Demand for ILS products on the capital market and among investors from the traditional reinsurance and primary insurance market remained unabated. Thus, for example, we were able to increase our “K” quota share – a modelled quota share cession consisting of non-proportional reinsurance treaties in the property, catastrophe, aviation and marine (including offshore) lines that we have placed inter alia on the ILS market for almost 20 years – by around USD 20 million for 2012 to USD 350 million.

In addition to protecting our own property catastrophe risks, we use the capital market to structure and package risks for our cedants. We also take the role of investor ourselves by investing in catastrophe bonds, the prices for which moved slightly higher at the beginning of the year under review in expectation of a lively US hurricane season. However, they softened sharply again in the course of the year for demand reasons and on account of the moderate – leaving aside “Superstorm Sandy” – hurricane season. While Sandy prompted price increases for US catastrophe bonds, it had little effect on the rest of the market.

The volume of new issues in the year under review was stable relative to the previous year; an increase had originally been anticipated. However, uncertainty surrounding the development of the Hurricane Sandy loss event resulted in fewer new instruments being brought to market at the end of the year than had been initially anticipated.

The year under review brought another strong inflow of cash into the ILS market. Investors find this market interesting because it has scarcely any correlation to the other risks associated with the traditional capital market, such as interest rate risks, and it therefore promotes diversification of asset portfolios. The available funds comfortably exceed the opportunities for new investments in catastrophe bonds. This prompts investors to search for further investment possibilities in the reinsurance sector, for example by way of industry loss warranties and collateralised reinsurance programmes. In the latter case the investor assumes reinsurance risks that are normally collateralised in the amount of the limit of liability.

Through its product range Hannover Re enables investors to enjoy optimised and customised access. We substantially expanded our collateralised reinsurance business in the year under review. In addition, we played a successful part in structuring a catastrophe bond for Japanese earthquake risks with a volume of USD 300 million.

Our premium volume in the area of insurance-linked securities rose sharply in the year under review. Profitability was pleasing.