Insurance-linked securities

As anticipated, demand for insurance-linked securities continued to grow in the year under review; this sector, which had contracted in the wake of the financial market crisis, has recovered.

Investor demand thus comfortably outstripped supply when it came to our “K6” transaction. The portfolio assembled for this securitisation consists of non-proportional reinsurance treaties in the property catastrophe, aviation and marine (including offshore) lines. The “K6” quota share, which had originally been launched in 2009, was boosted by USD 152 million in 2010 to the desired volume of more than USD 300 million, specifically, to USD 329 million. The additional shares in the “K6” transaction were written as new three-year treaties, which means that henceforth only a portion of the total volume will be renewed at year-end.

We make use of the capital market not only to protect our own property catastrophe risks, but also to structure and package risks for our cedants. When it comes to innovations and bespoke solutions we are a market pioneer.

Our “FacPool Re” project, which in 2009 for the first time transferred a portfolio of facultative risks to the capital market, was continued. What is more, we significantly expanded our business relations with individual investors by enabling them to enjoy optimised access to (re)insurance risks.

We also continue to take the role of investor by ourselves investing in catastrophe bonds. In this context, the natural disasters recorded in 2010 did not cause any losses.

The declining rate level in large areas of traditional reinsurance business is also causing prices to fall in the ILS market.

The development of our ILS activities in the year under review was very favourable overall.