Lancashire swings to half year loss due to COVID-19 hit

Lancashire Holdings blamed the COVID-19 pandemic, reserve deterioration and higher expenditure for its half year loss but highlighted strengthening pricing trends and attractive opportunity for growth in the near future.

The Bermuda-based insurer reported a $23 million loss for the first half of 2020, compared with a profit of $40.5 million in the first half of 2019.

Gross written premiums were $495.5 million for H1 020, up from $429.6 million in the same period of 2019, driven primarily by new business across all segments.

The company's combined ratio deteriorated to 106.9 percent for the half year, from 86.6 percent in the same period of 2019.

Lancashire said the unfavourable development during the first six months of 2020 was primarily driven by a number of late reported losses from the 2019 accident year, reserve deterioration on a couple of marine claims in the 2017 and 2019 accident years, in addition to adverse development on the 2010 New Zealand earthquake in the property segment.

Natalie Kershaw, group chief financial officer, said: “Our financial results were impacted by the COVID-19 losses, plus a number of late reported attritional claims from prior years. Excluding COVID-19 we did not incur any new major losses in the first half of the year and we have seen significant premium growth across all our underwriting segments.”

Alex Maloney, group chief executive officer, said: “In the face of the challenges generated by the COVID-19 pandemic to both sides of the balance sheet, there has been a retrenchment in re/insurance market risk capital and capacity."

Maloney noted that the first half of the year witnessed "double-digit percentage rate increases in many of our lines of business and accelerated rating dislocation in the catastrophe exposed reinsurance lines, resulting in rises in the range of 20%-30% for 1 June renewals in Florida."

"I believe that the economic fundamentals now dictate that this pricing trend is likely to strengthen throughout 2020 and into 2021 across a number of our business lines, and that current market conditions present an attractive opportunity for growth consistent with our strategy of deploying capital in line with the insurance market cycle," he said.

He added that the company is seeing attractive opportunities to develop many of our existing lines of business and to establish new ones. "Our business is well positioned to grow our underwriting portfolio and to develop opportunities to improve the risk adjusted returns for our business and our investors,” Maloney concluded.