Annual Report & Accounts 2023

Delivering

together

Holdings Limited

Our culture and focus

enables our success

Our values underpin

everything we do and are

at the core of our culture.

These embedded values create

a culture which delivers in the

right way for all our stakeholders,

as we continue to grow and

move forward.

Strategic report

Delivering together

2 2023 at a glance

3 Key performance indicators

4 Chair’s statement

6 Group Chief Executive’s review

Delivering our strategy

9 Business model

10 Our strategy

12 Financial review

14 Underwriting review

18 Business review

Delivering for our clients

23 Enterprise risk management

28 Principal risks

Delivering for our people

33 Our people and culture

Environmental, social and

governance report

Delivering sustainably

41 Chair’s introduction

43 Our ESG strategy and progress

Sustainability

Delivering for our communities

45 The Lancashire Foundation

49 2023 TCFD Report

65 Delivering responsibly

Governance

Delivering as a responsible business

72 Board of Directors

76 Corporate governance report

80 Section 172

83 Committee reports

101 Directors’ Remuneration Report

118 Directors’ Report

121 Statement of Directors’ responsibilities

Financial statements

122 Independent auditor’s report

131 Consolidated primary statements

135 Accounting policies

148 Risk disclosures

167 Notes to the accounts

Additional information

196 Shareholder information

198 Glossary

205 Alternative Performance Measures

207 Contact information

Leadership

Exhibiting passion and commitment in all aspects of

Lancashire life and inspiring others to do the same, we are…

Aspirational

aspiring to deliver a superior service for our clients,

ourselves and our business partners, we are…

Nimble

in our decisions, actions and business processes, and

considerate of our environment and wider society, we are…

Collaborative

valuing teamwork and a diversity of skills and experience

and sharing in our success, and we are…

Straightforward

in conducting our business inanaccountable, open,

honest and sustainable way.

Our long-term strategy is to manage the market

cycle and deliver strong returns for shareholders

through a portfolio of diversified products.

During 2023, we delivered on those objectives

with a disciplined approach to managing risk.

Find out more about how we’re delivering...

Our purpose – page 9

Our strategy – page 10

For our people – page 33

Sustainably – page 41

For our communities – page 45

As a responsible business – page 65

Delivering

together

1Lancashire Holdings Limited | Annual Report & Accounts 2023

2023 at a glance

2023 was a year

of delivering for all

our stakeholders

We are a provider of global specialty insurance and reinsurance

products offering risk transfer solutions to brokers and clients.

We always strive for long-term and mutually beneficial

relationships with our clients and stakeholders.

A strong, growing and sustainable business

We want to be the best and we are building on our strengths

Delivering

for our clients

Delivering

for our people

Delivering

for our investors

Delivering

for our communities

Our (re)insurance products give people and businesses confidence

to operate, thrive and recover quickly if loss events occur.

Our people are experts in their fields. From underwriting to support

functions, we strive to have strong, diverse and inclusive teams who

are focused on delivering our potential.

During 2023, we paid a total of

Delivering

sustainable operations

.m

donated through the

Lancashire Foundation in 2023



individual organisations supported



employees attended our

Project Transform volunteering

programme in Tanzania

%

of calculated GHG emissions

offset from our own operations

.m

in dividends to

our shareholders



core product groups with

associated business lines



colleagues across our offices

Top

employer in Bermuda in 2023

%

engagement score in

2023 all-staff survey

• New visitor suite opened at our London office

• U.S. office opened to support the expansion of our client offering

.m

gross losses paid in 2023

2 Lancashire Holdings Limited | Annual Report & Accounts 2023

5.7

(3.5)

82.6

98.7*

24.7

(1.2)*

2,072.2

1,850.7

382.1

141.6

9.5

11.7

Change in DBVS

An excellent result due to profit after tax of

$321.5 million, reflecting a strong underwriting

performance complemented by positive

investment returns.

Our shares performed broadly in line with the FTSE

250 in 2023. However, the total shareholder return

of 9.5% was supported by a special dividend of $0.50

per share in the year. This is in line with Lancashire’s

proven track record of returning excess capital to

shareholders over time.

Combined ratio

(undiscounted)

During 2023, we continued to implement our

long-term strategy to manage the market cycle

and deliver strong profitable growth through a

portfolio of diversified products. The combined

ratio (undiscounted) of 82.6% is a strong result

in a year with over $100bn of insured natural

catastrophe events.

