For global reinsurance firm Hannover Re, the business of collateralized fronting, where the corporate fronts reinsurance cedents for ILS investors and funds, is seen as an important element of its business and an area of growth, executive Thorsten Steinmann said this week.
Speaking during a briefing held on the Baden Baden reinsurance meeting in Germany, Steinmann discussed innovation at Hannover Re, with its insurance-linked securities (ILS) activities one area of focus.
Thorsten Steinmann is the Member of the Hannover Re Executive Board for Property & Casualty and will likely be the CEO of German subsidiary E+S Rück from 2025.
The Baden Baden briefing was the primary time Steinmann has spoken on topics corresponding to Hannover Re’s role within the ILS market, having only joined the corporate earlier this 12 months.
He explained that he still thinks of ILS for instance of innovation, “because we are only such an enormous cat bond market and we’re a number one supplier for a lot of a few years on this cat bond space.”
“Last 12 months we now have done 10 cat bond transactions, where we supported our clients to undergo the capital market and this 12 months alone in the primary six months in 2024, we now have also structured 10 cat bonds in the primary six months of the 12 months, with a limit of around 3.4 billion,” he continued.
Moving on, Steinmann then spoke in regards to the fronting role Hannover Re plays within the ILS market.
He said, “One other area of innovation, is what I call collateralized fronting. We have now fronted 1,800 reinsurance contracts for 12 investors.”
Adding that, “We’re fronting so many deals for investors who need to get access to the nat cat space and to the capital market.
“The trend is rising. It’s an important element for us and from my perspective, ILS and collateralized fronting is growing.
“It’s a market which is here to remain and helps to proceed reducing the protection gap.”
As we reported before, Hannover Re reported that the quantity of collateral furnished by investors as security for potential reinsurance obligations from ILS transactions it had fronted had risen again within the first-half of 2024, as too had its activity in fronting for catastrophe bond sponsors.
It’s an increasingly essential area of the reinsurers’ business and one which will likely be driving a major source of fee income for the corporate, in addition to synergies with its own balance-sheet deployment.
Steinmann also spoke about parametric risk transfer, saying that while it remains to be a “super small business” it’s a vital and growing one.
“One other example of innovation is parametric solutions,” he said. “It remains to be a distinct segment product nevertheless it’s growing.
“We’re doing deals with our clients. We’re doing deals with NGOs, with public private partnerships with public partners, etc, and the variety of deals that we will do on this space is significantly going up, and all this will even help us to narrow down the protection gap, all the time together with traditional reinsurance, in fact.”