Group Chief Executive Officer (CEO) of Lancashire Holdings Limited, Alex Maloney, doesn’t expect rates for the firm’s book to get any stronger from here unless loss activity picks up, but also doesn’t see rates going backwards.
Lancashire Holdings has now reported its first-quarter 2018 results, reporting minimal loss activity and positive growth across its portfolio, driven in part by new business opportunities as well as some post-loss opportunities and other expanded relationships at improved rates.
The firm’s CEO explained on the call that there’s evidence of carriers taking action to improve profits, with small signs of change in the underwriting environment a clear “indicator that we are finally off the bottom of the market,” said Maloney.
“For the first time in years pretty much everything is pulling in the right direction. It’s a finely balanced market that just has to improve, it simply has to,” he added.
Following the devastating impacts of 2017 catastrophe events, companies were hopeful for substantial rate increases at the January renewals after years of a softened market landscape.
However, and as highlighted by Lancashire’s Group Chief Financial Officer (CFO) and CEO, Lancashire Insurance Company Limited, Elaine Whelan, while rate improvements were evident at 1/1 2018, pricing didn’t improve as much as many had hoped for, Lancashire included.
As a result of the limited rate increases at the January renewals, which is largely being attributed to the growing presence and permanence of alternative capital post-event, the industry continues to debate the potential for further rate increases at the mid-year renewals.
Maloney commented on this, saying: “From our view I don’t think rates get stronger from here unless there’s any loss activity. Equally, I don’t think it goes backwards.
“For our portfolio, I don’t see rates going backwards, but I don’t see much additional hardening from here. We don’t expect any real changes, and we’re comfortable where we are at, on that basis.”
Despite Lancashire not expecting further rate strengthening from here, absent the influence of loss activity, it’s promising to hear that Maloney equally doesn’t see rate deterioration in the months ahead.
The marketplace clearly remains challenging and underwriting discipline will be key throughout 2018 in order to take advantage of any opportunities that might come to light.
Maloney stressed throughout the call that Lancashire is well placed to grow its business where it sees an opportunity to do so, however, it’s clear that this won’t be at the expense of underwriting discipline.