Lancashire Holdings Limited has announced an estimated $35 million of COVID-19 claims for the first-quarter of 2020, while gross premiums written (GPW) jumped by almost 12% year-on-year to $242.8 million.
The London-listed insurer and reinsurer has established a reserve of approximately $35 million of losses, net of reinsurance and reinstatement premiums, in Q1 2020 based on a review of its book and potential exposures from the pandemic occurring in the quarter.
Lancashire notes that the majority of the loss estimate relates to its property segment. As companies continue to report their first-quarter results, the impacts from the COVID-19 pandemic on underwriting has varied.
At $35 million, the re/insurer’s COVID-19 hit is fairly moderate and will be influenced by the fact it does not write numerous lines of business that are believed to be some of the most exposed to COVID-19 related losses.
Specifically, the company notes that it does not write travel insurance, trade credit, accident and health, D&O liability, medical malpractice, or long-term life. In addition, the company says that it has a minimal exposure to mortgage business and is exposed to a small number of event cancellation contracts.
The significant level of financial market volatility driven by the COVID-19 coronavirus pandemic also negatively influenced Lancashire’s investment performance in the quarter. The company has today reported that its investment portfolio total return (including unrealised gains and losses) was negative 1.9% for Q1 2020.
Lancashire notes that the majority of these unrealised losses were driven by its bank loan and hedge fund portfolios, “given the significant spread widening in credit and volatility in equities.”
Commenting, Group Chief Executive Officer (CEO) Alex Maloney, said: “Firstly, I want to extend my sympathy to those of our colleagues and friends who have suffered illness or personal loss at this time. I also want to thank our people for their dedication and professionalism in ensuring the smooth running of our business during what have been challenging and unprecedented times.
“Since early March our London and Bermuda offices have successfully moved to a home working model which has enabled us to continue to underwrite and to service the needs of our clients and their brokers. The Lloyd’s, London and international insurance markets have effectively moved to a model of remote trading and Lancashire has been fully equipped to handle this transition.”
Moving away from the pandemic and Lancashire’s GPW increased by 11.8% in Q1 2020 to $242.8 million, compared with $217.2 million for the same period in 2019. Overall, the January 2020 renewals season resulted in an increase in year-on-year premium income of around 12%, and a renewal price index (RPI) of 108%.
By segment: Property GPW increased by almost 11% to $152.4 million with an RPI of 104%; Energy GPW jumped by just under 20% to $35.6 million with an RPI of 109%; Marine GPW actually declined by 15.8% to $25 million with an RPI of 114%; and Aviation GPW increased by a huge 47.5% to $29.8 million with an RPI of 117%.
“Our purpose as a business is to deliver bespoke risk solutions that protect our clients and support economies, businesses and communities in the face of uncertain loss events and to manage our own risk exposures and capital resources. Whilst the world’s attention is naturally focused on the current pandemic crisis, we should remember that this is one of many possible risks, and that risk management is our field of expertise.
“We therefore continue to work with our brokers and clients to deliver our insurance and reinsurance products in all our areas of specialism including swift payment of valid claims. Whilst we expect economic challenges for clients in a number of sectors, including aviation, marine and energy, we have thus far seen demand hold up in many of our business classes.
“Looking at the developments during the first quarter, the January 2020 renewal season saw an increase in our year on year premium income of about 12% and an RPI of 108%. This is evidence of improved market discipline and, with the recent stress to many insurance industry balance sheets, we consider that the need for improved risk pricing will continue during 2020.
“In the face of this real world “stress test” I have been impressed by the resilience of our business model and the professionalism of our people. The Group retains a robust solvency buffer and we stand ready to meet the challenges and opportunities that lie ahead,” said Maloney.