Insurance revenue grew 23.9% to $1,519.9 million

driven by growth in casualty reinsurance, specialty

reinsurance, property insurance and energy and

marine insurance. 2023 was reasonably active for

natural catastrophe and weather loss activity and

we also saw some risk losses in our energy classes.

However, none of these were individually material

to the Group.

Total investment return

The Group’s investment portfolio, including

unrealised gains and losses, returned 5.7% in 2023.

The positive returns were driven by $108.5 million

of interest and dividend income as our portfolio

benefited from higher yields. The Group also

benefited from net movement in unrealised gains

on our fixed income portfolios due to the expectation

of rate cuts in 2024.

The Group continues to expand and diversify its

underwriting portfolio by taking advantage of the

current hard phase of the insurance market cycle

and the associated rate increases across multiple

lines of business. In 2023, the Group also announced

the launch of Lancashire Insurance U.S., which

will operate under a delegated underwriting

arrangement with Lancashire’s UK company

platform. Underwriting will commence in 2024.

Key performance indicators

Alternative Performance Measures (APMs).

Refer to page 205.

KPI linked to Executive Directors’ remuneration.

For more information, see pages 101 to 117.

Key

Total shareholder

return

Insurance service result Gross premiums written

under management

.bn.m.%

.% .%

.%

* Comparative figures have been restated to reflect the

adoption of IFRS 9 and IFRS 17.

3Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

“ Our strong performance allowed

us topay a special dividend in

December 2023. A further special

dividend was announced in March

2024, along with an increase inour

ordinary dividend of 50%.”

Peter Clarke

Non-Executive Chair

Chair’s statement

Our strength

and resilience

The Board is very pleased with the

performance of the business during

2023. As part of the Board’s annual

review of Lancashire’s strategic

priorities in 2023, we discussed

and affirmed three areas of focus:

underwriting comes first; balance risk

and return through the cycle; and

insurance market employer of choice.

Lancashire Holdings Limited | Annual Report & Accounts 2023

The management team have been committed to delivering on these

priorities and the performance of the business in 2023 is testament

to their success.

From an underwriting perspective, the business has continued to

grow with the market opportunity. These are some of the best market

conditions in over a decade, and Lancashire has always been a business

that is able to quickly and efficiently match capital to the best

underwriting opportunities. Gross premiums written increased by 16.9%,

and insurance revenue increased by 23.9%, as Alex discusses in his

review on page 6. The growth has come from a more diversified portfolio

which better mixes catastrophe risk with less volatile product lines.

This was the result of a strategic decision to diversify the portfolio that

has been implemented over the past five years, and I am pleased that

we are now seeing the results of that pivot come through in earnings

and in a healthy combined ratio (undiscounted) of 82.6% for 2023.

The performance of the business also resulted in a positive change

in diluted book value per share of 24.7%.

The strength of Lancashire’s business model has also allowed

us to increase our ordinary dividend by 50%.

Lancashire’s strong performance during 2023 was discussed at our third

quarter Board meeting, and the Board was pleased to approve a special

dividend of $119.5 million, which was paid in December 2023. The Board

also approved a buyback of Lancashire’s common shares. However,

no shares were repurchased under the programme. A further special

dividend was announced in March 2024.

While the underwriting result is key, the business has also benefited

from the higher interest rate environment within its investment

portfolio. The portfolio delivered a return of 5.7%, which is a welcome

outcome following the investment market volatility and negative returns

reported during 2022.

As Natalie discusses in her review, Lancashire has an extremely robust

capital position and has ample capital to fund its planned underwriting

during 2024 while rewarding its shareholders. The Group’s reserving

philosophy has traditionally been conservative for both newer and

more established lines of business. That remains the case, and there

are no plans to change this successful approach.

During 2023, the Group has also continued its focus on environmental,

social and governance matters. I discuss these in more detail in the

introduction to the Sustainability and Governance sections of this report,

starting on page 41. As always, I would like to commend the work of the

Lancashire Foundation and its efforts to help those less fortunate. This

includes putting ‘ESG into action’ through volunteering, particularly

through Project Transform, and in assisting a range of causes, which

during 2023 included a specific focus on the environment.

