Obligation Hannover Rück Gruppe 5% ( XS0856556807 ) en EUR

Hannover Rück Gruppe

100 % ▼

Allemagne

XS0856556807 ( en EUR )

5% par an ( paiement annuel )

29/06/2043

Prospectus brochure de l'obligation Hannover Re Group XS0856556807 en EUR 5%, échéance 29/06/2043

100 000 EUR

500 000 000 EUR

30/06/2026 ( Dans 347 jours )

Hannover Re est un groupe de réassurance international basé en Allemagne, offrant une large gamme de solutions de réassurance et de services de gestion des risques à des compagnies d'assurance dans le monde entier.

L'Obligation émise par Hannover Rück Gruppe ( Allemagne ) , en EUR, avec le code ISIN XS0856556807, paye un coupon de 5% par an.
Le paiement des coupons est annuel et la maturité de l'Obligation est le 29/06/2043

Prospectus dated 15 November 2012

Hannover Finance (Luxembourg) S.A.
(a corporation organised as a "société anonyme" under the laws of the Grand Duchy of Luxembourg,
having its corporate domicile in Luxembourg, Grand Duchy of Luxembourg)
500,000,000 Subordinated Fixed to Floating Rate
Callable Bonds with scheduled maturity in 2043
ISIN XS0856556807, Common Code 085655680, WKN A1HCPB
irrevocably guaranteed, on a subordinated basis, by
Hannover Rückversicherung AG
(a stock corporation incorporated under the laws of the Federal Republic of Germany,
having its corporate domicile in Hannover, Federal Republic of Germany)
Issue price: 99.778 per cent.
Hannover Finance (Luxembourg) S.A. (the "Issuer") will issue on or about 20 November 2012 (the "Issue Date") 500,000,000
Subordinated Fixed to Floating Rate Callable Bonds with scheduled maturity in 2043 (the "Bonds") in the denomination of 100,000 each.
The Bonds have the benefit of an irrevocable guarantee on a subordinated basis (the "Guarantee") of Hannover Rückversicherung AG (the
"Guarantor"). The Bonds and the Guarantee will be governed by the laws of the Federal Republic of Germany ("Germany").
The Bonds will bear interest from and including 20 November 2012 to but excluding 30 June 2023 at a rate of 5.00 per cent. per annum,
scheduled to be paid annually in arrear on 30 June in each year, commencing on 30 June 2013. Thereafter, unless previously redeemed,
the Bonds will bear interest at a rate of 4.30 per cent. per annum above the three months EURIBOR being the Euro-zone inter-bank offered
rate for three-month Euro deposits, scheduled to be paid quarterly in arrear on 31 March, 30 June, 30 September and 31 December in each
year, commencing on 30 September 2023.
Under certain circumstances described in § 4(3) of the Terms and Conditions of the Bonds (the "Terms and Conditions"), interest
payments on the Bonds may be deferred at the option of the Issuer or will be required to be deferred.
The Bonds are scheduled to be redeemed at the Redemption Amount on the Floating Interest Rate Payment Date falling on or nearest to
30 June 2043, provided that on such date the Conditions to Redemption (as defined in the Terms and Conditions) are fulfilled. If this is not
the case, the Bonds will be redeemed only in the circumstances described in the definition of the term Final Maturity Date (as defined in the
Terms and Conditions) on the Final Maturity Date.
Under certain circumstances described in § 5(3) and § 5(4) of the Terms and Conditions, the Bonds may be subject to early redemption.
The Bonds will initially be represented by a Temporary Global Bond which will be delivered on or prior to the Issue Date to a common
depositary for Euroclear Bank SA/NV ("Euroclear") and Clearstream Banking, société anonyme ("Clearstream, Luxembourg"). The
Temporary Global Bond will be exchangeable for interests recorded in the records of Euroclear and Clearstream, Luxembourg in a
Permanent Global Bond not earlier than 40 days after the Issue Date, upon certification as to non-U.S. beneficial ownership.
This prospectus in respect of the Bonds (the "Prospectus") constitutes a prospectus within the meaning of Article 5.3 of Directive
2003/71/EC of the European Parliament and of the Council of 4 November 2003 (as amended, inter alia, by Directive 2010/73/EU) (the
"Prospectus Directive"). This Prospectus will be published in electronic form together with all documents incorporated by reference on the
website of the Luxembourg Stock Exchange (www.bourse.lu).
This Prospectus has been approved by the Commission de Surveillance du Secteur Financier, Luxembourg ("CSSF") in its capacity as
competent authority under the Luxembourg Act dated 10 July 2005 relating to prospectuses for securities (Loi du 10 juillet 2005 relative aux
prospectus pour valeurs mobilières, the "Luxembourg Prospectus Law"). By approving this Prospectus, the CSSF gives no undertaking
as to the economic and financial opportuneness of the transaction and the quality or solvency of the Issuer in line with the provisions of
article 7 (7) of the Luxembourg Prospectus Law. The Issuer may request CSSF to provide competent authorities in other host Member
States within the European Economic Area with a certificate of approval attesting that the Prospectus has been drawn up in accordance
with the Luxembourg Prospectus Law.
Application has been made to the Luxembourg Stock Exchange for the Bonds to be listed on the official list of the Luxembourg Stock
Exchange (the "Official List") and to be admitted to trading on the Luxembourg Stock Exchange's regulated market "Bourse de
Luxembourg", appearing on the list of regulated markets issued by the European Commission. The Luxembourg Stock Exchange's
regulated market is a regulated market for the purposes of the Directive 2004/39/EC of the European Parliament and of the Council of
21 April 2004 on markets in financial instruments.
Sole Structuring Adviser
Commerzbank
Joint Lead Managers
Commerzbank
J.P. Morgan
Société Générale
UniCredit Bank
Corporate &
Investment Banking

