Regulatory developments: Hannover Re has implemented the standards resulting from the reform of insurance supervision law in accordance with Solvency II in relation to capital requirements, governance and reporting. Based on our internal target capitalisation with a confidence level of 99.97%, which comfortably exceeds the target level of 99.5% set by Solvency II, the capital requirements of Solvency II do not represent any additional obstacle for our company. Effective 1 January 2016 Hannover Re received approval from the regulatory authorities to calculate its solvency requirements using a partial internal capital model. Our next step will be a full internal capital model that also includes the operational risks.
Parallel to the regulatory developments in Europe, we are seeing adjustments worldwide to the regulation of (re)insurance undertakings. It is often the case that various local supervisory authorities take their lead from the principles of Solvency II or the requirements set out by the International Association of Insurance Supervisors (IAIS).
With regard to the United Kingdom’s exit from the European Union, we do not anticipate any major implications for our customer relationships, not least because a trend is emerging among ceding companies towards moving their home base to Continental Europe.
The progress of convergence between the supervisory regimes of the United States and European Union is unclear and remains to be seen.
Capital market environment: On the investment side we expect to see increased volatility on equity and credit markets right across Europe. We take the view, however, that we are suitably prepared with our rather defensively oriented investment posture.