According to Lancashire Holdings’ Chief Underwriting Officer (CUO), Paul Gregory, market conditions in almost all lines of business continues to have “very solid rating fundamentals going into 2025.”
“Our expectation is that the recent loss activity both highlights the value of the products that we sell, which will always help demand, and also prolongs the disciplined and pragmatic underwriting approach we’ve seen from the market this year,” Gregory said during Lancashire’s Q3 2024 earnings call earlier today.
“Looking at insurance and reinsurance separately, we would expect the following market dynamics: We would anticipate marginally greater competitive pressures in the insurance lines, given they started their upward rating trajectory earlier than the reinsurance lines.
“But let’s just emphasize the strong position they are currently in, and that the rate adequacy is very good, and we fully expect healthy margins to continue.”
He added: “We expect continued discipline in the reinsurance lines. Casualty remains in focus, given continued prior year development and loss trends. Both specialty and property reinsurance have had their share of large loss experience this year, which again, will help with maintaining discipline. Our expectation is the market will remain in a position of strong rate inadequacy, and we see opportunities for continued growth.
“Our extremely healthy balance sheet provides the foundation to support this profitable growth. We’re incredibly pleased with our start in the US, and this will continue to be an engine for growth over the next few years. Outside of the US, we see numerous opportunities across our products lines to continue to profitably grow and further strengthen the portfolio.”
In their financial results for the first nine months of 2024, Lancashire reported insurance revenue of $1.3 billion, an increase of $186.8 million, or 16.8%, compared to the same period in 2023.
Q3 2024 was of course an active quarter for catastrophe loss events, in which Lancashire had exposure to losses in respect of hurricanes Helene and Debby, the Calgary hailstorm, and storm Boris. These events were then followed by hurricane Milton in October.
The estimated ultimate net losses incurred in respect of all these weather events (undiscounted, including reinstatement premiums) is expected to be within the range of $110 million to $140 million, Lancashire noted.
During the call, the firm were asked a question on how much prudence Lancashire has within their loss estimates for hurricanes Helene and Milton and how much could potentially come through in prior year developments in later years.
Gregory said: “I’d start with saying that we’ve followed the same reserving approach and methodology that we always do on any loss, and that has historically proved to be a reasonably prudent methodology. A couple of things in terms of trying to work out where it’s going to ultimately end up is, I’d caveat that every loss is different and behaves differently, so it’s hard to use one loss and say the next loss will act in exactly the same way.
“I’d also caution that, particularly for Milton, that wasn’t actually that long ago, and we’re still receiving information at the moment. So, to make any kind of bold statement in terms of where it could end up, we’re obviously not in a position to do that. But I would reiterate, our methodology, particularly on cat reserving, has been pretty sound. We followed the same process we normally do. So, hopefully, directionally, we’ll see that, but it’s very early.”
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