De-risking & re-underwriting of LGT’s Lumen Re having intended effect: AM Best

Lumen Re, the main reinsurance underwriting vehicle of LGT ILS Partners, the specialist dedicated insurance-linked securities (ILS) investments unit of the private bank and asset manager LGT Capital Partners, has seen its loss ratio reduce significantly, according to rating agency AM Best.

In affirming the ratings of Class 3A Bermuda based reinsurer Lumen Re, with a Financial Strength Rating of A (Excellent) and the Long-Term Issuer Credit Rating of “a” (Excellent), both continuing to have stable outlooks, the rating agency explained that steps taken to improve the performance of the reinsurer are having the desired effect.

We wrote a year ago that Lumen Re had begun a de-risking and re-underwriting process, to improve contract terms and raise attachments on the reinsurance contracts it underwrites, so as to prevent outsized losses.

AM Best reported, “The company’s de-risking and reunderwriting process appears to be having the intended effect as the loss ratio has come down significantly compared with the prior year.

“Lumen Re’s operating performance is expected to improve given the hardening market and tightening underwriting.”

AM Best also said that Lumen Re’s balance sheet strength is assessed as “strongest”, while it also cites “adequate operating performance, limited business profile and appropriate enterprise risk management.”

Lumen Re “predominantly writes catastrophe excess of loss contracts and limited reinsurance protection programs with well-established cedants in highly developed markets,” AM Best said, noting that concentration risk is mitigated through risk diversification across regions, perils and the number of cedants.

Last year, LGT ILS Partners onboarded an external equity investor into Lumen Re, as it continues to place the reinsurance vehicle at the heart of its ILS investment operations.