Lancashire Capital Management has best portfolio since inception: Redhead

Opportunities in certain areas of reinsurance and retrocession are in some cases the best seen in years, which has helped Lancashire Holdings third-party capital collateralised reinsurance arm write what could be its best portfolio since inception.

Lancashire Capital Management (LCM) underwrites a still relatively unique-in-the-market fully collateralised and multi-class reinsurance product, combining catastrophe and certain specialty covers and is therefore utilised by some of the largest reinsurers as retrocession.

With retrocession being one of the areas of the market that’s seen the highest rate increases at recent renewals, Lancashire itself highlighted today that property retrocessional reinsurance business experienced some of the best price gains, it’s clearly benefited Lancashire Capital Management (LCM) in building out its portfolio for this year.

Speaking today, during the Lancashire Holdings earnings call, LCM CEO Darren Redhead explained that his unit has been “very pleased” with market conditions and the opportunities they presented at the 2021 renewals.

“We’d say the portfolio is the best we’ve had since inception in terms of yield to investors,” Redhead explained.

Adding that this market opportunity is currently “down to the rate environment.”

LCM has been relatively opportunistic when it comes to growth of the portfolio in recent years, able to draw on additional funds from its third-party investor base when market conditions warrant it.

There’s a strong chance that the January 2021 renewals were one of those opportunities, when it would have been compelling to draw more capital to deploy, given the market disruption seen in retrocession and the core product LCM underwrites.

Redhead was also asked about the potential impact of the US winter storms including Uri and the Texas freezing weather on the LCM portfolio, to which he replied that, “With Winter Storm Uri, we’d say we expect very little impact given the levels that we attach at.”