This is my final report to shareholders as I prepare to step down from

my roles as Chair and Non-Executive Director following the 2024 AGM,

having completed nine years’ service. I am delighted that Philip Broadley

has been appointed as Non-Executive Director of LHL and as the LHL

Chair designate. Philip has a wide breadth of experience across the sector

and beyond, and I know the Board and the Company will be in safe hands

under his stewardship.

As I reflect on the past nine years, Lancashire has changed considerably

and has grown from a relatively small underwriter of select risks to a

much larger, diversified business and a respected leader across the (re)

insurance sector. In 2016, my first year as Chair, the business wrote

$633.9 million of premium – and underwrites three times that today.

This growth has been accompanied by a commensurate investment

across our business in underwriting, actuarial and support functions.

Lancashire’s product suite has also expanded with the introduction of

many new lines of business. While catastrophe risk is still a significant

part of the portfolio, the less volatile lines now add ballast to the

business. Lancashire remains a lean and efficient company and is able

to react quickly when the right opportunities are available. None of this

could have been achieved without a dedicated and committed team and

I would like to thank Alex, Natalie and Paul, and the other members of

the management team, for their leadership. It has not always been easy

and we have seen some challenging periods, but I am confident that the

business is in excellent hands and that their passion for ongoing success

will be realised. I know that this commitment to the business is shared by

all employees across the Group, and I would like to thank them for their

hard work, enthusiasm and good humour. The Group’s headcount has

grown from 198 in my first year as Chair to nearly 400 today. Despite

this rapid expansion, Lancashire has retained its distinctive and vibrant

culture and will continue to do so.

So, as I sign off for a final time, I would like to thank all my colleagues

at Lancashire, my fellow Board members, both past and present, and

our shareholders for their fantastic support and dedication during my

tenure as Chair. I am extremely proud to have been the Chair of this

great company that places its clients, business partners, shareholders,

people and all stakeholders at the centre of everything it does. I offer

everyone at Lancashire my very best wishes for the future, and I look

forward to the continued success of the business in 2024 and beyond.

Chair designate Philip Broadley

Philip Broadley was appointed as a Non-Executive Director

in November 2023. Philip was also identified as the Chair

designate, and his appointment as Chair is expected to take

effect immediately following Lancashire’s 2024 AGM in

May 2024, subject to shareholder approval.

Philip is Senior Independent Director and Audit Committee Chair

at AstraZeneca PLC and a Non-Executive Director of Legal &

General Group Plc, and has held senior roles across financial

services, including as Group Finance Director at Prudential plc

and Old Mutual plc. He has also served as Chair of the 100 Group

of Finance Directors and as a member of the Code Committee of

The Takeover Panel.

Philip said: “Lancashire is in a period of robust growth in a strong

market environment. I join a business which is in very good hands.

I am extremely pleased to accept my appointment to the Board.

I look forward to working with Alex and all my colleagues at

Lancashire and to leading the LHL Board as Chair following

the 2024 AGM.”

5Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

“ At the heart of our business is our belief in

the importance of managing the cycle. This

means we will take opportunities to grow

when the environment is right and, during

2023, we continued to focus on writing

profitable business during the best market

conditions we have seen for a decade.”

Alex Maloney

Group Chief Executive Officer

Delivering our growth

and profit ambitions

I am extremely pleased with

Lancashire’s performance in 2023, its

development as a growing organisation,

and the future opportunities we see.

Group Chief Executive’s review

6 Lancashire Holdings Limited | Annual Report & Accounts 2023

We have delivered on our growth and profit ambitions, delivered for our

people, and within our communities. We have achieved this through our

unique culture and way of approaching our work and, as I look into 2024,

I am extremely encouraged by the opportunities that await us and our

ability to continue to deliver on our strategic objectives.

Delivering our growth and profit ambitions

At the heart of our business is our belief in the importance of managing the

cycle. This means we will take opportunities to grow when the environment

is right and, during 2023, we continued to focus on writing profitable

business during the best market conditions we have seen for a decade.

Gross premiums written increased by 16.9%, and insurance revenue

increased by 23.9%, during the year, due to a combination of new

business and rate rises across our portfolio. The insurance service result

increased by 169.8%. This excellent underwriting performance resulted

in a combined ratio (undiscounted) of 82.6% and, as our 2023 results

demonstrate, we have built a better balanced and more diverse

underwriting portfolio, which generated more profit against our capital

base. Our ultimate goal at Lancashire is to maximise risk-adjusted returns

for our shareholders. Our diversified product mix means we aim to have

lower earnings volatility and the ability to produce better returns on

capital and grow our diluted book value per share over the long term.