RESPONSIBILITY STATEMENT
Each of the Issuer with its registered office in Luxembourg and the Guarantor with its registered
office in Germany accepts responsibility for the information contained in this Prospectus and hereby
declares that, having taken all reasonable care to ensure that such is the case, the information
contained in this Prospectus is, to the best of its knowledge, in accordance with the facts and
contains no omission likely to affect its import.
Each of the Issuer and the Guarantor further confirms that (i) this Prospectus contains all relevant
information with respect to the Issuer and the Guarantor as wel as to the Guarantor and its
consolidated subsidiaries taken as a whole (the "Hannover Re Group" or the "Group") and to the
Bonds and the Guarantee which is material in the context of the issue and offering of the Bonds,
including al relevant information which, according to the particular nature of the Issuer and the
Guarantor and of the Bonds and the Guarantee is necessary to enable investors and their
investment advisers to make an informed assessment of the assets and liabilities, financial position,
profits and losses, and prospects of the Issuer, the Guarantor and the Hannover Re Group and of
the rights attached to the Bonds and the Guarantee; (i ) the statements contained in this Prospectus
relating to the Issuer, the Guarantor, the Hannover Re Group, the Bonds and the Guarantee are in
every material particular true and accurate and not misleading; (ii ) there are no other facts in
relation to the Issuer, the Guarantor, the Hannover Re Group, the Bonds or the Guarantee the
omission of which would, in the context of the issue and offering of the Bonds, make any statement
in the Prospectus misleading in any material respect; and (iv) reasonable enquiries have been
made by the Issuer and the Guarantor to ascertain such facts and to verify the accuracy of all such
information and statements.
NOTICE
No person is authorised to give any information or to make any representation other than those
contained in this Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorised by or on behalf of the Issuer, the Guarantor or the Joint Lead
Managers (as defined in the section "Subscription and Sale of the Bonds").
This Prospectus should be read in conjunction with any supplement hereto and with any other
documents incorporated herein by reference.
This Prospectus contains certain forward-looking statements, including statements using the words
"believes", "anticipates", "intends", "expects" or other similar terms. This applies in particular to
statements under the caption "General Information on the Guarantor and the Hannover Re Group 
Business Overview" and " Recent Developments/Trend Information" and statements elsewhere in
this Prospectus relating to, among other things, the future financial performance, plans and
expectations regarding developments in the business of the Hannover Re Group. These forward-
looking statements are subject to a number of risks, uncertainties, assumptions and other factors
that may cause the actual results, including the financial position and profitability of the
Hannover Re Group, to be materially different from or worse than those expressed or implied by
these forward-looking statements. The Issuer and the Guarantor do not assume any obligation to
update such forward-looking statements and to adapt them to future events or developments.
Each investor contemplating purchasing any Bonds should make its own independent investigation
of the financial condition and affairs, and its own appraisal of the creditworthiness, of the Issuer and
the Guarantor. This Prospectus does not constitute an offer of Bonds or an invitation by or on behalf
of the Issuer, the Guarantor or the Joint Lead Managers to purchase any Bonds. Neither this
Prospectus nor any other information supplied in connection with the Bonds should be considered
as a recommendation by the Issuer, the Guarantor or the Joint Lead Managers to a recipient hereof
and thereof that such recipient should purchase any Bonds.
2

