Hannover Re, a Rare Moat in Insurance

Hannover Re is a property and casualty and life and health reinsurer with P&C contributing a little over two thirds of the company's profits to shareholders. Hannover Re has slightly less than double-digit market share in both these divisions. This is a business that is characterised by underwriting and carving our deep expertise in niche areas. While this may sound a bit woolly, our sense is that some of this underwriting difference comes from the overall ownership of the underwriting process by Hannover Re’s underwriters. We conceptualise this through lenses of decision-making and responsibility. Whereas in other reinsurance firms, underwriters may need to defer back to a head of risk or perhaps even the C-suite, underwriters at Hannover Re have more authority and a better line of sight. Furthermore, we anticipate this leads to stronger client relationships because underwriters are client-facing and thus renewals a reiterative negotiation, with Hannover Re’s underwriters in the position to directly negotiate and discuss client needs without the need for constant deferral. This drives stronger retention rates, thereby lowering commissions and acquisition costs.