Company FAQ
6. Life and health reinsurance: What are block assumption transactions?
BATs are geared to early realisation of the embedded value tied up in our clients' existing portfolios.
As part of its activities in the life and health reinsurance segment, Hannover Re has specialised in so-called "block assumption transactions" (BATs). This concept was originally developed for the US market and is geared to the early realisation of the embedded value tied up in our clients' existing portfolios.
This can be illustrated by way of the following example: an insurer has a portfolio of policies, which he does not intend to expand by way of writing new business. This portfolio thus has a value based on its future earnings less expenses. However, this value will only be realised over the period of the policies. We offer our support by giving the insurer an opportunity to realise the embedded value of the portfolio in question immediately by paying out the present value of the embedded value.
This approach enables the insurer to release funds from his portfolio without delay in order to reinvest them or, for example, to efficiently safeguard the achievement of financial or solvency policy goals. We receive repayment of our financing from the regular earnings of the portfolio, in which we participate by way of a quota share reinsurance treaty.
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