This Prospectus reflects the status as of its date of issue. The offering, sale and delivery of the
Bonds and the distribution of the Prospectus may not be taken as an implication that the information
contained herein is accurate and complete subsequent to the date hereof or that there has been no
adverse change in the financial condition of the Issuer or the Guarantor since the date hereof.
To the extent permitted by the laws of any relevant jurisdiction, neither any Joint Lead Manager nor
any of its respective affiliates accepts responsibility for the accuracy and completeness of the
information contained in this Prospectus or any other document incorporated by reference. The
Joint Lead Managers have not independently verified any such information and accept no
responsibility for the accuracy thereof.
This Prospectus does not constitute, and may not be used for the purposes of, an offer or
solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorised or to any
person to whom it is unlawful to make such offer or solicitation.
The distribution of this Prospectus and the offering, sale and delivery of the Bonds in certain
jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are
required to inform themselves about and to observe any such restrictions. For a description of the
restrictions applicable in the United States of America and the United Kingdom, see "Subscription
and Sale of the Bonds Selling Restrictions". In particular, the Bonds and the Guarantee have not
been and will not be registered under the United States Securities Act of 1933 (the "Securities
Act"), as amended, and are subject to United States tax law requirements. Subject to certain
exceptions, the Bonds and the Guarantee may not be offered, sold or delivered within the United
States of America or to U.S. persons.
The legal y binding language of this Prospectus is English. Any part of the Prospectus in German
language constitutes a translation, except for the Terms and Conditions of the Bonds and the
Guarantee in respect of which German is the legal y binding language.
In this Prospectus al references to "", "EUR" or "Euro" are to the currency introduced at the start
of the third stage of the European economic and monetary union, and as defined in Article 2 of
Council Regulation (EC) No. 974/98 of 3 May 1998 on the introduction of the Euro, as amended.
IN
CONNECTION
WITH
THE
ISSUE
OF
THE
BONDS,
COMMERZBANK
AKTIENGESELLSCHAFT (THE "STABILISING MANAGER") (OR ANY PERSON ACTING ON
BEHALF OF ANY STABILISING MANAGER) MAY OVER-ALLOT BONDS OR EFFECT
TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OF THE BONDS AT A
LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL. HOWEVER, THERE IS NO
ASSURANCE THAT THE STABILISING MANAGER (OR ANY PERSON ACTING ON BEHALF OF
THE STABILISING MANAGER) WILL UNDERTAKE STABILISATION ACTION. ANY
STABILISATION ACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE
PUBLIC DISCLOSURE OF THE TERMS OF THE OFFER OF THE BONDS IS MADE AND, IF
BEGUN, MAY BE ENDED AT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF
30 DAYS AFTER THE ISSUE DATE OF THE BONDS AND 60 DAYS AFTER THE DATE OF THE
ALLOTMENT OF THE BONDS. ANY STABILISATION ACTION OR OVER-ALLOTMENT MUST BE
CONDUCTED BY THE STABILISING MANAGER (OR ANY PERSON ACTING ON BEHALF OF
THE STABILISING MANAGER) IN ACCORDANCE WITH ALL APPLICABLE LAWS AND RULES.

3

TABLE OF CONTENTS
RISK FACTORS .................................................................................................................................. 5
TERMS AND CONDITIONS OF THE BONDS .................................................................................. 25
SUBORDINATED GUARANTEE ....................................................................................................... 64
GENERAL INFORMATION ON THE GUARANTOR AND THE HANNOVER RE GROUP .............. 70
GENERAL INFORMATION ON THE ISSUER .................................................................................. 83
TAXATION ......................................................................................................................................... 85
SUBSCRIPTION AND SALE OF THE BONDS ................................................................................. 91
GENERAL INFORMATION ............................................................................................................... 93

