an underwriter's day in non-life reinsurance€¦ · working with brokers vs. direct business...

An underwriter's day in non-life reinsurance

Sven Althoff, Managing Director

16th International Investor's Day 2013

Frankfurt, 23 October 2013

Strong client orientation in a structured framework

1 An underwriter's day in non-life reinsurance

Underwriting skills

Strategy

Underwriting guidelines

Tools

CRM approach

Business partner

Underwriter

Our strategy guides our actions. . .


Non-life reinsurance

Our

strategy

We co-operate predominantly with R/I brokers (especially in the non-prop. sector)

We attach great value to direct contacts with our ceding companies

We combine high level of technical expertise with sound CRM & offer

a full range of products according to our clients’ needs

We achieve higher RoE margins than our peers:

xRoCA: ≥2%

EBIT margin: ≥10%

C/R: <96%

Sophisticated control of aggregates

Conservative reserving level is of utmost importance

Use of retrocessions to reduce volatility and protect our capital

Secure and further develop already attained market positions, while keeping

to our margin requirements Sales

channels

Self-

image

Profit

contribution

Clients and

products

Risk

management

Markets

We successfully meet all individual client and market needs

. . . and is integrated in the general underwriting guidelines


General underwriting guidelines

• Provide a framework for those authorised to write non-life

reinsurance or direct insurance business in compliance with

all applicable external and internal requirements

Special underwriting guidelines

• Provide an individual framework for underwriting centres

Exposure management guideline for NatCat business

• Sets framework conditions for underwriting without

overexposing the capital base within the bounds of risk

budgets

They assist in writing profitable business without overexposing the capital base

However, we aim for the greatest possible delegation of tasks and authority

Our underwriters are passioned and committed


Their capabilities

Experienced

Trained in-house

Speak the

client’s language

Analytical

skills

Team workers

Travel to

meet clients

Familiar with

our tools

Loyal

Empowered

Take consistent

decisions

Responsible for

marketing and

underwriting

Provide

broad support

Accessible and

respond fast

5 of our underwriters are within the top 11 leading R/I underwriters in EU*

* Source: Gracechurch

Meetings

Conferences

Client feedback

Cross-Selling

Conceptual ideas

Feedback,

acquisition

Client data

Market

environment

Portfolio

management

Coverage

Technical price

Sanction

screening

Analysis

Market price

Commission

Written line

Structure

Contract language

Terms of trade

Firm order

terms

Signed line

Placement slip

Contract wording

Premium

(instalment)

Data encoding

Aggregate

monitoring

Electronic filing

Cash monitoring

Data quality

Main steps of the underwriting process


An annual cycle

Strategy and

research

Negotiation Transaction Administration

Controlling

Our working day starts by passing this door


33 nationalities working together in Hannover

Who are our (potential) clients?

7

Insurance companies

• Stock listed insurance companies

• Mutual insurers

Pools

Captives

Governmental entities

Risk retention groups

Underwriting agencies

Broker


A dedicated broker market, but 1/3 of our business is written on a direct basis

We meet our clients regularly

How do we find a new client?

8

Strategy

• We have ambitious profit and growth targets

• We are a preferred business partner

Market research

• Market potential, development and profitability

• Analysis of competitors

Segmentation

• By region, class of business, customer group and distribution channel

“Travelling underwriter”

• Ensures constant contacts

Working with brokers vs. direct business

• Distribution and services

Satisfied clients bring in new clients

The subscription market: the role of co-(re)insurance


Our CRM strategy provides framework for coordinated client-directed activities

High quality of data is an important competitive advantage

9

Administrative tools, especially designed for our business needs

• Re7 treaty

• Re7 frontend facultative

Data Management Systems: revision-safe archiving

• Submission

• U/W decision sheet

• Further documentation

NatCat steering tools

• Anker

• GEM

Compliance related tools

• Sanctions screening tool

Pricing tools


State of the art tools and systems

Quotation department secures consistent approach to pricing

10

A large number of pricing tools have been internally developed by our actuarial

quotation department. Amongst others, these are used to price the following

treaties/lines:

