Lancashire said looking strong in recent dive into casualty reinsurance

London market leader  Lancashire is drawing praise for the style and structure of its foray into casualty reinsurance, with equity market analysts telling investors the move appears to be a strong step towards ever-more-diversified earnings while maintaining the group’s niche specialty style.

“We were particularly impressed by the actuarial-led approach in Lancashire's casualty reinsurance team, which started writing business 18 months ago,” analysts at the Jeffries brokerage told investment clients.

While Lancashire has launched the business with a focus on standard quota share opportunities for “high quality counterparties” with a “strong track record,” the group is working a bottom-up analytical approach to its own independent underwriting, boding well for future earnings, Jeffries analysts indicated.

“Crucially in our view, the casualty underwriters appear to be avoiding business where the underwriting authority is delegated,” Jeffries stated.

That creates a strong fit to the existing Lancashire approach to its niche specialty lines while adding diversification to smooth earnings, analysts at the Berenberg investment house said in chorus.

Lancashire prefers niche specialization and foreswears any hint of “wide-ranging, sprawling expertise,” Berenberg analysts said of their take from a recent company presentation.

“Its recent expansion into new lines of business such as casualty reinsurance, is effectively transforming the business model by providing a more diversified earnings stream,” Berenberg analysts told investor clients. “This means earnings volatility should be less pronounced in future.”

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