Greenlight Re expects LA wildfires losses of up to $30 million

By Michael Loney

March 12 - (The Insurer) - Greenlight Capital Re expects losses of between $15 million and $30 million from the Los Angeles wildfires, while its CEO said that aviation losses related to the Russia-Ukraine conflict have not exhausted its retrocession cover.

On an investor call on Tuesday, Greenlight Re CEO Greg Richardson said his company estimates the insurance industry loss from January’s wildfires at $40 billion to $50 billion and that its share of this loss will be $15 million to $30 million “as we are somewhat underweight in property compared to the industry”.

The executive was speaking after Cayman Islands-based Greenlight Re reported a net loss of $27.4 million for 2024's fourth quarter, compared with a net profit of $17.6 million in the same period of 2023.

On the call, Richardson described the fourth quarter as “challenging” for Greenlight Re, with a net underwriting loss of $18 million on a combined ratio of 112.1% and an investment loss from Solasglas of $8.8 million, or -1.9%.

“Our underwriting loss was driven by a combination of cat activity in the quarter and prior-year development,” Richardson said.

Nasdaq-listed Greenlight Re’s share price closed down 3.1% on Tuesday at $13.28, following the release of the results after markets closed on Monday.

Greenlight Re booked $17.6 million of cat losses in the fourth quarter, with Hurricane Milton being the most material at $7.5 million.

The driver of the prior-year development was a $15 million increase in Russia-Ukraine conflict reserves, linked to the confiscation of aircraft.

“We booked an initial provision for the Russia-Ukraine conflict in the first quarter of 2022, and that provision remained broadly flat over the intervening quarters,” Richardson said. “However, in Q4 of last year, following the commencement of High Court litigation in London, we became aware of increased settlement activity.

“Based on our analysis of various legal claims and industry sources and in anticipation of formal claim notifications, we decided to get ahead of this issue and to strengthen our IBNR provision.”

Richardson said that Greenlight Re has outward retrocession, and the development booked is net of that.

“That retrocession cover is not exhausted. We're into it, but not exhausted. So that also dampens the uncertainty,” he said.

Richardson added that the greatest uncertainty around the Russia-Ukraine loss is the interpretation of the loss in terms of the number of events and how it is reported by reinsurers into the reinsurance and retrocessional market.

'ATTRACTIVE' MARKET CONDITIONS AT 1.1

Richardson said Greenlight Re was “very pleased” with the progress at the January 1, 2025 reinsurance renewals, during which the company incepts more than 50% of its business.

“Market conditions remain very attractive despite softening in certain classes, and we took advantage of those conditions to grow our business in key areas,” he said.

Richardson said that he is optimistic for the prospects for Lloyd's in 2025 after several years of material rate increases and strong performance.

“This year, we expect our FAL (Funds at Lloyd's) book to grow by approximately 25%, given the attractive opportunities available to us,” he said.

Discussing specialty reinsurance, Richardson said the market remains disciplined with terms and conditions being maintained and some modest softening on rates with 2.5% to 5.0% decreases.

“However, the specialty market was very competitive on signings, with many of our competitors looking to grow in this space. We expect our 1.1 specialty book to grow modestly,” he said.

Greenlight Re saw some weakening in the property line at 1.1, “and we estimate rates are down on average 5.0% to 7.5%, with reductions on our XoL accounts larger than on our quota share accounts”.

Richardson added: “Despite this, the market remains attractive, and we expect this portfolio to grow by approximately 10% over 2024.”

Greenlight Re’s innovations portfolio is spread throughout the year and not heavily weighted towards 1.1.

“For the business that did renew on 1.1, we saw strong growth and relatively flat rates,” Richardson said.