Opportunity report
Speed is one of the qualities used to measure a successful knowledge transfer. Quick solutions and staying one step ahead of the competition is the name of the game. Hannover Re searches systematically for new business opportunities in order to generate sustainable growth and strengthen the company’s profitable development. With a view to identifying opportunities and successfully translating ideas into business, Hannover Re adopts a number of closely related approaches in order to achieve holistic opportunity and risk management. Of significance here is the interplay without overlaps of the various functions within opportunity and risk management, which is ensured by defined interfaces.
Key elements in Hannover Re’s opportunity management include its various market-specific innovations in the Life & Health and Property & Casualty reinsurance business groups (see Forecast). What is more, innovative and creative ideas are generated by our employees. If they can be successfully translated into additional profitable premium volume, such ideas are financially rewarded. Further elements are the working group on “Emerging Risks and Scientific Affairs” and the “Future Radar” initiative. Not only that, Hannover Re has set up a stand-alone organisational unit for “Opportunity Management”. This service unit deals exclusively and systematically with ideas and opportunities and it concentrates its activities on generating additional premium volume with profit potential. To this end, ideas are translated into business opportunities and business models with the backing of project teams, and these are then acted upon in cooperation with primary insurance partners. Such business approaches are subsequently evaluated and fleshed out more concretely by the “Opportunity Management” service unit. This unit also supports selected projects from the conceptual design of holistic business models right through to operational implementation or handover to line responsibility. The goal is to generate new business and thereby sustainably promote Hannover Re’s profitable growth. Several initiatives and projects have grown out of some 100 ideas contributed by the global network since the unit was set up. As part of an attractive employee incentive scheme, a number of projects have been financially rewarded – including the opportunity management projects “Weather” and “Energy Savings Protect”:
Opportunity management project “Weather”
The goal was to offer a heavily weather-dependent clientele industry-specific solutions to protect against fluctuations in the weather. The interest shown by businesses in this product has grown sharply of late on account of greater variability in weather conditions and the higher profile of the product. It has taken on special relevance for wind farms due to the turnaround in German energy policy.
Opportunity management project “Energy Savings Protect”
This project was tasked with developing covers for so-called energy-savings warranties in Germany. This insurance solution enables providers of energy efficiency solutions to take out protection in the event that the promised energy savings fail to materialise. In this case the company in question receives a compensatory payment from the primary insurer. For its part, Hannover Re covers the energy saving warranties of its primary insurance clients. By building trust, the greater planning reliability created by the product makes it possible for many activities needed as part of Germany’s turnaround in energy policy to be undertaken in the first place. Based on its considerable success, reflected not only in the rewarding of those behind the product but also in its singling out for an innovation award, this product is now available Europe-wide and is being modified for other fields of application.
Since as long ago as 2010 the stand-alone service unit “Opportunity Management” has been assigned to the Chief Executive Officer’s area of responsibility. This is a clear reflection of the considerable importance that Hannover Re attaches to opportunity management. The monitoring and active networking carried out by the innovative minds involved give rise to close links with other projects, working groups and bodies, such as with the working group on “Emerging Risks und Scientific Affairs” in regard to emerging risks and opportunities (see Other risks). The working group carries out qualitative assessments of emerging risks. As a result, however, not only are the potential risks analysed but also any available business opportunities. In the year under review, for example, issues such as general environmental pollution, climate change and associated questions of liability, e-cigarettes and the risks of lithium-ion batteries as well as cyber-risks were explored by the working group.
Cyber-risks
Cyber-attacks on critical systems are becoming increasingly common. They can cause considerable financial losses and also damage corporate reputations. Not only that, they can severely hamper private and public life, especially if critical infrastructures are impacted – such as the health, transportation / traffic and energy sectors. In such instances supply bottlenecks with lasting effects as well as major disruptions to public safety may ensue. In a networked world the repercussions of cyber-attacks are intensifying because the volume of data stored around the world is constantly growing – and in this context it is not only one’s own technical infrastructure that needs to be secured. On the contrary, the trend towards cloud computing is increasingly shifting the focus to third-party infrastructures and the associated network connection. As part of our holistic risk and opportunity management activities, we are also tackling the question of what new insurance products can be developed in order to protect against the relevant threats. We have been present in this market since 2007 and have already developed corresponding products.
If a business idea is translated into reality and a new reinsurance product results, the normal procedure – provided the criteria defined for this purpose by Risk Management are applicable – is to work through the so-called new product process. This process is supported by Risk Management at Hannover Re. The process is always worked through if a contractual commitment is to be entered into in a form not previously used by Hannover Re or if the exposure substantially exceeds the existing scope of coverage. If this is the case, all material internal and external influencing factors are examined beforehand by Risk Management (e. g. implications for the overall risk profile or the risk strategy) and an assessment is made. Risk Management ensures that before it can be used or sold a new reinsurance product must be approved by the Executive Board.
