Insurtech firm Lemonade has announced the successful renewal of its reinsurance program. It has also formed Lemonade Re and a captive cell to retain some of their risk.
According to the announcement, the program is to be led by the same tier-one carriers as the expiring one and was oversubscribed on all dimensions.
The centrepiece of the program is 55% quota share protection, the same level as the expiring coverage. The variable ceding commissions are projected to be roughly equivalent to those under the outgoing agreements.
The program covers all Lemonade businesses globally, which now also includes Metromile, acquired by Lemonade in 2022.
Additionally, the renewed program is augmented by some new structures. The insurtech firm formed a new risk-bearing entity, Lemonade Re, in the Cayman Islands, where it plans to hold some of its retained risk.
Similarly, Lemonade has established a captive cell at a Bermuda transformer, and plans to utilize it to retain most of its windstorm exposure.
While windstorm reinsurance capacity was available, this structure was determined to offer a materially better cost/benefit profile, the firm noted.
Daniel Schreiber, Lemonade co-CEO and cofounder, commented: “It says a great deal when some of the world’s largest and most respected reinsurers choose to stake their capital on the performance of our business,”
“These partners allow us to operate in a very capital light mode, and focus our resources on expanding our customer base across all of our products and geographies, while harnessing our technologies to get ever more efficient, and ever better at matching rate to risk.”
The new reinsurance program will go into effect on midnight on June 30, 2023, which is also the time when the extant program expires.
Lemonade’s financial expectations for Q2 and full year 2023 remain unchanged, the firm noted.
The news of Lemonade’s reinsurance program renewal come shortly after the insurtech firm announced a world record achievement by settling an insurance claim within two seconds by using AI and machine learning.