• Proportional short tail (e.g. property)

• Proportional long tail (e.g. motor liability)

• Non-proportional short tail

• Non-proportional long tail

• NatCat XL

• Stop-loss

• Multi-line

• Individual tools for specialty business

− Credit

− Agriculture

− Facultative (e.g. engineering, MedMal, pharma, workers’ comp., PI, D&O, energy, mining, GTPL,

Bankers’ Blanket Bond, Recall-Crisis Management, fine arts)


Pricing tools

Ensuring the quality of our portfolio


Step 1

Step 2

Step 3

Determining the expected loss

Historical loss and exposure

analysis

Future inflation

Changes in the quality of the

underlying risk

Changes in the quantity of the

underlying risk

Discounting of future cash flows

Estimating expenses

Commission

Brokerage

Internal administration

Pricing for the targeted return

Quantity of capital allocated

dependent on volatility of

underlying business and its

contribution to diversification

Return on equity expected by

shareholders

Mix of capital

Our quotation process in non-life reinsurance

Regular review of: loss cost trends

inflation

Most important non-life

distribution channel:

brokers variable cost

We constantly monitor our business


Proportional1) Non-proportional2)

Conditions for Hannover Re still favourable

-100%

-50%

0%

50%

100%

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0%

20%

40%

60%

80%

100%

04 05 06 07 08 09 10 11 12 13

Deterioration Unchanged Improvement Net change (improvement - deterioration)

As at January 2013 renewals

1) Comparison of commission 2) Comparison of Rate on Line (RoL)

0%

20%

40%

60%

80%

100%

04 05 06 07 08 09 10 11 12 13

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-50%

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50%

100%

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Why do clients buy reinsurance from us?

13

Strong balance sheet

Highly rated by rating agencies

Competitive

Consistent

Exposure pricing

• Deterministic methods: e.g. first loss scales, increased limits factors

• Probabilistic methods: e.g. modelling of natural catastrophe exposure

Experience pricing

• Burning cost

• Assumptions on e.g. inflation

• Shifts in underlying portfolio: individual vs. market experience

Delegation vs. committee underwriting


Our rating and pricing are essential, but. . .

What makes us somewhat different?

14

Transparent approach

Upfront communication what can and cannot be delivered

Clear message on risk appetite

Reliable in fulfilling promises of support

Service standards

Timely quotations

Timely turnaround of contract documentation

Timely turnaround of special requests during the contract period

Timely and reliable claims payment

Value creation

Long-serving client teams

Capacity for all lines of business

Solution-minded approach which offers alternatives

Ability to take wider client relationship into account


. . .our service orientation makes us a preferred business partner

Disclaimer

This presentation does not address the investment objectives or financial situation of any particular person or

legal entity. Investors should seek independent professional advice and perform their own analysis regarding

the appropriateness of investing in any of our securities.

While Hannover Re has endeavoured to include in this presentation information it believes to be reliable,

complete and up-to-date, the company does not make any representation or warranty, express or implied, as

to the accuracy, completeness or updated status of such information.

Some of the statements in this presentation may be forward-looking statements or statements of future

expectations based on currently available information. Such statements naturally are subject to risks and

uncertainties. Factors such as the development of general economic conditions, future market conditions,

unusual catastrophic loss events, changes in the capital markets and other circumstances may cause the

actual events or results to be materially different from those anticipated by such statements.

This presentation serves information purposes only and does not constitute or form part of an offer or

solicitation to acquire, subscribe to or dispose of, any of the securities of Hannover Re.

© Hannover Rück SE. All rights reserved.

Hannover Re is the registered service mark of Hannover Rück SE.

an underwriter's day in non-life reinsurance€¦ · working with brokers vs. direct business...

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