Lancashire took less retro from 1.1, trimmed nat cat to balance

Lancashire bought less nat cat retro protection in a late and challenged 1.1. renewal season, but managed to hold its net nat cat exposure flat by adjusting on the front end, top company officials said of the recent renewals.

“We kept our footprint broadly stable,” CEO Alex Maloney (pictured) told the company’s Q4 earnings conference. “We proactively started to buy less retro limit protecting our own portfolio into 1.1 and retain more risk and we managed our inwards portfolio accordingly to get to the same position on a net basis.”

Retro held out as a wildcard in the recipe until the very end. Lancashire “wasn’t entirely clear until late in the day” what retro protection would back its cat underwriting, Mahoney admitted. The result: a goal to maintain flat net exposures. Lancashire ended up paying more for reduced cover with higher retentions.

Mahoney calls that caution in nat cat ‘dry powder’ for growth in 2023.

“Given the strong capital position that we have, if market conditions continue to remain strong and there are good opportunities to increase, then we have the capital to do it,” Mahoney said. “We sit in a good capital position if those opportunities do manifest.”

But nat cat will not likely take more than its share of Lancashire’s attention, despite the hard market conditions. “We are going to grow, but maintaining the balance we have in the portfolio,” Mahoney said.

Lancashire also sees “a lot of good opportunities outside of cat” including “newer lines” and the group’s recent expansion in specialty. Only select capital-light lines – and terror was named as an example – could be allowed to grow out of proportion. But cat losses “can disrupt quite materially.”

“We are not undoing the work we’ve done over the past years,” he said of Lancashire’s move to diversify risks and smooth earnings.

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