Hannover Re Backs U.S. Life Reinsurance Growth With Deutsche Bank Facility

Hannover Re said it inked a deal with Deutsche Bank for a US$500 million long-term letter of credit facility that will allow the reinsurer to pursue growth opportunities in the U.S. life and health reinsurance market.

According to Hannover Re, the line of credit can be used for collateral required by regulators for assumed technical liabilities. The facility will be used solely to expand the reinsurer's life business.

Hannover Re said it has the option to further increase the size of the facility to support additional business. The facility matures in 30 years, with an early termination option that the reinsurer can exercise at specified times. Pricing is fixed through the first optional redemption date.

Through its acquisition of ING Group's life reinsurance portfolio in 2009, Hannover Re said it also has a policy administration platform and a team of mortality risk experts.

Hannover Re bought the book of individual life reinsurance business in the United States from life reinsurer Scottish Re last January (BestWire, Jan. 23, 2009).

The book was a portfolio of ING business that was bought by Scottish Re in December 2004. It is comprised of physical mortality, individual life reinsurance and ING reinsurance business spread across the U.S. market. Hannover Re is predicted the book will generate a premium volume of around $1.2 billion (936 million euros) in 2009.

"Having a perfect team combined with these new financial resources gives us a sound basis for leveraging the opportunities that will open up going forward," said Hannover Re Chief Executive Ulrich Wallin in a statement. "We are striving to expand our business in the life market."

Detusche Bank recently entered into what it described as the "largest ever longevity insurance transaction" by taking on almost 3 billion pounds (3.4 billion euros) in pension liabilities from automobile maker BMW (BestWire, Feb. 22, 2010). The insurance cover will be provided by Abbey Life, a wholly owned subsidiary of Deutsche Bank, on behalf of about 60,000 pensioners in the BMW (UK) Operations Pension Scheme.

The deal was put together by specialist London-based insurer Paternoster Ltd., which specializes in the bulk annuities market. In addition to structuring the agreement, Paternoster has been dealing with a panel of reinsurers that includes Hannover Re, Pacific Life Re and Partner Re. Deutsche Bank is Paternoster's biggest shareholder.

(By David Pilla, international editor, BestWeek: [email protected])