Due to the strong operational performance during the year, in the third

quarter we announced a special dividend of $0.50 per share. At its March

2024 meeting, the Board also agreed a further special dividend of $0.50

per common share.

We are always led by the underwriting opportunity, and we believe there

are significant opportunities going into 2024. We are well capitalised to

be able to fund those opportunities through internal earnings growth

while also rewarding our shareholders.

While Lancashire remains a significant insurer of catastrophe risk, since 2018

we have invested in our underwriting teams and added new product lines

that better balance that risk and inherent volatility. At the same time, we

have benefited from the positive underwriting conditions for catastrophe

business during the past 12 months. This mix of products during this phase

of the market cycle has resulted in higher returns and this has improved

our portfolio’s overall resilience to the impact of catastrophe losses.

We have now shown that we can manage volatility through a balanced

portfolio whilst also substantially growing the business. During 2023,

Lancashire did not incur any individually material catastrophe or large

risk losses and we were able to release reserves on prior years. As Natalie

discusses in her review on page 12, allocating our capital to the most

profitable opportunities remains our focus.

Delivering for Lancashire’s people

and communities

We are fundamentally a people business, and we believe that focusing on

our people as part of our strategy is crucial to our ongoing success. We

instil high expectations in our people and aim to offer a culture that is

diverse, unique and special. My role as CEO is to keep that positive culture

alive because it seeps into all areas of our business. The promise we make

to our people is that we will give them every opportunity to thrive and

develop their careers. The growth we have seen over the past few years

has increased the scope of the opportunities available. We also want to

reward people for their hard work, and I am always proud to be able to

announce our internal promotions – and we made 46 of those during

2023. We are all invested in Lancashire and committed to success.

I’ve been at Lancashire for 18 years, Paul Gregory has been here for 16 years

and Natalie Kershaw for 14 years. We also have underwriters who have

been with us for all or the majority of their careers. This tells its own story

– that we have a dedicated team who like what we do and how we do it.

That doesn’t mean we are afraid to question ourselves, but we always do

that in a positive way for a better outcome. We have also been incredibly

successful at attracting new talent to the Group in recent years to help us

challenge how we work across both underwriting and support services.

I was particularly pleased with the results of our 2023 employee survey

which showed strong support for our culture and the experience we offer

our people. Our overall engagement score (a common way to track how

companies are doing based on four core questions: recommending a

business as a good place to work, feeling proud to work there, being

motivated to do your best work, and intention to stay) was 90%. It’s an

important measure, and one that has increased since our last survey in

2021 and is 14 points higher than our peer benchmark. Our highest scores

were for being proud to work at Lancashire at 94%, while 92% of people

responding said they are motivated to do their best work and would

recommend Lancashire as a great place to work. This is great feedback,

showing that we are on the right path, and I look forward to developing

this engagement even further in 2024 and beyond (please see page 33

for more information).

Aside from our strong financial performance, I am also pleased with our

continued focus on environmental, social and governance matters. This

is particularly the case in our communities, where our ethos is supporting

those less fortunate through the work of the Lancashire Foundation.

During 2023, 12 employees travelled to Tanzania to assist with a

construction project and we believe it is initiatives like this that bring

social responsibility to life (please see page 48 for more information).

Seizing the opportunities and looking

ahead to 2024

During 2023, we announced the first significant geographical expansion

of our business since our inception. Lancashire Insurance U.S. will operate

under a delegated underwriting arrangement with Lancashire’s UK

company platform. It will allow us to write business that we could not

access before through new distribution channels and with new clients.

This development has been driven by the compelling underwriting

opportunity that we see in the U.S. Excess and Surplus market.

While we are being conservative in our initial approach, with our

reputation for underwriting excellence and service to our clients we

are excited by the long-term opportunities that we see. There will be

significant opportunities for Lancashire in 2024 with the continuing

strong rate environment across our product suite. Our strong capital

base means we will continue to write profitable business that is within

our appetite and respond quickly to new opportunities.

