Hannover Re trims retro cover: K-cession ILS down after ‘strong’ payout

Hannover Re reduced its retrocession cover entering 2024, trimming the role for third party investors in its K-cessions program and letting a prior cat swap fade away while holding the more traditional elements of its program largely unchanged.  

"We were able to renew our structures on mostly an unchanged basis," Hannover Re’s chief for P&C reinsurance Sven Althoff (pictured) told a teleconference for equity market analysts. Retention points on the major non-proportional treaties were said to have held flat. 

Hannover Re cut its K-cessions ILS programme for third party investors by some 9% or €74 million to € 757 million following what it called “very good” payouts for investors in the prior year’s program. 

K-cession ILS was cut “given the fact that 2023 was a very good year for the investors behind the transaction,” Althoff said of the previously flagged move.  “Our payback situation was turning much more positive numbers for our retrocessional partners and therefore we could reduce some of that cession.” 

That reduction had followed a sizeable increase in the prior year program and cut the programme’s cession rate from in the 50’s for 2023 to the “higher 40’s” for 2024, Althoff indicated.  The cession rate remains above a longer-term average still nearer the 40% mark, he indicated. 

A cat swap was allowed to drop away, taking €100 million out of the would-be nat cat retro tower. Althoff called the prior deal “less strategic, more transactional” following the diversification needs of one pf the group’s cedents. Hannover Re claims it did not need the swap for its own risk management, so let the deal fade with the demand.  

Cyber quota share remains in the collateralized ILS retro program after a 2023 launch, albeit the program is down following declines in Hannover Re’s incoming cyber business.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.