4

RISK FACTORS
The Issuer and the Guarantor believe that the following factors may affect their ability to fulfil their
obligations under the Bonds and the Guarantee, respectively. Factors which the Issuer and the
Guarantor believe may be material for the purpose of assessing the market risks associated with
the Bonds are also described below. All of these factors are contingencies which may or may not
occur and neither the Issuer nor the Guarantor are in a position to express a view on the likelihood
or the extent of any such contingency occurring.
The Issuer and the Guarantor believe that the factors described below represent the principal risks
inherent in investing in the Bonds, but the Issuer or the Guarantor may be unable to pay interest,
principal or other amounts on or in connection with the Bonds or the Guarantee, respectively, for
other reasons than those described below, and the Issuer and the Guarantor do not represent that
the statements below are exhaustive. Prospective investors should also read the detailed
information set out elsewhere in this Prospectus (including any documents incorporated by
reference herein) and reach their own views prior to making any investment decision.
Words and expressions defined in "Terms and Conditions of the Bonds" below shall have the same
meanings in this section.
Risks relating to the Guarantor and the Hannover Re Group
Set out below are risks associated with the Guarantor and the Hannover Re Group which may have
a material impact on its business operations and/or the level and volatility of its profitability, and
therefore its ability to perform its obligations under the Bonds and the Guarantee, including:
Business and company-related risks
Business relations with primary insurers
Within the scope of its reinsurance business, the Hannover Re Group underwrites the business of
primary insurers, which means that facts and circumstances in the insurers' environment may also
indirectly influence the Hannover Re Group. These circumstances include, in particular, the risk that
insurers may write less business as a result of which a smaller volume is also reinsured , the risk
that insurers may write business, the quality of which is incorrectly assessed by the Hannover Re
Group as more favourable than it actual y is, and the risk that the credit status of insurers may
develop worse than the Hannover Re Group had anticipated at the time when the reinsurance
treaties in question were written. The materialisation of each of these individual circumstances
could detrimentally affect the assets, financial position and net income of the Hannover Re Group.
Business relations with retrocessionaires
The Hannover Re Group systematically uses retrocessions and protection covers to smooth results
and optimise its net income; in this context it attaches considerable importance to the quality and
credit status of its retrocessionaires. The assets, financial position and net income of the Hannover
Re Group could therefore be adversely affected if the market conditions for retrocession deteriorate
to the detriment of reinsurers in the future, if certain protection covers especially catastrophe
excess of loss covers are no longer available or if individual retrocessionaires should become
unable or unwil ing to pay.
Rating of the Hannover Re Group
The business result of the Hannover Re Group is influenced by its ability to acquire new insurance
business at advantageous conditions, to expand existing profitable business relationships and to
raise capital on the financial markets. Of particular significance to this ability is the evaluation of the
5

financial strength and creditworthiness and hence also indirectly of the competitiveness of the
Hannover Re Group and its individual companies by specialised agencies (hereinafter referred to as
its "rating"). The most important rating for the Hannover Re Group is the Insurer Financial Strength
Rating, which evaluates the financial strength of the Hannover Re Group on the basis of the factors
that are relevant to policyholders and ceding companies. These factors include, most notably, the
capital adequacy, market positioning, risk management and earnings outlook.
The current (Q3/2012) financial strength rating for the Guarantor from Standard & Poor's Credit
Market Services Europe Ltd., branch office Germany ("S&P") is "AA-" ("Very strong", stable
outlook), while that of A.M. Best Europe - Rating Services Limited ("A.M. Best") is "A+" ("Superior",
stable outlook).1 A downgrade in the rating can have significant adverse implications for the
conditions of new and existing business, impair competitiveness and increase the costs of financing
for the Hannover Re Group. In addition, a downgrade can result in the materialisation of new or
accelerated maturity of existing liabilities that are contingent upon maintenance of a particular
rating. Each downgrade of the rating could therefore detrimentally affect the assets, financial
position and net income of the Hannover Re Group.
Risks from insurance contracts
The business conducted by the Hannover Re Group is founded on the deliberate assumption of
risks through the conclusion of insurance and reinsurance contracts. The Hannover Re Group
constantly assesses and monitors these risks and reviews their probability of occurrence. This also
includes ongoing monitoring of legal, demographic, macroeconomic and environmental
developments being outside the influence of the Hannover Re Group. As a general principle, the
Hannover Re Group concludes insurance contracts only if the premiums (including the investment
income generated from these premiums) are expected to exceed the calculated risk and it
establishes actuarial y determined provisions for the occurrence of claims. If the premiums
calculated upon contract closing do not suffice to fund the resulting losses, if the premium
calculations are based on inaccurate assumptions, if the companies belonging to the Hannover Re
Group fail to (fully) identify or correctly evaluate developments, if unexpected developments occur
on the claims side or if retrocessionaires with which the Hannover Re Group has, for its part,
reinsured risks default on payment, this could detrimentally affect the assets, financial position and
net income of the Hannover Re Group.
Risks from IT-systems
The Hannover Re Group's ability to keep its business operating depends on the proper and efficient
operation of its computer and data-processing and telecommunications systems. Since computer
and data-processing systems are susceptible to malfunctions and interruptions (e.g., interruptions
of power supply, computer viruses and a range of other hardware, software and network problems),
it cannot be excluded that such malfunctions or interruptions will occur in the future. A significant or
large-scale malfunction or interruption of one or more of the Hannover Re Group's computer or
data-processing systems could adversely affect its ability to keep its operations running efficiently. If
a malfunction results in a wider or sustained disruption to the Hannover Re Group's business, this
could have detrimental effect on the assets, financial position and net income of the Hannover Re
Group.

