Cat hardening to continue even if hurricane season is kind: Lancashire CEO

Hardening of property catastrophe reinsurance rates is expected to continue through this year and into 2023, according to Alex Maloney, CEO of specialty insurance and reinsurance group Lancashire Holdings.

Maloney is the latest senior executive in the industry to suggest that reinsurance renewals in 2023 will see catastrophe reinsurance lines of business harden further.

Which the CEO believes is largely down to a lack of capacity in the space.

Speaking during Lancashire’s first-half earnings call just now, CEO Maloney explained what Lancashire has been seeing, “We’ve seen continued hardening in the cat portfolio and we expect that to continue into 2023, even if the hurricane season is kind to the industry.

“That’s mainly being driven by supply and demand of capital issues.”

Lancashire CUO Paul Gregory concurred, saying that, “In cat classes in Q2 there was clearly a positive step-change in rating.”

Gregory went on to say that the market for catastrophe exposed classes of business is being driven because, “There is noticeably less capacity available which is squeezing rates higher.”

Maloney also highlighted that, “On the cat side, there’s some quite public retrenchment of cat capacity and when you get past the jargon, we believe there well be less supply of capital supporting catastrophe business, mainly driven by climate change and retrenchment.”

At the same time, demand for catastrophe reinsurance capacity may increase, as companies deal with inflation, climate change and other factors, so “That’s why we think will go up even in a clean cat year,” Maloney said.

All of which leads the company to be increasingly constructive, on cat risks but also more broadly on the rest of its specialty focused book.

Lancashire has spent significant effort in attracting talent and underwriting teams and feels it is now particularly well-positioned as the market is expected to continue hardening.

Maloney stressed, Our DNA is to grow whenever the underwriting opportunity is better and we continue to do that.”

Gregory added, “Our outlook for the market is more positive today, than it was at the beginning of the year.”