Reinsurance News

Lancashire takes advantage of greater market discipline in 2019

7th November 2019 - Author: Luke Gallin

Lancashire Holdings Limited has reported gross written premium growth of 13.8% to $578 million for the first nine months of the year, while its net loss estimate from hurricane Dorian and typhoon Faxai, at $33.2 million, fell within expectations.

Lancashire logoWith the exception of energy, Lancashire experienced premium growth across all business segments in the first nine months of the year, including expansion of 59.6% to $24.1 million in aviation as a result of new business in the aviation deductible and other aviation classes, driven by continuing building of the book.

Marine premiums jumped by more than 30% year-on-year to $33.1 million, while Lloyd’s increased by 15% to $233.1 million.

Property premiums hit $210.1 million for the nine month period, which is growth of 19% on the $176.5 million reported a year earlier. Lancashire attributes this to new business growth as well as rate and exposure driven premium increases across all classes of business, most notably in property catastrophe and political risk classes.

At $77.6 million, energy premiums fell by 10.5% in the period and Lancashire states that while there was more new business in the global offshore and onshore energy classes in 2019 versus the prior year, 2018 benefited more from the restructuring of an existing multi-year deal.

Alex Maloney, Group Chief Executive Officer (CEO), said: “Once again the Atlantic and Pacific wind seasons have produced loss events which have disrupted lives and livelihoods, with tragic consequences. Lancashire’s products help our clients and ultimate insureds manage these volatile risks and to rebuild after such moments of disruption.

“The Group’s exposures to recent catastrophe loss events have been comfortably within our expectations.”

Net of reinsurance and excluding the impacts of inwards and outwards reinstatement premiums, the firm’s total loss from Dorian and Faxai hit $33.2 million. Lancashire notes that there were no other significant cat losses in the period, but notes that it is in the early stages of assessing the impacts of typhoon Hagibis.

Prior year favourable development in 2019 reached $42.6 million compared to $87 million for the first nine months of 2018. In both periods, Lancashire explains that the favourable development is driven by general IBNR releases across the majority of lines in light of a lack of reported claims.

“In the face of these market losses, which pose yet another challenge to the global insurance industry, the markets have now reached a point at which the pricing of both property and specialty risks has required reappraisal. There is an increasing industry focus on the need for more disciplined underwriting and better assessment of risk.

“We have benefited from that greater market discipline and have taken the opportunity to achieve measured, disciplined growth, in line with the underwriting opportunity and our strategy. There is more progress for our industry to make in reaching a point at which the market operates at more sustainable levels. But I am encouraged that we are at a stage in the cycle where we are benefiting from the realisation across the market of the need to ensure long term, sustainable returns and underwriting discipline,” continued Maloney.

For the first nine months of the year, Lancashire has reported a renewal price index of 106% versus 104% for the same period in 2018.

Lancashire’s investment portfolio total return was 4.1% for the first nine months of the year.

The firm’s CEO continued to explain that in light of an expectation of improved market conditions in 2020, Lancashire intends to retain all of its current capital in order to be able to advantage of underwriting opportunities.

“Therefore, in line with our active capital management policy, we are not declaring a special dividend at this point. Our dividend policy remains unchanged and we fully expect to pay our normal final dividend next year. We will continue to actively monitor our capital levels versus underwriting opportunities and will update further at the time of our full year 2019 results,” said Maloney.

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