The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.
Capital Markets

CDOs: Hannover Re manages risk with CDO technology

SG CIB takes its cue from collateralized loan obligation securitization.

It might not appear particularly magical but Merlin CDO 1 BV does stand out as the first synthetic CDO of insurance and reinsurance entities. Structured by SG CIB, the transaction provides Hannover Re with credit protection on 99 reference entities in the reinsurance sector. It has sold reinsurance recoverables credit risk into the capital market.

One way reinsurers manage risk is through buying retrocession from other reinsurers – in other words laying off risk. Historically, Hannover Re was heavily reliant on retrocession but the rating agencies had voiced their unhappiness with the amount of reinsurance recoverables this left on its balance sheet. The obvious problem is that there is credit risk because until Hannover Re actually claims the money from the reinsurer it bought retrocession from, it is exposed to fact that they might not be able to pay when the time comes.

Balance sheet

"In addition to reducing the number on their balance sheet they were looking at ways to manage the remaining credit risk.

Take out a complimentary trial

Take out a 7 day trial to gain unlimited access to and analysis and receive expertly-curated updates direct to your inbox.


Already a user?

Login now


We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree