Lancashire grows P&C reinsurance 85%, catastrophe risk a driver

Specialty insurance and reinsurance group Lancashire Holdings reported that its property and casualty reinsurance book grew by 85% across the first nine-months of 2021, as the company deployed more capital and took advantage of a stronger rate environment.

Property catastrophe risk appears to have been one of the areas of specific growth within this, reflecting Lancashire’s view that rates had improved to a level where deploying more capital into catastrophe risks was appropriate.

Of course, that comes with greater exposure and as we previously reported Lancashire has pre-announced its Q3 net catastrophe losses as between $165 million and $185 million, with another $40 million of losses from political violence portfolio related to the unrest in South Africa that occurred in July 2021.

Those figures remain unchanged this morning, as Lancashire delivered its nine-month trading statement.

Growth in the property and casualty reinsurance book came at an average Renewal Price Index (RPI) of 110%, suggesting 10% increases over the prior year.

The property catastrophe class of business was particularly singled out, with Lancashire saying growth here was a combination of new business and higher rates, while inwards reinstatement premiums after the catastrophes also “contributed meaningfully to the growth in this segment”.

The growth continued across Lancashire’s other core segments, driving gross premiums written to almost $968 million for the nine-months, up 47% year-on-year.

Lancashire said that, even after the strong growth so far in 2021, it remains well-capitalised to take advantage of opportunities through Q4 and into 2022.

Alex Maloney, Group Chief Executive Officer, highlighted the “improving market” and said that Lancashire has “ambitious underwriting plans for 2022.”

He explained, “During the past nine months, we have welcomed a number of new colleagues who have been attracted by the strength of our franchise, our clear strategy, and our commitment to disciplined underwriting. They join a dedicated group of employees whose hard work, enthusiasm and expertise are the bedrock of Lancashire’s success, and we are now starting to benefit from this investment. In addition, further new underwriting hires will join us in the coming months, in time for the January 2022 renewals.

“I have every confidence in our ability to continue to deliver outstanding service, maintain our discipline and maximise market opportunities in the final quarter of 2021 and into 2022.”

Lancashire does not give any visibility to its Lancashire Capital Management units performance at the nine-month point of the year.

Based on where recent major losses fell, it’s to be expected that the Lancashire Capital Management, third-party capital collateralised reinsurance underwriting arm, will have experienced some impacts to certain contracts it may have underwritten or participated in, meaning its investors will likely have some exposure too.

Lancashire Capital Management (LCM) writes a collateralised and multi-class reinsurance product that can combine catastrophe and certain specialty covers and is used as retrocession by some major reinsurers.