HANNOVER RE TRANSFERS FAC RISKS TO CAPITAL MARKETS

German reinsurer Hannover Re has introduced a new concept to the alternative risk transfer market, creating Fac Pool Re. With $60m in capital, Fac Pool Re is the first attempt by a reinsurer to securitize a pool of clients’ facultative business. The deal will run for two and a half years. Hannover Re will keep a $5m share of the $60m and will also assume any losses above the capacity of the new sidecar. The contracts were transferred to the capital markets by Aon Benfield and Execution Ltd. Hannover Re CEO Ulrich Wallin said that “we make reinsurance capacity available and give investors an opportunity to share in the currently prevailing attractive market conditions”. Aon Benfield Fac CEO Elliot Richardson said that “Fac Pool Re is a world first, and its success will give both clients and investors confidence, and pave the way for further transactions of this type”. He said that the programme was only accessible to Aon Benfield clients. Execution Insurance Products was the lead distributor, placing the business with “A number of international investment institutions”. Neil Strong, Head of Insurance Products at Execution Ltd, said that “Hannover Re’s transaction has been structured to include a wide range of property risks, from a number of different regions, with a reduced catastrophe element”. He noted that the deal offered investors “both an interest in a sector currently enjoying high rates and the portfolio benefits of widely diversified, identified set of risks. Institutions have found this an attractive proposition”.