Hannover Re seeks investors for its ILS fund
Hannover Re is seeking third party investors to partner with on its internal fund that invests in insurance-linked securities (ILS), Henning Ludolphs, managing director, retrocessions and the capital markets at Hannover Re, told Monte Carlo Today.
Leine Investment, formed in 2012, has about $100 million invested in ILS although the reinsurer has the capability to increase this to $150 million should it see the right opportunities.
In making the fund available to third party investors who would invest alongside Hannover Re, Ludolphs said the reinsurer will take fee income from managing the portfolio, although he stressed the reinsurer was in no rush to increase the size and scope of the fund.
He explained that the ILS investment activities were launched predominantly because Hannover Re wants to be able to take advantage of ways other than reinsurance to assume risk and finds it helpful to be close to the ILS market on the investment side, in terms of seeing how other bonds price and perform in the market.
He said that growth in ILS market has slowed in recent months, partly because returns have dropped to the point that some investors are holding back from investing in the space.
“Prices have dropped and investors seems to have funds ready on the sidelines but are holding back because prices are not as good as they were,” Ludolphs said.
“Transactions are still profitable but less so than in the past.”
Ludolphs is also responsible for the part of Hannover Re’s business that acts as a transformer on collateralised reinsurance whereby investors want to reinsure specific transactions or portfolios.
“Investors want to act as reinsurers and we act as a facilitator for that,” he said. “Some need a transformer in the middle of a transaction for regulatory reasons, others because ceding companies like a highly rated reinsurer to be involved.
“Others need us for leverage or ease of administration simply because only one trust account has to be negotiated rather than many if transactions shall be entered into with different ceding companies.”
