Reinsurance

12 Months Ended

Dec. 31, 2024

In the ordinary course of business, the Company cedes losses and LAE to other reinsurance companies. These arrangements reduce the net loss potentially arising from large or catastrophic risks. Certain of these arrangements consist of excess of loss and catastrophe contracts, which protect against losses exceeding stipulated amounts. The ceding of risk through reinsurance does not relieve the Company from its obligations to policyholders. The Company remains liable with respect to losses and LAE ceded in the event that any reinsurer does not meet obligations assumed under the reinsurance agreements. The Company does not have any significant unsecured aggregate recoverable for losses, paid and unpaid including IBNR, loss adjustment expenses, and unearned premium with any individual reinsurer.

The Company maintains proportional reinsurance contracts which cover all of the Company's products and geographies, and transferred, or “ceded,” a specified percentage of the premium to reinsurers ("Proportional Reinsurance Contracts"). The Company also opted to manage the remaining percentage of the business with alternative forms of reinsurance through non-proportional reinsurance contracts ("Non-Proportional Reinsurance Contracts").

Whole Account Quota Share Reinsurance Contracts

The Company agreed to the terms of a reinsurance program effective July 1, 2023 through June 30, 2024 which included Whole Account Quota Share Reinsurance Contracts by and among the Company, Lemonade Insurance Company ("LIC"), Metromile Insurance Company ("MIC") and Lemonade Insurance N.V. ("LINV"), and each of Hannover Ruck SE, MAPFRE Re, and Swiss Reinsurance America Corporation (collectively referred to as “Reinsurers”) ("Reinsurance Program"). Under the Reinsurance Program, which covers all products and geographies, the Company transfers, or "cedes," a share of premium to the Reinsurers. In exchange, these Reinsurers pay the Company a ceding commission on all premiums ceded to the Reinsurers, in addition to funding the corresponding claims, subject to certain limitations, including but not limited to, the exclusion of hurricane losses, and a limit of $5,000,000 per occurrence for non-hurricane catastrophe losses. The overall share of proportional reinsurance under the Reinsurance Program is approximately 55% of premium. The Per Risk Cap across the contracts is $750,000. Additionally, the contracts are subject to loss ratio caps and variable ceding commission levels, which align the Company's interests with those of its Reinsurers, and is settled primarily on a funds-withheld basis. The Reinsurance Program was renewed effective July 1, 2024 and will expire on June 30, 2025, with similar terms to the contracts that expired on June 30, 2024, except for the limit per occurrence for non-hurricane catastrophe losses which increased to $10,000,000.

MIC entered into a Quota Share reinsurance agreement effective January 1, 2022 and expired on June 30, 2023. Under the terms of the agreement, the Company ceded 30% of premiums and losses to reinsurers.

Property Per Risk Excess of Loss and Auto Facultative PPR Reinsurance Contracts

LIC and LINV entered into a Property Per Risk Excess of Loss Reinsurance Contract with a panel of reinsurance companies (the "PPR Contract"), and LIC entered into an Automatic Facultative Property Per Risk Excess of Loss Reinsurance Contract with Arch Re (the "Automatic Facultative PPR Contract"), each effective from July 1, 2023 until June 30, 2024. Under the PPR Contract, claims in excess of $750,000 are 100% ceded up to a maximum recovery of $2,250,000, subject to certain limitations. The PPR Contract was renewed with LIC and MIC at similar terms effective July 1, 2024 and will expire on June 30, 2025. The Automatic Facultative PPR Contract, in which claims in excess of $3,000,000 are 100% ceded with a potential recovery of at least $10,000,000, subject to certain limitations, expired on June 30, 2024, and was not renewed.

Excess of Loss Reinsurance Contract

The Company entered into an Excess of Loss ("XOL") Reinsurance Contract through a captive in Bermuda in which the Company has variable interest, primarily to cover catastrophe risk over the initial $50,000,000 limit for each loss occurrence, and further subject to a limit of $80,000,000 for each loss occurrence and in aggregate, primarily on property and auto business underwritten by LIC. This XOL reinsurance contract became effective July 1, 2023 and expired on June 30, 2024. The Company renewed the XOL reinsurance contract, effective July 1, 2024 through June 30, 2025 at similar terms and was expanded to include risks written by MIC.

The Company entered into a reinsurance program to protect against catastrophe risk in the U.S. that exceed $80,000,000 in losses effective July 1, 2022 which expired on June 30, 2023.

Captive

The Company is also exposed to some risks from MIC ceded through the Quota Share ("QS") Reinsurance Contract which is retained in an offshore captive subsidiary, Lemonade Re SPC. This QS reinsurance contract became effective July 1, 2023 and shall remain in force for an indefinite period until terminated by either party.

Through the offshore captives, the Company is exposed to the risk of natural catastrophe events and other covered risks under the reinsurance contracts from policies underwritten by LIC and MIC.

Reinsurance recoverable

Amounts recoverable from reinsurers are recognized in a manner consistent with the claims liabilities associated with the reinsurance placement and presented on the balance sheet as reinsurance recoverable. Such balance as of December 31, 2024 and 2023 are presented in the table below ($ in millions).


	December 31,
	2024		2023
Reinsurance recoverable on paid losses	$	20.9	$	18.2
Ceded unpaid loss and LAE	149.5		120.2
Total reinsurance recoverable	$	170.4	$	138.4

To reduce credit exposure to reinsurance recoverable balances, the Company obtains letters of credit from certain reinsurers that are not authorized as reinsurers under U.S. state insurance regulations. In addition, under the terms of its reinsurance contracts, the Company may retain funds due to reinsurers as security for those recoverable balances. The Company has the following unsecured reinsurance recoverable balances from reinsurers at December 31, 2024 and 2023 with a majority of the reinsurers having A.M. Best rating of A (Excellent) or better ($ in millions):


AM Best Rating		December 31,
	Reinsurer	2024		2023
A+	Hannover Rueck SE	$	104.0	$	126.6
A	MAPFRE Re, Compania De Reaseguros S.A.	34.0		27.2
A+	Swiss Reinsurance America Corporation	26.3		20.1
NR	Lloyd's Underwriter Syndicate no. 2791 MAP	2.7		1.7
A+	Aviva Insurance Limited	2.1		0.9
A++	Tokio Marine & Nichido Fire Insurance Company Limited	1.9		0.1
NR	Lloyd's Underwriter Syndicate no. 1084 CSL	1.1		1.6
A++	The Travellers Indemnity Company	0.4		0.4
A+	Odyssey Reinsurance Company	0.2		0.1
A+	Lloyd's Underwriter Syndicate No. 2001 AML	0.2		0.4



		$	172.9	$	179.1
	Other reinsurers	0.4		1.3
		$	173.3	$	180.4

Premium written, earned and losses and LAE incurred

The impact of reinsurance treaties on the Company's consolidated statements of operations and comprehensive income is as follows ($ in millions):


	December 31,
	2024		2023		2022
Premium written:
Direct	$	916.4	$	730.9	$	555.6
Assumed	12.6		7.5		0.1
Ceded	(513.9)		(389.1)		(333.1)
Net premium written	$	415.1	$	349.3	$	222.6

Premium earned:
Direct	$	815.9	$	667.2	$	490.5
Assumed	11.4		5.1		—
Ceded	(456.7)		(357.1)		(318.1)
Net premium earned	$	370.6	$	315.2	$	172.4

Loss and LAE incurred:
Direct	$	593.3	$	563.4	$	441.0
Assumed	11.7		6.0		—
Ceded	(328.0)		(289.0)		(273.7)
Net loss and LAE incurred	$	277.0	$	280.4	$	167.3