Lemonade renews reinsurance program

Digital insurance company Lemonade has announced that its reinsurance program has been renewed and that it has created new risk-bearing entities.

Lemonade has formed a new risk-bearing entity, Lemonade Re, in the Cayman Islands. Lemonade plans to hold some of its retained risk in Lemonade Re. Similarly, Lemonade has established a captive cell at a Bermuda transformer and plans to utilise it to retain most of its windstorm exposure. While windstorm reinsurance capacity was available, this structure was determined to offer a materially better cost/benefit profile.

The centerpiece of the program is 55% quota share protection, the same level as the expiring coverage. The variable ceding commissions are projected to be roughly equivalent to those enjoyed under the outgoing agreements. The program covers all Lemonade businesses globally, now also including Metromile, acquired by Lemonade in 2022.

“It says a great deal when some of the world’s largest and most respected reinsurers choose to stake their capital on the performance of our business,” said Daniel Schreiber, Lemonade co-chief executive and cofounder. “These partners allow us to operate in a very capital light mode and focus our resources on expanding our customer base across all of our products and geographies, while harnessing our technologies to get ever more efficient, and ever better at matching rate to risk.”

Lemonade said that its program is led by the same tier-one carriers as the expiring and was oversubscribed on all dimensions.

The extant program expires at midnight on June 30, 2023, at which time the new program will go into effect for a standard 12-month term. The company’s financial expectations for Q2 and for the full year 2023, as communicated in the Q1 ‘23 Lemonade Letter to Shareholders, remain unchanged.