Casualty
Hannover Re has been a writer of US Casualty business since the mid-1970's. Over this period we have built up know-how and a very well balanced portfolio. In order to succeed in the casualty arena, monitoring of the primary insurance market is essential. Market intelligence is one of the major tasks of our underwriters as well as our US representatives. As at least equally important we regard stringent actuarial monitoring, both prospectively and retrospectively. This has been carried out by our actuarial division since the early 1980's, in cooperation with our underwriters and external services.
During the soft phase of the market cycle in the second half of the 1990's we cut back our volume as we saw that rates and terms would not allow us to generate satisfactory returns. Market trends have changed to the positive since the year 2000, and we believe that casualty business will still generate adequate contribution margins, although we have to be more selective than two years ago.
We look at all classes of casualty business. We are, however, not a market for reinsurances in the heavy products liability field, nor for open ended occurrence coverages in long-tail E&O classes like medical malpractice. In general, we endeavour to reduce the tail of our portfolio by focusing on reinsurance of claims made coverages in the E&O classes, and by avoiding extremely long-tail classes in general. Furthermore, we prefer to design our treaties in a way that reduces our tail, via sun-set clauses, early commutation options, etc. In general, we prefer to reinsure only those portfolios that are core areas of our cedents' books of business, and we prefer to deal with those primary insurance companies that in our view have long term reinsurance needs.
We consider the know-how of our clients in their business fields and their reinsurance buying practice as being essential in our customer selection process. We ascertain this by meeting and auditing our clients regularly. Most of our growth has been generated from existing relationships, with companies and their management and underwriters with whom we have been dealing long term. We do, however, selectively broaden our client base as well. Less than 25% of our casualty book is proportional, or consists of "first USD coverages". In general, we prefer to write Excess of Loss business, with the exception of those lines that have a high total loss potential, and where it consequently makes sense for a reinsurer to share the premium of the entire portfolio reinsured.
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