Hannover Re benefited from a further recovery under its long-term capital markets helped by a change in mortality in the first half of 2022, with financial gains from retro hedges reaching EUR 88 million by the end of the period.
Hannover Re has set mortality rates in capital markets for nearly a decade, a strategy that recently paid off when reinsurers’ COVID-19 pandemic losses caused their mortality rates to rise and trigger a recovery under these arrangements.
Hannover Re reported for the first time the profit from the capital markets that contributed to the excess mortality after 2021, when it booked EUR 43.9 million, which is recognized by assets measured at fair value due to profit or loss in businesses in the life and health sector. . his business.
Then, after the first quarter of 2022, Hannover Re revealed another return under the Investor the capitalist market contributed to the exchange of mortality, while the mortality rate rises significantly (from 112% to 114%) and drives another profit of EUR 46 million that was reported. Below is his lifestyle and health spending in Q1 2022.
Profits from dead swaps continue to flow, with another return under major retro markets in the second quarter of 2022, it seems.
The company also explained that the loss of COVID continues to affect its life and health restoration business, “The epidemic led to a large amount of money, especially in the killing of people. As we expected, however, this was less due to the milder strains of the virus. Overall, Hannover Re suffered losses due to EUR 194 million (EUR 263 million) in the first six months. Of this total, EUR 72 million came from the second quarter.
However, the mortality hedge continues to generate gains, helping Hannover Re reduce its exposure to the pandemic’s death toll.
“Hannover Re obtained EUR 88 million from its death cover, the components of which Hannover Re has placed on the capital market regularly since 2013. These were kept with funds known for their good value in relation to life and health. ,” the insurer explained.
In the same way, the strong retro program of Hannover Re appeared again in its life with the health business through the first half, when the company posted this positive amount of EUR 88 million related to the retro recovery against its dead cover, whose components have had the effect nice. it has been listed on the stock market regularly since 2013.
It is possible that some ILS funds dedicated to life insurance risks may be about to share this, as we understand that the long-term hedge of capital markets is very supportive of the market.
Commenting on the benefits of this risk hedge, CEO of Hannover Re Jean-Jacques Henchoz said, “Given the high mortality rate of the Covid-19 pandemic, we have been supported by the mortality cover we had. Similarly, it was taken years ago as a bit of protection against events such.
“This smart way of managing the risks we have created for ourselves is what we also offer our clients.”
Hannover Re’s variable death cover is a hedge against the number of deaths, so it covers an event related to epidemics, natural disasters or an event such as a terrorist attack.
This mortality risk exchange is set against a weighted combination of US, UK and Australian mortality, with corresponding premiums when the mortality rate reaches 110%, up to 120% when protection ends.
The death index reached 114% at the end of Q1 2022, so we have to stand above it, maybe around 116% we can estimate, which means that there are some benefits to be gained from the retro death cover, if the claims of COVID can rise again in Hannover. Continue throughout the year.
At the end of the first half of 2022, the proceeds from this death swap were retained by Hannover Re with a fair value of EUR 127.6 million, with EUR 88.4 million retained during the 2022 financial year to date.
Hannover Re’s use of capital markets for high-risk hedging has paid off during the pandemic and is a good example of capital markets helping to transfer risks that play a vital role in restoring operations to a large global company.