Hannover Re uses Kubera for life ILS issuance. Life ILS volumes pass $1bn

Global reinsurance firm Hannover Re has been expanding its activities in life insurance-linked securities (ILS), with its life ILS volumes passing $1 billion and a recent deal tapping its Kubera Insurance (SAC) Ltd. as an issuer to transact with life ILS investors.

In fact, Hannover Re’s expanding life ILS operations are seen as an opportunity for further growth and so the reinsurance firm is in the process of growing its life ILS focused team.

Hannover Re has recently used its Bermuda-domiciled Class C reinsurance vehicle, Kubera Insurance (SAC) Ltd., for a life transaction backed by insurance-linked securities (ILS).

The Kubera Insurance vehicle was first used for a traditional annuity or life reinsurance transactions with client Fidelity & Guaranty Life (FGL) in late 2018, as our sister publication Reinsurance News previously reported.

FGL entered into a reinsurance agreement with a protected cell of Kubera on 28th December 2018, ceding certain multi-year guaranteed annuities to it on a quota share basis.

FGL then reported benefiting from $758 million of reinsurance recoverable from the Kubera protected cell at the end of that year.

But Hannover Re has now begun to use the Kubera Insurance vehicle for life insurance-linked securities (ILS) arrangements, with one transaction entered into in September 2020 now coming to our attention.

Kubera Insurance raised investor capital to support a life reinsurance arrangement through a bond issuance, which was made available to an Australian intermediary of insurance business through a swap agreement that financed a portion of its business.

Hannover Re invested in the bond issuance alongside external investors, with repayment of the issued life ILS bonds contingent on the performance of the intermediary’s business.

Details are limited and the reinsurer would not comment specifically on this Kubera Insurance life ILS transaction.

But Henning Ludolphs, Managing Director Retrocession & Capital Markets at Hannover Re, explained to us that this is part of the expansion of Hannover Re’s life insurance-linked securities (ILS) activities.

“Our ILS Life unit has been very successful over the recent years. Several transactions were structured and facilitated with a total volume in excess of USD 1 billion transferred to ILS investors,” Ludolph explained.

Adding that, “We are very optimistic that in the future we will be able to build on our experience and facilitate further risk transfer and financing transactions to capital markets across almost all lines of life business. We are currently in the process to expand our ILS Life team in order to manage the business potential.”

Hannover Re expanding its life ILS activities bodes well for investors focused on the life side of ILS, including ILS fund managers that allocate to life insurance and reinsurance risks.

The reinsurer has become a major player in property catastrophe ILS, in ceding risks to ILS funds and investors, as well as facilitating their access to risk, or fronting for cedents seeking to access the capital markets.