Swiss Re Insurance-Linked Fund Management

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Lancashire pegs Q3 nat cat & political violence losses at up to $225m


Specialty insurance and reinsurance group Lancashire Holdings has estimated that natural catastrophe and political violence losses suffered in the third-quarter of 2021 could amount to as much as $225 million.

lancashire-logoThe company explained that losses from recent natural catastrophe events, including hurricane Ida and European storms Bernd (the flooding event), as well as windstorms Volker and Xero, will drive aggregate net ultimate losses of between $165 million and $185 million.

On top of this, Lancashire said that it has exposure to large loss events in its political violence portfolio related to the unrest in South Africa that occurred in July 2021, which is expected to cause an aggregate estimated ultimate net loss of around $40 million.

So the top-end impacts expected this quarter could be as much as $225 million, which Lancashire said is estimated after “anticipated” recoveries from its outwards reinsurance programme, suggesting the company will be making claims from its reinsurance partners or retrocessionaires, as well as costs related to outwards and inwards reinstatement premiums.

Alex Maloney, Group Chief Executive Officer, commented on the announcement, “Our thoughts are with those who have suffered as a result of the recent catastrophe and political violence events. For Lancashire, these loss estimates are within our expectations for these types of events and demonstrate the value of our products to our (re)insureds and other stakeholders.

“Looking ahead, the Company remains strongly capitalised to be able to take advantage of the improving market, both in the rest of this year and in order to achieve our ambitious underwriting plans for 2022. The rating environment continues to improve, premiums continue to grow, and we are well-positioned to achieve our strategic goals.”

Lancashire said that the losses from windstorm and flood related events affected the following classes of business: property retrocession, property direct and facultative, property reinsurance, marine and energy.

Given where the losses fell, it’s to be expected that Lancashire Capital Management Limited, the firm’s third-party capital collateralised reinsurance underwriting arm, will experience some impacts to certain contracts it may have underwritten and that its investors have exposure to.

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.

Lancashire, as an underwriting group, has been expansive through recent quarters, writing a little more catastrophe exposed business as well in the improved rate environment.

Given where the company writes its business, its specialisms and risk appetite, it would always be anticipated to take a reasonable share of losses after the last quarter’s catastrophe loss events.

Some of the other and more significant Q3 catastrophe loss pre-announcements include: Swiss Re at $1.27 billion net; RenaissanceRe at $725 million netArch Capital at up to $345 million net; Everest Re at $635 million net; AXIS Capital at $250 million net; and Munich Re at around €1.8 billion.

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