Specialty insurance and reinsurance group Lancashire Holdings Limited has pre-announced some expected third-quarter catastrophe and marine losses, which the firm expects will drive it to a negative return on equity for the quarter.
Lancashire has broad exposure in the property and specialty reinsurance markets, hence the firm is always likely to suffer losses from any major events occurring around the globe.
In the third-quarter of 2018 Lancashire said it has exposure to loss events within its marine book of business, which it expects will drive aggregate estimated ultimate net losses of around $30 million.
This marine loss, or series of losses, will likely include Lancashire’s exposure to the recent fire at a floating dock in the shipyard of luxury super yacht manufacturer Lürssen, which is anticipated to result in a large loss for marine underwriters.
Additionally, Lancashire said that it also expects that natural catastrophe events including hurricane Florence, and typhoons Jebi, Mangkhut and Trami, will result in a further aggregation of estimated net ultimate losses amounting to between $25 million and $45 million.
Numerous reinsurance firms are likely to reveal attritional losses from these catastrophe events during Q3 and there is also an expectation that marine losses will be widely felt as well.
For Lancashire it is also of interest on the ILS side of the market, given the firm has its Kinesis Capital Management third-party collateralized reinsurance capital management unit as well.
At this stage it’s not clear whether Kinesis’ portfolio will be affected, Lancashire’s statement makes no disclosure regarding the strategy.
Lancashire does say that its losses have been suffered through its Bermuda, UK and Lloyd’s operations, but as Kinesis provides a multi-class, specialty and property catastrophe focused retrocession product, its exposure to these events would be through Lancashire clients, rather than the Lancashire portfolio.
Hence, at this stage, it’s uncertain whether Kinesis’ strategy could pick up any exposure from the third-quarter loss activity and will depend on the loss experience of its counterparties.
Lancashire further explained that its estimated Q3 losses are after outwards reinsurance programme and the impact of outwards and inwards reinstatement premiums.
The firms losses will come from multiple lines of business, as it has hurricane and typhoon exposure across the property retrocession, property direct and facultative, property reinsurance, cargo, marine and energy sectors.
Lancashire said that it will report a negative return on equity for the third-quarter of 2018, but absent the losses it would have been profitable for the period. It also expects to remain profitable for the first 9 months of 2018.