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Hannover Re to make whole account and sidecar recoveries from Bernd loss

Hannover Re could claim retrocession recoveries from both its K-Cessions sidecar and its whole account excess-of-loss (XoL) protection for Storm Bernd flooding, the company said today.

On a call to discuss the carrier’s Q3 results, board member for P&C re Sven Althoff noted that there was a “relatively high” difference between Hannover Re’s gross Bernd loss, at EUR643mn ($742.7mn) and its EUR214.2mn net position.

The EUR430.6mn gap “means that we could collect the Bernd losses from both our K transaction but also particularly from our whole account protections,” Althoff explained.

Hannover Re has three pillars to its EUR2.4bn retro cover. First, it has the sidecar facility, K-Cessions, which provides EUR610mn of cover, followed by a whole account XoL layer above that providing EUR337mn of protection.

It then has a layer of catastrophe swaps providing EUR41mn of cover, and finally an aggregate XoL layer providing EUR225mn of protection.

Hannover Re retrocession programme as of 31 March 2021-01.jpg

“You should think about Bernd as a substantial partial loss against our whole account tower with the remainder going to K,” Althoff said.

Hannover Re’s EUR527.3mn loss from Ida, however, will not impact the whole account XoL protection, Althoff explained.

On that loss, around EUR180mn of the EUR221.6mn gap between the carrier’s gross and net loss stemmed from ILS businesses that Hannover Re fronts, Althoff said.

“On Ida, we had K recoveries but no further XoL recoveries towards our net position,” he said.

The executive also said Hannover Re had received further updates to claims on Winter Storm Uri during Q3, which was “a little unexpected”.

Hannover Re’s gross loss from the February storm that struck Texas was EUR259.2mn, or EUR158.1mn net. This compares to a gross loss of EUR220.9mn as of 30 June this year.

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