Font size

Risk report

Principles for the handling of opportunities and risks

Our objective is to consolidate and further extend our position as one of the world’s leading globally operating reinsurance groups of above-average profitability. With a view to accomplishing this aim we enter into a broad variety of risks which, on the one hand, open up opportunities for profit but, on the other hand, can also have adverse implications for our company. Our goal is to make optimal use of opportunities while at the same time adequately controlling and managing the risks associated with our commercial activities. Through our global orientation and our operations in all lines of reinsurance we achieve extensive risk equalisation. In particular, diversification between our non-life and life/health reinsurance business groups enables us to effectively deploy our capital. As a reinsurance specialist, we also transact primary insurance business in selected niche markets on a complementary basis to our traditional reinsurance activities. Of material significance to all segments are the underwriting results and the investment of the premium payments. Overall, crucial importance attaches to the qualitative and quantitative elements of our risk management. The parameters and decisions of the Executive Board with respect to the risk appetite of the Hannover Re Group are fundamental to the acceptance of risks. The risk strategy derived from the corporate strategy constitutes the basis for our handling of opportunities and risks. We act on opportunities only by weighing up the associated risks. The risk strategy and the guidelines derived from it, such as the Framework Guideline on Risk Management and the central system of limits and thresholds, are subject to regular review. In this way, we ensure that our assumptions and hence also our risk management system are kept up-to-date. Operationalisation of our corporate strategy takes place on multiple levels and ultimately leads into guidelines, including for example the underwriting guidelines used by our treaty and regional departments.

We manage our total enterprise risk such that we can expect to generate positive Group net income with a probability of 90% and the likelihood of the complete loss of our economic equity and shareholders’ equity does not exceed 0.03% p. a. These indicators are monitored using our internal capital model. The necessary equity resources are determined according to the requirements of our economic capital model, solvency regulations, the expectations of rating agencies with respect to our target rating and the expectations of our clients. Above and beyond that, we maintain an equity buffer in order to be able to act on new business opportunities at any time. We manage the level of our shareholders’ equity in such a way that our targeted return of 750 basis points above the “risk-free” interest rate is attainable.

Opportunities for the Hannover Re Group are to be anticipated inter alia as a consequence of the impending adoption of risk-based solvency systems, such as Solvency II in Europe. Irrespective of the date of implementation of Solvency II on the European level, risk-based national regulations are already in force and others will likely follow. We have long practised a risk-based and value-based management approach of the type which regulators will call for under Solvency II and we began to make our preparations for the requirements of Solvency II at an early stage. This includes, among other things, participating in all Quantitative Impact Studies (QIS) and entering the pre-application phase for approval of an internal capital model. We see Solvency II as an opportunity for the convergence of international regulatory and internal corporate approaches and consider ourselves well-equipped to provide the markets with tailored products. Thanks to our broad Group diversification, we enjoy the advantage of being able to offer our clients attractive solutions for improved utilisation of their own capital resources. For Hannover Re itself, the minimum capital requirements imposed under Solvency II are unlikely to present an obstacle, since our internal capitalisation targets ( confidence level of 99.97%) go well beyond the regulatory requirements (confidence level of 99.5%).

Stronger demand for reinsurance covers can also be expected as a consequence of content-based adjustments to the natural catastrophe simulation models used by many companies (including Hannover Re) as well as the vigorous growth recorded in a number of markets. Furthermore, we anticipate rising demand for individual protection against biometric risks in major emerging markets such as China, India and Brazil. Business ideas and opportunities are systematically analysed by our Business Opportunity Management unit with the aim of generating new business and thereby enabling the Hannover Re Group to enjoy continued sustainable growth going forward. This is complemented by initiatives such as our “future radar”, a systematic analysis of relevant factors that will drive future success.

Operationalisation of the risk strategy

Operationalisation of the risk strategy enlarge zoom

In this connection we aspire to a rating from the rating agencies most relevant to our industry that opens up and secures access for our company to all attractive business worldwide. Hannover Re is analysed by the rating agencies Standard & Poor’s and A.M. Best by way of an interactive rating process; this means that both rating agencies are also granted access to confidential information about Hannover Re. The current financial strength rating from Standard & Poor’s (S&P) is “AA-” (“Very Strong”, stable outlook) and the rating from A.M. Best is “A+” (“Superior”, stable outlook). Hannover Re’s risk management is assessed by Standard & Poor’s as “Strong”, the second-best S&P rating. The evaluations highlighted, among other things, the very good risk management, the continuous and systematic implementation of the corporate strategy by the management team and the company’s excellent capital resources.

This evaluation testifies to the quality of our holistic approach to risk management. We would additionally refer the reader to our remarks on the financial strength ratings of our subsidiaries in the “Financial position” section of the management report. All activities and decisions within the Group are guided not only by profit targets but also increasingly by sustainability considerations. We have defined what we consider to be the most important issues in the context of our sustainability strategy.

More Information

Topic related links within the report:

Topic related links outside the report:


Download this chapter as a PDF file:

Topic Navigation

Build your own individual report according to the topics you are interested in. Choose the topics which are essential for you.

show all

My Annual Report

Your page has been added successfully. Please click on "My Annual Report" in the service section to see your selection.

Link für Popup