Lancashire Holdings Ltd (Lancashire) is the latest to announce its trading statement for the three months ended March 31, 2020. In a strong start to the year, the group revealed that its gross premiums written increased by 11.8% year on year to $242.8 million (around £194.9 million) and across Lancashire’s four principal segments, property, energy and aviation gross premiums written increased while in marine a decrease was reported.
The increase in property was largely accredited to new business with rate and exposure increases also contributing to the growth. The jump was somewhat offset by a reduced level of reinstatement premium compared to the first three months of 2019, and some business which was not renewed.
The group’s energy gross premiums written, meanwhile, rose mainly due to new business and rate and exposure increases in the upstream energy, downstream energy and power classes of business. Aviation gross premiums written saw jumps primarily due to new business in the aviation deductible and the aviation hull and liability class of business, as well as exposure increases on policies bound in prior underwriting years in the AV52 class.
Lancashire said that the decrease in marine gross premiums written was due to timing differences on the renewal of non-annual policies in the marine hull and total loss class, which more than offset new business and rate and exposure increases in the marine cargo class.
Looking at the developments during the first quarter, group CEO Alex Maloney highlighted the premium income growth of the business and an RPI of 108%, and said this is evidence of improved market discipline and that with the recent stress to many insurance industry balance sheets, the group expects the need for improved risk pricing will continue during 2020.
“In terms of the impact of the current pandemic on Lancashire’s own business and capital resources, we have established provisional reserves for pandemic related liabilities of approximately $35.0 million (around £28 million),” Maloney said. “In line with the broader market, our investment portfolio delivered a negative total net investment return of 1.9% for the first quarter, which is, to a large degree, driven by unrealised losses. This was in line with our expectations of performance given the stressed market conditions.”
Maloney outlined that the ongoing nature of the COVID-19 pandemic makes it exceptionally difficult to predict what the ultimate impact will be for the group or the wider industry. The reserve established of approximately $35.0 million of losses, net of reinsurance and reinstatement premiums, in this quarter, was based on a review of Lancashire’s book and its potential COVID-19 exposures arising in this quarter, which is principally concerning its property segment. He noted, however, that the final COVID-19 related losses may be materially different from those booked to date.
“The group has more than adequate liquidity and solvency headroom and management will continue to monitor and regularly review the longer term impact of the COVID-19 pandemic on the group,” he said.
“In the face of this real world ‘stress test’ I have been impressed by the resilience of our business model and the professionalism of our people. The group retains a robust solvency buffer and we stand ready to meet the challenges and opportunities that lie ahead.”
