Even prior to the 2022 wind season, specialty re/insurer Lancashire Holdings expected catastrophe-exposed lines to harden considerably for next year, and according to Group Chief Underwriting Officer (CUO), Paul Gregory, Hurricane Ian has “tipped the balance”.
Speaking recently during an earnings call to discuss Lancashire’s 9M 2022 results, Gregory and Alex Maloney, Group Chief Executive Officer (CEO), commented on the rate environment ahead of the key January 1st, 2023, reinsurance renewals.
“As the year’s progressed, you’ve seen rates continue to harden into Q3,” said Maloney. “And as we said at the last call, we expected any catastrophe exposed products to harden substantially for 2023, even absent any activity in ’22.”
Now, however, following the impacts of Ian, which on current estimates will be the second most costly natural catastrophe loss event ever for the re/insurance industry, Maloney expects that trend to accelerate and drive “a material change in the catastrophe pricing for ’23.”
Expanding on Maloney’s comments, CUO Gregory highlighted the shift in supply / demand dynamics pre-wind season, noting that while inflation pushes client demand for more limit, supply appears to be retracting.
“Hurricane Ian has tipped the balance from a hardening market to a hard market, and we anticipate severe dislocation for 2023 renewals,” said Gregory.
In 2021, Lancashire expanded its catastrophe footprint as the rating environment started to improve, and Gregory explained that after further optimising that portfolio through this year, the company is “very well placed to underwrite the opportunity that’s ahead of us.”
All in all, the carrier sees good opportunities going forward, with management pointing to a strong underwriting opportunity and the return of investment income in the future.
“To summarise, I think the outlook is strong across all product lines. We see lots of opportunity driven by the investments we’ve made across our business. Clearly, we have a lot more product lines than we’ve had in our history, which is driving our growth,” said Maloney.
“Our capital position is incredibly strong, it’s exactly where we want to be at this stage of the cycle, and that gives us more optionality as we look into 2023. We’re better leveraged than have been before, so the benefit of the investment returns coming through is definitely going to help our overall returns. So, look, we’re very positive. There’s a lot of uncertainty, but I think we couldn’t be better positioned for the very interesting market,” he added.