I remain focused on delivering our objectives and continuing the growth

and momentum we have built during 2023. Our franchise remains

resilient, and we have fantastic teams across the Group who are

dedicated to achieving our goals.

I would like to thank everyone at Lancashire for their hard work during

2023 and their commitment to the business. Going into 2024, we have

a strong vision for the future, and we have the right people, products

and operational expertise to deliver it.

7Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

Delivering

our strategy

“Our franchise remains

resilient and we have

fantastic teams across the

Group who are dedicated

to achieving our goals.”

Group CEO

Alex Maloney

8 Lancashire Holdings Limited | Annual Report & Accounts 2023

Our purpose

Our business model

Our people

%

of employees say

they are proud to

work at Lancashire

Our policyholders

.m

gross losses paid in 2023

Our shareholders

.%

change in diluted

book value per share

Society

m

donated through the

Lancashire Foundation

since 2007

The environment

,

carbon credits purchased

to support our continued

carbon-neutral status

Delivering value for

Business model

Deliver bespoke risk

solutions that protect

our clients and support

economies, businesses and

communities in the face of

uncertain loss events.

Support our people and

work with our stakeholders,

fostering a positive,

sustainable and open

business culture to the

benefit of society.

Our vision is to be the leading underwriter of specialty insurance and reinsurance products.

We work to deliver that vision through our business model which focuses

on our core strengths.

• We value our long and mutually beneficial relationships with our clients and brokers

• Our aim is to enable our clients to recover from loss events as soon as practicable

• We focus on customer service and ensure we are responsive, open and honest at all times

• Our experienced management team has a diverse skill set and is focused on delivering our strategy

• We have skilled teams across the Group and make decisions quickly and effectively through our lean

business operations

• We offer highly-specialised multi-class products with market barriers to entry

• We maintain rigorous systems for risk monitoring and management

• Our strong track record of capital management is central to our strategy

• We manage our underwriting portfolio through market cycles and reduce volatility

by optimising our capital

• We have the ability to write business across our platforms

• Through access to multiple markets we provide clients with bespoke solutions and ourselves

with underwriting opportunities

• We have a stable core book of business and disciplined underwriting approach

Expert people and

specialised products

Customer focus

Disciplined risk and

capital management

A diverse offering

Manage our risk exposures

and capital resources

to generate returns for

our investors.

9Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

Our strategy

Focusing on

our strategy

Our goal is to

maximise risk-adjusted

returns for our

shareholders

Profitable

growth

Our speed and agility in the

way we manage volatility

helps us underwrite our

core portfolio profitably

through the cycle, as well

as enabling us to explore

opportunities for growth in

markets where we believe

the right long-term

opportunities exist.

Maximise

risk-adjusted

returns

Rigorously monitor and

manage our risk exposures

alongside capital availability

to enable us to operate

efficiently whilst seizing

opportunities when they

present themselves.

Positive culture

enables sustainability

Maintaining our positive culture and the ability to retain

and attract the best talent is key for success, coupled with

a strong focus on profitability and risk selection.

10 Lancashire Holdings Limited | Annual Report & Accounts 2023

Underwriting

comes first

Strategic pillar Objective

Profitable

growth

• Continue to grow in classes

where favourable and improving

market conditions exist, and

explore new distribution

opportunities

• Reduce earnings volatility from

natural catastrophe risk

• Focus on maintaining a

diversified portfolio structure

and our core clients

Focus

• Gross premiums written of

$1,931.7 million in 2023

• Insurance revenue of

$1,519.9 million in 2023

• New U.S. operation to begin

underwriting in 2024

Delivery

Balance risk and

return through

the cycle

Strategic pillar Objective

Maximise

risk-adjusted

returns

• Actively manage capital to

support underwriting

opportunities

• Deploy capital quickly when it

is needed and have the discipline

to return it when it is not

• Encourage a culture of risk

challenge, questioning and

understanding

Focus

• Total capital available of

$1,954.5 million

• Total dividends paid to

shareholders of $155.3 million,

including special dividend

announced in Q3 2023 due to

strong operational performance

Delivery

Insurance market

employer of

choice

Strategic pillar Objective

Positive

culture

enables

sustainability

• Foster entrepreneurial,

collaborative culture via

Lancashire values

• Further develop the Group’s

ESG principles to ensure we

operate responsibly as a business

• Continuously strive for

operational efficiency alongside

development of data capabilities

Focus

• Five-star employer award from

survey organisation WorkBuzz

• 90% Group-wide

engagement score

• First ClimateWise report

published detailing progress

on climate risk

Delivery

11Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

Lancashire’s strong financial

performance in 2023 clearly

demonstrated the benefits of our

growth and diversification strategy.

