Hannover Rück SE has secured by subordinated guarantee the subordinated debts issued by Hannover Finance (Luxembourg) S.A. in the 2010 and 2012 financial years in amounts of EUR 500.0 million each.
The guarantees given by Hannover Rück SE for the subordinated debts attach if the issuer fails to render payments due under the bonds. The guarantees cover the relevant bond volumes as well as interest due until the repayment dates. Given the fact that interest on the bonds is partly dependent on the capital market rates applicable at the interest payment dates (floating rates), the maximum undiscounted amounts that can be called cannot be estimated with sufficient accuracy. Hannover Rück SE does not have any rights of recourse outside the Group with respect to the guarantee payments.
As security for technical liabilities to our US clients, we have established two trust accounts (master trust and supplemental trust) in the United States. They amounted to EUR 3,850.7 million (EUR 3,511.5 million) and EUR 45.6 million (EUR 27.2 million) respectively as at the balance sheet date. The securities held in the trust accounts are shown as available-for-sale investments. In addition, we furnished further collateral to ceding companies in an amount of EUR 1,857.5 million (EUR 1,810.3 million) in the form of so-called “single trust funds”. This amount includes a sum equivalent to EUR 1,328.7 million (EUR 1,281.2 million) which was furnished by investors as security for potential reinsurance obligations from ILS transactions.
As part of our business activities we hold collateral available outside the United States in various blocked custody accounts and trust accounts, the total amount of which in relation to the Group’s major companies was EUR 2,954.6 million (EUR 2,775.8 million) as at the balance sheet date.
The securities held in the blocked custody accounts and trust accounts are recognised predominantly as available-for-sale investments.
Letter of credit (LoC) facilities existed with a number of financial institutions as at the balance sheet date. A syndicated letter of credit facility taken out in 2011 with a volume of nominally USD 1.0 billion originally had a term maturing at the beginning of 2019. It was terminated in January 2016 and partially refinanced through bilateral credit facilities.
Letter of credit facilities with various terms (maturing at the latest in 2021) and a total volume equivalent to EUR 2,826.0 million (EUR 2,764.4 million) exist on a bilateral basis with financial institutions.
As security for our technical liabilities, various financial institutions have furnished sureties for our company in the form of letters of credit. The total amount as at the balance sheet date was EUR 1,343.7 million (EUR 1,335.2 million). In a departure from the previous year, this figure does not include letters of credit furnished in favour of Group companies in an amount of EUR 996.3 million (EUR 1,729.4 million).
A number of LoC facilities include standard market contractual clauses that allow the banks rights of cancellation in the event of material changes in our shareholding structure or trigger a requirement on the part of Hannover Re to furnish collateral upon materialisation of major events, for example if our rating is significantly downgraded. Please see also our explanatory remarks in the “Financial position” section of the management report, on the information pursuant to § 315 Para. 4 German Commercial Code (HGB).
We put up own investments with a book value of EUR 49.8 million (EUR 57.9 million) as collateral for existing derivative transactions. We received collateral with a fair value of EUR 17.7 million (EUR 6.9 million) for existing derivative transactions.
As security for liabilities in connection with participating interests in real estate companies and real estate transactions the usual collateral under such transactions has been furnished to various banks, the amount of which totalled EUR 594.4 million (EUR 592.7 million) as at the balance sheet date.
Outstanding capital commitments with respect to alternative investments exist on the part of the Group in an amount of EUR 1,096.4 million (EUR 837.1 million). These primarily involve as yet unfulfilled payment obligations from investment commitments given to private equity funds and venture capital firms.
Group companies are members of the association for the reinsurance of pharmaceutical risks and several atomic and nuclear pools. The failure of one of the other pool members to meet its liabilities would result in an additional call according to the quota participation.
The application of tax regulations may not have been resolved at the time when tax items are brought to account. The calculation of tax refund claims and tax liabilities is based on what we consider to be the regulations most likely to be applied in each case. The revenue authorities may, however, take a differing view, as a consequence of which additional tax liabilities could arise in the future.
Hannover Re enters into contingent liabilities as part of its normal business operations. A number of reinsurance treaties concluded by Group companies with outside third parties include letters of comfort, guarantees or novation agreements under which Hannover Rück SE guarantees the liabilities of the subsidiary in question or enters into the rights and obligations of the subsidiary under the treaties if particular constellations materialise.