Lancashire wrote less retro at 1/1 amid ‘reasonably competitive’ market conditions: CUO

Paul Gregory, Chief Underwriting Officer (CUO) of insurance and reinsurance firm Lancashire Holdings Limited, has revealed that the company wrote a smaller retro book at the January 1st 2025 reinsurance renewals, which according to the CUO, resulted in a marginally better outcome for the organisation.

It’s worth noting that Lancashire is primarily a buyer of retrocession, rather than a seller.

Speaking during Lancashire’s full-year 2024 earnings call, the CUO explained that the company cut its inwards retro writings at the January renewals, as market conditions were “reasonably competitive”.

“We did take the opportunity to cut our retro book back. There was more rating pressure in that market, and as I said earlier, we’re a bigger buyer than seller so at the margin that’s better for us,” Gregory said.

“But, we took the opportunity to cut back some of our inwards exposure, given the rating environment.”

Also during the call, Gregory explained that Lancashire expects there to be less property catastrophe reinsurance rate softening than initially anticipated for the reminder of 2025, following the impacts of the wildfires in Southern California.

Industry losses for the January 2025 Los Angeles wildfires are currently centered around the $40 billion mark, however some companies have suggested the total loss could reach as high as $50 billion, while economic losses are expected to exceed $250 billion by some margin.

For Lancashire, the wildfires are estimated to drive net losses of between $145 million and $165 million, while the firm recently revealed that the event has eroded “a good portion” of its annual aggregate reinsurance coverage placed at the 1/1 2025 renewals.

Gregory commented on the potential impact of the fires on rating for the rest of 2025 for different classes and regions.

He said: “For property catastrophe reinsurance, we would expect there to be less rate softening than we originally anticipated. We would expect to see a flattening of rate in the US and more measured rate softening in other territories.”

“There are, of course, a number of territories still to renew through the year that are loss impacted, and these will see year on year rate increase. So, overall, the rating environment will now be more favorable than originally expected,” he added.

Outside of property cat reinsurance, Gregory explained that Lancashire does not foresee any significant change from the firm’s original rating outlook, other than if directly impacted by wildfires.

“What the California wildfires do is act as a reminder that our industry is always subject to large loss events. It is also a reminder of the value of our product. Usually, large loss events of this nature are a catalyst for future demand, and any increased demand for the product will only help further stabilise the rating environment,” commented Gregory.