For the year ended 31 December

2023

2022

Highlights

Gross premiums written 1,931.7 1,652.3

Insurance revenue 1,519.9 1,226.5

Insurance service result 382.1 141.6

Net investment return 160.5 (76.7)

Profit (loss) after tax 321.5 (15.5)

Dividends

155.3 36.2

Net insurance ratio 65.1% 83.4%

Combined ratio (discounted) 74.9% 90.2%

Combined ratio (undiscounted) 82.6% 98.7%

Total investment return 5.7% (3.5%)

Diluted book value per share $6.17 $5.48

Change in diluted book value per share 24.7% (1.2%)

1. Comparative figures have been restated to reflect the adoption of IFRS 9 and IFRS 17.

2. Dividends are included in the financial statement year in which they were recorded.

Financial review

Natalie Kershaw

Group Chief Financial Officer

A diversified and

capital-efficient portfolio

12 Lancashire Holdings Limited | Annual Report & Accounts 2023

Our long-term aim has been to develop a more diversified and

capital-efficient portfolio as we spread risk across catastrophe

and non-catastrophe related business.

This approach has resulted in a robust underwriting profit and

an undiscounted combined ratio of 82.6%, while maintaining

our usual discipline and focus on balancing risk and return.

Our strong operating performance and very healthy capital position

meant we were able to announce a special dividend of $0.50 per share at

our third quarter results, as well as a potential share buyback scheme of

up to $50 million. In March 2024 we also announced further capital

return actions, including a 50% increase in our ordinary dividends. This

illustrates the benefit of our diversified portfolio alongside our

considered approach to balancing our capital requirements – shaped by

the underwriting environment – and rewarding our shareholders.

Our undiscounted combined ratio of 82.6%, or 74.9% on a discounted

basis, translated into a net insurance services result of $382.1 million.

This was an increase of 169.8% compared to the same period last year.

The benefit of our growth over the last few years and additional

premiums written in newer and existing product lines resulted in

insurance revenue of $1,519.9 million, a 23.9% increase compared

to 2022.

Our overall profit after tax for the year was $321.5 million, resulting

in a change in diluted book value per share of 24.7%.

During 2023, market loss environment was reasonably active with

estimates for global insured losses from natural disasters hitting

$118 billion, according to Aon research. This is more than 30%

higher than the average since 2000.

Despite this, Lancashire did not incur any individually material loss

events. Total catastrophe, weather and large losses, (undiscounted

and net of reinstatement premiums), were $106.1 million.

The benefits of our diversification strategy to better balance the portfolio

and our established underwriting discipline and risk selection expertise

are clear in this context.

Lancashire has always maintained a conservative reserving philosophy

and this has continued in 2023. The confidence level of our net insurance

reserves is 88%, with a net risk adjustment of $239.1 million, or 16.7%

of net insurance contract liabilities. Our confidence level remains within

our preferred range of 80%-90%.

Additionally, favourable prior year loss development totalled

$78.8 million, primarily due to releases on the 2022 and 2021 accident

years across most lines of business. During 2023, our estimate of

potential claims from the conflict in Ukraine has remained stable.

Within our investment portfolio we have benefited from higher interest

rates and the portfolio returned 5.7% during the year, resulting in a

net investment return of $160.5 million. The overall credit rating of

our investment portfolio is AA-. We have always maintained a relatively

conservative investment portfolio. During 2024, we plan to modestly

increase the duration of the portfolio but we do not intend on making

any material changes to our investment strategy.

All in all, 2023 was a very strong year for Lancashire in which we were

able to demonstrate that we are delivering on our strategic objectives

through disciplined underwriting and maximising risk adjusted returns.

While we were able to return some capital to shareholders in 2023, we

ended the year with a strong capital position from which we can fund

future growth in 2024. Looking forward, active capital management

will continue to be at the heart of how we run the business.

This Annual Report is our first since the implementation of the IFRS 17

accounting standard. Although this has been a significant change in the

presentation of our financial performance it has not had a significant

impact on financial performance in 2023.

