Lancashire expects less property cat reinsurance rate softening after LA wildfires: CUO Gregory

Paul Gregory, Chief Underwriting Officer (CUO) of re/insurance company Lancashire Holdings Limited, expects there to be less property catastrophe reinsurance rate softening than initially anticipated for the remainder of 2025, following the impacts of the costly January wildfires in Southern California.

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

For Lancashire, the fires are expected to drive net losses of between $145 million and $165 million, and the firm revealed earlier today that the event has eroded “a good portion” of its annual aggregate reinsurance coverage placed at the 1.1 2025 renewals.

At the January renewals, overall, property and property cat reinsurance rates softened when compared with the 1.1 2024 renewals, although conditions were in line with Lancashire’s expectations.

Prior to the LA wildfires, industry sentiment suggested that reinsurance rates would soften further at the April and mid-year 2025 renewals, but the magnitude of the wildfire loss has, unsurprisingly, altered the landscape somewhat.

During Lancashire’s full year 2024 earnings call, CUO Gregory commented on the potential impact of the fires on rating for the rest of 2025 for different classes and regions.

“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,” said Gregory.

“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.

Later in the call, the CUO reiterated that the carrier’s current view is that the US base property cat risks will move closer to flat, unless loss impacted where the rates will increase.

“For territories outside the US, we would anticipate marginal softening but being less than we would have originally expected. So, overall rating on that portfolio will improve versus our original expectations. I wouldn’t define it as a severe hardening, or anything of that nature.

“In terms of Japan specifically, we are in the midst of those renewals at the moment. So, we’ve probably only got a couple of firm orders and are still pricing other parts of the portfolio. But I would categorise it as in line with what I’ve just said, probably slightly less softening than we would have seen, but I would still anticipate there to be marginal rate softening for most Japanese clients at 1.4,” said Gregory.