Reinsurer uses low interest rates to boost capital

German reinsurer Hannover Re has issued a €500m subordinated bond to European investors through its subsidiary Hannover Finance (Luxembourg).

The issue, which was oversubscribed several times, was taken up primarily by institutional investors.

“We are using the current relatively low level of interest rates to raise additional hybrid capital, further optimise our capital structure and fund continued growth going forward,” Hannover Re chief executive officer Ulrich Wallin said in a statement.

The bond has a maturity of 30 years with a first scheduled call option after ten years. It carries a fixed coupon of 5.75% a year in the first ten years, after which it changes to a floating rate of 3-month EURIBOR + 423.5 basis points.

JP Morgan was the structuring adviser for the transaction. Three other banks - BNP Paribas, Commerzbank and Credit Agricole CIB - participated in the deal.