1 The office issuing and elaborating the rating was a registered branch of Standard & Poor's Credit Market Services Europe
Limited and AM Best Europe-Rating Services Ltd. each of which is, to the Issuer's and the Guarantor's belief, registered in
accordance with Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit
rating agencies (see "List of registered and certified credit rating agencies" which can be accessed under
www.esma.europa.eu).

6

Asset management performance
The premiums and the capital position of Hannover Re Group is invested to a large extent in
different types of assets. Thereby, the Hannover Re Group pursues a defined investment policy,
which focuses on required liquidity of assets, adequate issuer diversification as well as on asset
liability management measures in terms of duration, currencies and risk budgeting. It may, however,
not be excluded that performance fluctuations or inadequate decision making related to the
selection of assets and the respective trading activities or other misconducts occur (including wilful
breaches of mandatory law and/or investment guidelines of the Hannover Re Group). This could
result in losses to the investment portfolio and in a divergence to the value of the liabilities from the
(re)insurance business detrimentally affecting the Hannover Re Group's assets, financial position
and net income.
Information by ceding companies
Hannover Re Group systematically covers risk underwritten by primary insurers and reinsurers. In
deciding on whether such reinsurance or retrocession agreements are entered into and which
technical provisions are to be provided Hannover Re Group relies on the provision of correct and
sufficient risk information by the respective ceding company. Should the Hannover Re Group, on
the basis of incorrect or incomplete information, wrongfully assess the covered risks, this may result
in additional expenses. Even if the Hannover Re Group would have recourse claims against the
ceding company it cannot be assured that these claims are fully valuable and enforceable. This
could detrimentally affect the Hannover Re Group's assets, financial position and net income.
Risk management system
The Hannover Re Group maintains complex risk management systems. These systems define the
Group's risk strategy, the allocation of tasks and responsibilities within the risk management
process and the continuing identification, documentation, assessment, reporting and the measures
to control and avoid risks. Despite the implementation of group wide risk management guidelines,
the occurrence of errors or interruptions of these systems may not be excluded. It cannot be
assured that data and assumptions used in the risk modules correctly indicate in every respect the
future market development and the risks arising thereof for the Hannover Re Group's business and
investment portfolio.
Since 2008 the Hannover Re Group is in an ongoing review process with the German Financial
Supervisory Authority (Bundesanstalt für Finanzaufsicht, "BaFin") for the approval of its internal
capital model in the light of Solvency II requirements.
If the Hannover Re Group's risk control and risk management systems do not sufficiently reflect
material risks or should the handling of risks not be sufficient this could detrimentally affect the
Hannover Re Group's assets, financial position and net income.
Recruiting and retaining of qualified staff
The Hannover Re Group is to a significant extent dependent on qualified executives and personal.
The Hannover Re Group's success has depended and will continue to depend on recruiting and
retaining qualified employees. In the event that the Hannover Re Group experiences high rates of
employee turnover, it is also possible that the Hannover Re Group may not be able to recruit new
employees from the labor market immediately and that this may result in additional costs. The loss
of qualified employees or ongoing difficulties in the hiring of suitable employees could lead to a
situation in which the Hannover Re Group cannot successfully implement key decisions, measures
and developments, which would adversely affect the business operations of the Hannover Re
Group.

