Hannover Re placed a facultative risk portfolio as part of its extended Insurance-Linked Securities (ILS) activities.
Fac Pool Re is the second transaction to be completed by the ILS unit, which Hannover Re set up at the beginning of 2008.
In the transaction, worldwide individual risks of selected clients are pooled and transferred as a program to the capital market. Hannover Re's interest here is not in protecting its own portfolio, but rather in transferring the business of its clients directly to the capital market.
"With this type of pooling and transformer role we enable cedants to access the capital market for risks that would not otherwise lend themselves to this purpose on a stand-alone basis", Chief Executive Officer Ulrich Wallin said. "We make reinsurance capacity available and give investors an opportunity to share in the currently prevailing attractive market conditions.”
The contracts mediated by the reinsurance intermediary Aon Benfield are written by Hannover Re and placed in the capital markets in conjunction with Execution Ltd.
The Fac Pool Re transaction consists of a quota share cession and two risk tranches. The total amount of capital provided stands at $60 million, with Hannover Re keeping a share of approximately $5 million and additionally assuming losses that exceed the capacity of Fac Pool Re. The term of the transaction is two and a half years.