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Hannover Re - L6 Life Reinsurance Securitization

Client Need

Hannover Re approached RISConsulting to assist it in developing a solution to monetize EUR 100 million of .embedded value. related to an existing portfolio of individual unit-linked life insurance policies from Germany and Austria. The Client goal was to realize value and to demonstrate that future earning streams can be liquidated in a short period of time in the international financial markets

The Solution

In cooperation with Hannover Re, RISConsulting developed a portfolio stress model to support an evaluation of the embedded value and related risk. The model was constructed with a user-friendly input interface to allow users to stress key drivers of risk and provided a variety of portfolio-level, underwriting year of account-level and product-level results. RISConsulting also advised Hannover Re on the development of a risk transfer structure that provided terms which were better than its .do nothing. strategy.

The Result

Hannover Re completed the L6 transaction with effect from 31 December 2005 through a private placement with a leading European financial institution. The L6 transaction optimizes capital efficiency, improves Hannover Re exposure profile and provides a new source of funding which can be used to support growth in the international life business. Finally, the L6 transaction demonstrates that embedded value is more than just an actuarial line item and that such assets can be monetized on favorable terms.

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