Hannover moves into US program market.

German reinsurer Hannover Re is branching out into US program business to reduce the volatility in i...

German reinsurer Hannover Re is branching out into US program
business to reduce the volatility in its earnings.

The company has expanded its operations in the US with the purchase of New
York insurer Clarendon in a deal worth $500m. Clarendon specialises in
program business, a specialised sector of the US insurance market that is
expected to be worth $20bn in premiums this year.

Clarendon distributes policies through managing general agents that focus
on niche 'program' products such as, for example, homeowners' insurance in
catastrophe-prone areas of the US like Florida and California, or
substandard motor business in New Jersey.

Wilhelm Zeller, Hannover Re's chairman, explained: "US program business
will become the fourth strategic cornerstone of our worldwide

The relative share of the more cyclical, highly competitive and less
predictable property casualty reinsurance business will reduce to below
50% of our 1999 worldwide gross premium income." As well as property
casualty business, Hannover Re writes life and health and financial

Hannover Re announced two years ago that it was targeting the US

"With gross premiums of more than $2.5bn, the US will in future be by far
our single largest market," said Mr Zeller last month.

Clarendon produced profits of $45m before tax last year on gross premiums
of $1.3bn, or a return on equity of 17.4%.

Clarendon's current reinsurance arrangements will remain intact, although
Hannover Re might be interested in writing any additional reinsurance
cover Clarendon might require.

Meanwhile, Hannover Re has sold a 3.8% stake in E&S Re, which writes its
German business, reducing its holding to 50.1%. The share was bought by
mutual insurer Wurttemberg-ische. Eight German mutuals now have shares in
the company. E&S Re is traditionally the exclusive or preferred reinsurer
of its mutual shareholders.
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