Credit and surety

In worldwide credit and surety reinsurance Hannover Re ranks among the market leaders. As in previous years, we concentrated exclusively on the core business of the credit and surety lines. We do not write financial guarantees or credit default swaps.

While the situation in credit and surety insurance had been challenging in the previous year, it eased in the year under review. Although most of the industrial nations have put the recession behind them, the environment remains volatile. Countries with high levels of sovereign debt recorded significantly slower growth, whereas emerging markets – in particular – returned to their strong growth rates. Export-oriented nations such as Germany profited from this development.

Claims rates in credit insurance, which had been driven up sharply by the economic crisis, reached their peak at the beginning of 2010. They then subsided appreciably; since mid- 2010 claims rates have reverted to pre-crisis levels or in some cases even lower. In the surety and political risk lines claims rates remained on a good level. Most notably, results in surety business escaped the crisis virtually unscathed.

The economic crisis had prompted many competitors either to heavily curtail their involvement or entirely withdraw from credit business in 2009 and 2010. Hannover Re, on the other hand, made the most of the capacity squeeze and the accompanying substantial price increases to selectively enlarge its portfolio. This brought about further expansion of our already robust market position. Our premium growth in the year under review amounted to around 20%; the bulk of this derived from the reinsurance of trade credit business.

The picture in credit reinsurance was a similar one to that in the primary sector: here too claim rates improved markedly. Reinsurance rates were also very pleasing, rising significantly for 2009 and 2010. From the middle of the year under review onwards rates held stable, only coming under pressure in isolated cases.

In surety reinsurance the situation remains favourable; claims rates were stable on a good level. Rates increased only slightly here on account of a favourable loss experience.

The experience of our political risks business was also satisfactory. Rates in this segment peaked at the beginning of 2010; modest rate erosion then ensued over the course of the year, albeit still on a good level.

All in all, the development of credit and surety reinsurance was satisfactory. The decision to selectively enlarge our portfolio in the challenging crisis year of 2009 proved to be correct: in non-proportional business the portfolio was virtually loss-free. On the proportional side claims rates improved markedly in the credit line, while in surety and political risks business the claims situation was also highly gratifying. Once again, we did not incur any major losses – i.e. losses in excess of EUR 5 million – in the year under review.

The combined ratio moved back under 100% in the year under review. It stood at 97.8%, after 104.2% in the previous year.