7

Payment obligations resulting from past divestments
In the last years the Hannover Re Group (via its holding company Hannover Finance Inc.) has
entered into agreements relating to the divestment of parts of its business operations. Such
divestments included, for example, the sale of the shares in Clarendon National Insurance
Company Inc. (and its wholly owned subsidiaries) and Praetorian Financial Group Inc. (and its
wholly owned subsidiaries) to Enstar Group Limited and QBE Holdings, Inc. respectively. Under the
relevant sale and purchase agreements the Hannover Re Group has made representations and
warranties for the benefit of the purchaser. In case of a breach of these representations and
warranties pyment obligtions could arise, which could have an adverse affect on the assets,
financial position and net income of the Hannover Re Group.
Provisions
The Hannover Re Group calculates the amount of the provisions that are to be established for
insured events in accordance with relevant actuarial methods that reflect assumptions and empirical
values. The level of provisions constituted is regularly adjusted in the context of normal run-off with
the aid of the latest information available to management. The adequacy of the provisions initially
constituted and subsequently adjusted as necessary cannot be assured. In the insurance and
reinsurance market this was demonstrated in the past, for example, by claims connected with
asbestos. If, on the basis of the actual future development especially with respect to risks that
have currently not even been recognised as such or as a consequence of the inaccurate selection
or application of methods to calculate the constituted provisions, the Hannover Re Group were to
be compel ed to increase the provisions or if the liabilities of the Hannover Re Group in connection
with the events that it has insured were to be higher than the constituted provisions, this could
detrimentally affect the assets, financial position and net income of the Hannover Re Group.
Market- and competition-related risks
Competition
The competitiveness of the Hannover Re Group is influenced by numerous factors. They include,
inter alia, the Hannover Re Group's financial strength, rating, experience, local presence and
reputation, the quality of its client relationships, the type, scope and conditions of its offered
products and services, the efficiency of its receivables management as well as its ability to respond
appropriately to changing customer requirements and the behaviour of its competitors. The
Hannover Re Group constantly monitors changing customer requirements and the behaviour of its
competitors, and it adjusts its range of products and services accordingly. Should, however, the
Hannover Re Group be unable to respond appropriately to new developments, this could
detrimentally affect the assets, financial position and net income of the Hannover Re Group.
Cyclical business
Non-life reinsurance is essentially a cyclical business. The same is true to a lesser extent of life
reinsurance. This means that the business volume of the Hannover Re Group does not develop in a
linear manner. In past years the volume of reinsurance business has therefore been subject to
considerable fluctuations, which can be attributed to a broad range of factors. These factors, which
cannot always be foreseen and/or influenced, include inter alia competition among reinsurers, the
frequency and scale of catastrophic events, the availability of reinsurance capacities, the volatility of
capital markets and the general economic conditions. Furthermore, these factors have also brought
about changes in treaty conditions and hence profit margins in the past. A slowdown or decline in
the business development could detrimentally affect the assets, financial position or net income of
the Hannover Re Group.

