too substantially scaled back our peak exposures in Japan.

Although reinsurance capacities for catastrophe covers were scarce in the United States, they were certainly adequate. The rate increases obtained in Florida – one of the largest markets for catastrophe business – nevertheless fell short of expectations. We therefore reduced our peak exposures in this region too. Appreciable rate increases were possible in the rest of the US under programmes that had been impacted by loss events such as hurricane “Ike” or other natural disasters.

While the major loss picture in global catastrophe business was moderate in the year under review in terms of loss expenditure, there were again numerous human tragedies. In January the European winter storm “Klaus” left our company with a net loss burden of EUR 33.8 million. The devastating bush fires in Australia cost almost 200 people their lives. Hannover Re incurred loss expenditure of EUR 34.7 million in this regard. In April the Italian region of Abruzzo was struck by a severe earthquake. The medieval city of L'Aquila was almost entirely destroyed, and many residents perished. The cost of this event to our company was EUR 11.2 million. Hurricane events were the exception in the year under review and had no bearing on our technical account.

We slightly reduced our premium volume for global catastrophe business.