Bermuda-based insurer Lancashire Holdings Ltd. reported strong growth in its property reinsurance portfolio in the first six months of 2024, and recent comments from Chief Underwriting Officer (CUO) Paul Gregory suggest the company will continue to benefit from favorable market conditions.
In the first half of this year, Lancashire’s reinsurance gross written premiums (GPW) increased 11.6% year-on-year to an impressive $734.6 million, with property and specialty lines the key drivers.
In addition to higher premiums throughout 2023 and 2024 – albeit to a somewhat more moderate extent this year – reinsurers have worked over the past year to impose improved terms and conditions. With insurers now retaining more risk while liability points have increased, the property reinsurance market has become more attractive, helping some insurers, including Lancashire, to increase earnings.
CUO Gregory said today during Lancashire’s H1 2024 results conference call that in reinsurance, “it is very pleasing that underwriting discipline is being maintained.”
“While it is fair to say there is greater interest from existing carriers to deploy, we have not seen any new capacity come to market and continue to see increasing demand, particularly from our existing customers,” he continued.
Gregory stressed that the markets for the majority of reinsurance products, particularly property insurance, are extremely healthy.
“In property reinsurance, there were no significant changes in tie points or rating levels. Instead, we saw in the mid-year renewals that the market remained stable when aggressive business was sought and sensible underwriting practices prevailed. This is encouraging,” he said.
While Gregory noted an increased willingness among existing players in the real estate market to deploy their capacity, he said increased demand for property reinsurance was helping to offset this.
“We view the property reinsurance market as a great place with ample opportunity to do well-priced, structured business,” Gregory said.
Lancashire has consistently stressed that it wants to grow in areas where the attractive ratings environment continues to provide opportunity. And with reinsurance market conditions expected to remain strong in the property and casualty sector through 2025, further growth appears highly likely.
During the conference call, Alex Maloney, Chief Executive Officer (CEO) of Lancashire, was asked about the possibility of deploying capital at attractive interest rates next year.
“We think we’re in a great place. We think the market is in a great place,” Maloney said. “Valuation has been strong… So we think whatever happens over the next year or two will continue to be in a great place. When you’re at the peak of the cycle, you don’t go from a great market to a market where you’re struggling to find opportunities within a year, that doesn’t happen.”
“So, yes, we definitely believe there are opportunities through 2025, whatever happens this year,” he added.
For Lancashire, Maloney continued, the US platform offers a great growth opportunity, as do mergers and acquisitions.
“Q&A will start at some point, and for us, Q&A has generally been good. And what I mean by that is it confuses people, and that usually means we’ve had good opportunities through Q&A, whether it’s people or products. So that’s another benefit for us,” he said.
“The outlook is good no matter what happens with interest rates. We are optimistic. We think there are opportunities next year, but we are also generating more capital as a company, so we think we are really well positioned,” Maloney concluded.