8

Catastrophic events
Both natural catastrophes and man-made disasters are partially covered by insurance policies in
the non-life and life/health (re)insurance written by the Hannover Re Group. Such catastrophic
events include, among other things, windstorms and hailstorms, floods, earthquakes, major fires,
cold spel s, factory explosions, and insurrections. Neither catastrophes as such nor the scale of loss
and damage caused by such events can be foreseen. Even though the Hannover Re Group
monitors the aggregate risk with respect to catastrophic events in each geographical region,
catastrophe-related damage and claims can lead to extraordinarily high losses. Should the scale of
catastrophe losses increase in the coming years relative to the multi-year average, this could have
a corresponding detrimental effect on the assets, financial position and net income of the Hannover
Re Group.
Terrorist attacks and other geopolitical risk
In the aftermath of the attacks on the World Trade Center on 11 September 2001, the Hannover Re
Group, as many other reinsurance companies, tried to exclude terror risks from their insurance
terms, or considerably increased the premiums for the insurance of these risks. However, the
potential of terror risks materialising could not be completely eliminated by these measures. While,
on the one hand, an exclusion of liability was not possible with respect to al insurance contracts,
consequential damage caused by terror attacks such as fire may, on the other hand, stil give rise to
claims brought against companies of the Hannover Re Group by policyholders. Another risk is that
potential future terror attacks might not be clearly identifiable as such or that there is at least no
proof of a terror attack having occurred. If, in these cases, the limits or exclusions provided for in the
insurance contracts cannot be enforced, this would result in increased claim expenditure. The
Hannover Re Group cannot definitely assess the consequences that future terror attacks may have
on its business activities. Increased geopolitical risks, including, but not limited to, risks resulting
from the terrorist attack on 11 September 2001 and potential future terrorist attacks, may have an
adverse effect on the Hannover Re Group's assets, financial position and net income.
Impacts from interest rate fluctuations
In past years fluctuations in the level of both short- and long-term interest rates have influenced the
amount of gains and losses on securities held among the Hannover Re Group's financial assets as
well as the point in time when such gains or losses were realised. The majority of Hannover Re
Group's holdings are invested in fixed-income securities; the bulk of which are denominated in
Euros and US dol ars. An increase in the interest rate level could therefore reduce the market price
of the financial assets. If the market price were to fall below amortised cost for a sustained period,
this could have to be written down to fair value with a charge recognised in income which could
have a detrimental effect on the assets, financial position and income of the Hannover Re Group.
Risks may also arise from a protracted period of low interest level in the international financial
markets which might affect the asset management performance. Should the current low level of
interest rates be sustained or decline even further, this may adversely affect the assets, financial
position and net income of the Hannover Re Group.
Inflation risks
In connection with the ongoing sovereign debt crisis in Europe and the United States of America
and the corresponding monetary policies of the central banks, there are significant uncertainties on
the future development of inflation rates. An increase in the inflation rate can lead to losses in the
investment portfolio and a decrease in the net income, because the market value of fixed interests
investments normally decreases as the higher inflation rate causes an increase in the market
interest rate. Additionally, higher inflation rates could result in unexpectedly increased losses or
respectively loss payments especially in long term reinsurance contracts.

9

If any of the risks mentioned above materialises this could detrimentally affect the Hannover Re
Group's assets, financial position and net income.
Turbulent stock market environment
In the aftermath of the historic price falls on international stock markets in 2008, many investors
became more risk-averse.
As a consequence, the Hannover Re Group has scaled back its exposure to a marginal holding
(<1 per cent.) of equity securities in 2008 and maintains such marginal holding to date. As of
September 30, 2012 the total exposure of equity securities amounts to EUR 46.8 mil ion or 0.15 per
cent. of total investments under own management. However, the holding of equity securities may be
increased in the future. Therefore, stock market volatility could have a detrimental effect on the
assets, financial position and net income of the Hannover Re Group.
Exchange rate fluctuations
The Hannover Re Group writes (re)insurance business worldwide in numerous international
currencies and prepares annual and interim financial statements in Euros, as a consequence of
which the Group is exposed to exchange rate fluctuations. The Hannover Re Group reduces the
resulting currency risks through the use of matching currency coverage as much as possible as wel
as derivative financial instruments. This does not, however, make definitive hedging possible, and
an exchange rate risk, especially with respect to the Euro/US dollar exchange rate, consequently
remains. Changes in the exchange rates used to convert a foreign currency into Euro can therefore
have a detrimental effect on the assets, financial position and net income of the Hannover Re
Group.
Operational Risks
Operational risks refer to the risk of losses occurring because of the inadequacy or failure of internal
processes or as a result of events triggered by employee-related, system-induced or external
factors. Operational risks are monitored primarily by way of appropriate process management.
These risk potentials are evaluated on the basis of expert assessments, the plausibility of which is
verified by central risk management. Because of the broad spectrum of operational risks, the
realisation of one of these risks could have a detrimental effect on the assets, financial position and
net income of the Hannover Re Group.
Emerging Risks
The hallmark of emerging risks (such as in the field of nanotechnology, climate change, disruption
of critical infrastructure or pandemics) is that the content of such risks cannot as yet be reliably
assessed especially with respect to Hannover Re Group's treaty portfolio. Such risks evolve
gradually from weak signals to unmistakable tendencies.
The Hannover Re Group aims to detect, assess, steer and monitor these risks through a process
involving experts from the relevant fields of knowledge. The realisation of one or several of these
risks could have a detrimental effect on the assets, financial position and net income of the
Hannover Re Group.
Counterparty risks
Hannover Re Group has monetary and securities claims under numerous transactions against
retrocessionaires, ceding companies, brokers and other debtors. In view of the general economic
downturn, the uncertain development of capital markets, the decline in real estate values and
comparable influencing factors, increased default by debtors may occur (counterparty risk). This
increased default would mean that value adjustments above and beyond the extent already covered

10