Reinsurance News

Lemonade reduces quota share reinsurance program

5th August 2021 - Author: Katie Baker

Insurtech start-up Lemonade has made a reduction in its quota share reinsurance program, lowering it from the previous 75% to 70%.

LemonadeLast year, Lemonade transitioned to a quota share program and agreed to cede 75% of its premium to a panel of reinsurers, with the firm retaining 25%.

Following the impacts of Winter storm Uri in Texas, which had an adverse impact on Lemonade’s gross loss ratio, the carrier’s reinsurance coverage “worked exactly as designed”, protecting its bottom line from 75% of the impact.

In July 2020, when Lemonade entered into the quota share, it managed to secure 55 of the 75 points on a three-year term, with the remaining 20 points up for renewal each year.

Now, the firm has made a modest reduction in its programme, reducing it from the previous 75% to 70%, meaning it has successfully renewed 15 out of the 20 points that were up for renewal.

Stratumn, by SIA Partners

“We are pleased to share that despite meaningful noise and volatility in the reinsurance market, which has anecdotally been a point of concern for some of our shareholders, we were able to secure similar financial terms on the portion of the quota share that we renewed,” says Lemonade.

The insurtech company has also released its results for the second quarter of 2021, showing a gross profit of $9.8 million, which increased by $4.4 million compared to the second quarter of 2020.

Its net loss in Q2 came increased to $55.6 million compared to $21.0 million in the second quarter of 2020. This was primarily due to the increase in gross earned premium, which was partially offset by a higher net loss ratio.

However, its total revenue for Q2 was $28.2 million, down only slightly from $29.9 million for the same prior year period.

“We’re happy to report that Q2 saw positive trends and metrics across the board. With healthy unit economics and robust customer demand, the overarching theme of Q1 21 was leaning in to growth investment, and this happily characterised Q2 21 too,” the company said in a statement.

“We saw accelerating IFP growth for the second consecutive quarter, with IFP increasing by 91% year-over-year. We concluded Q2 21 with IFP of $297 million, and about 1.2 million customers. Separately, for the fourth consecutive quarter, we saw accelerating growth in premium per customer.

“This metric increased year-over-year by an all time record of 29% to $246. This acceleration reflects the sustained diversification of our business mix to higher premium products, and the increasing prevalence of Lemonade customers with multiple policies.”

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