Alex Maloney, Group Chief Executive Officer (CEO) of Lancashire Holdings Limited, has said that there is “enough pain in the system” and that regardless of new players and new capital, the “market moves on from here.”
Lancashire posted positive albeit reduced earnings for the first-half of the year, with management highlighting improved discipline and pricing dynamics across the global reinsurance space.
Speaking during the company’s H1 2019 earnings call earlier today, Maloney stressed that while the market is certainly improving and Lancashire is encouraged that the market has taken further positive steps in Q2 when compared with Q1, by no means is it a hard market.
Rates have improved in virtually all lines of business, explained Maloney, adding that Lancashire expects rate levels to “continue to improve in 2019 and into 2020 regardless of any cat activity over the summer. If there are losses, then we expect rate hardening to accelerate.”
Several times throughout the earnings call Maloney underlined that we are now entering the next stage of the reinsurance market cycle.
During the call, Maloney was questioned on the potential influx of capital from new market players, such as Convex, which have entered the market at a time when rates are improving, and whether this would have an impact on the market.
“It’s not a massive issue, and there’s enough pain in the system that I think the market moves on from here. We don’t go back from here…This is just a realism of where we are,” he said.
Adding, “But before it gets to anything sustainable it needs to move a lot from here, and this is the start of the process. Everyone is going back to the basics, everyone is going back to underwriting.”
During the first-half of the year, Lancashire took advantage of rate increases in the Florida market, and commenting on its re-entry into the space, Maloney said that while Lancashire does not think it is a brilliant or hard market, the firm has done what makes sense and took advantage of the opportunity, adding that it would expand further in the state if rates improved further.
Commentary from global reinsurers so far during the Q2 and H1 2019 earnings period have been fairly optimistic around pricing, with some expecting the current momentum to be sustainable in the months ahead, regardless of any wind events and new capital.