I would like to thank all my colleagues in the finance and actuarial teams

for their hard work and diligence during 2023 in preparing our financial

reports on the new basis. This has been a fantastic team effort and I am

extremely grateful for the expertise and commitment they have brought

to the task of continuing our established focus on transparency.

What is your thinking regarding

Lancashire’s capital requirements going

into 2024?

We have always focused on balancing risk and return through

the market cycle, and we manage our capital to support the

underwriting opportunities that we see. Our success has been

built on being able to deploy capital quickly when it’s needed

but also having the discipline to return it when it’s not. In fact,

Lancashire has returned approximately $3 billion since inception

and raised about $550 million. We believe that there will be

significant opportunities for Lancashire in 2024, and we are

confident that we have the capital headroom to make the

most of those opportunities, including the U.S. operation.

So, overall, the work we have put in to diversify the business puts

us in a really strong position to maximise the market opportunity

from a solid base. Our focus is always to provide the best returns

for our shareholders, and we will deploy our capital where it

makes the most sense and offers the greatest rewards.

A diversified and

capital-efficient portfolio

13Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

Underwriting review

The intention of this strategy has been to build out a more robust

portfolio that allows us to better absorb the inherent volatility of

the business we underwrite. Whilst we have seen continued rating

momentum over the past five years, there was a more marked

improvement in trading conditions in 2023 and this allowed us to

continue to deliver on our strategy. We are clearly seeing the benefits

of the investments in our business we have made alongside the improved

market conditions in our 2023 underwriting result. All classes within our

underwriting portfolio have contributed to an exceptional underwriting

result with an undiscounted combined ratio of 82.6%, which results in

an insurance service result of $382.1 million.

Our underwriting strategy has remained

simple since inception. We look to

actively manage the underwriting cycle.

Since 2018 we have been growing and

diversifying our underwriting portfolio,

taking advantage of market conditions

that have been improving each year.

Paul Gregory

Group Chief Underwriting Officer

A more robust

portfolio

14 Lancashire Holdings Limited | Annual Report & Accounts 2023

Loss activity from natural catastrophes continued around the world

in 2023, creating devastating consequences for those affected and

leading to significant economic and insured losses. It was another year

where estimated insured losses from natural catastrophes were above

$100 billion, ranging from the earthquake in Turkey and Syria, hurricanes

in Mexico, cyclones in Asia, to wildfires and severe convective storms

in the U.S. and storm activity in Europe. Given the changes to our

catastrophe exposed products in rating, attachment levels and structure

we have been able to produce profitable underwriting returns despite

a reasonably large amount of loss occurrences and cost.

The geopolitical tensions of 2022 continued throughout 2023. The

conflict in Ukraine continues with little sign of relenting, and the conflict

between Israel and Gaza adds to increased tensions in the Middle East.

Events such as these have far-reaching humanitarian and economic

consequences and undoubtedly bring loss exposure to the (re)insurance

market. The financial impact to (re)insurers remains uncertain, also

bringing with it a number of challenges and complexities for the

broader market and Lancashire. Whilst we have exposure to such

events, this has remained very manageable and within our risk

tolerances and expectations.

The market conditions in 2023 have been the most favourable we

have seen in over 10 years. The underwriting environment was very

supportive, as demonstrated by a portfolio RPI of 115%. Every class of

business delivered a positive year-on-year rate increase. For the majority

of product lines 2023 was the sixth straight year of positive rating. Given

that the market has struggled to make adequate underwriting returns

over the past few years this adjustment was needed.

It is these strong market conditions, as well as the continuing maturity

of newer lines of business that have allowed us to grow premiums by

16.9% to $1.9 billion – a record high for the Group. Since the turn of

the market in 2018 we have more than tripled our premiums, matching

our long-held strategy of managing the cycle. Whilst we anticipate a

more stable market in 2024, we again expect to grow our underwriting

footprint, supported by the creation of Lancashire U.S.. This is an exciting

next development for the Group, and a good example of the continued

investment in people within the underwriting function. It will be

spearheaded by Huw Jones as the CEO of that operation as he moves

from his role of Group Head of Specialty. We have a long tradition

of promoting from within to strengthen our underwriting team and this

continues to be a vital part of our continued success. Complementing

this, we continue to hire quality individuals externally to bring new

thoughts and ideas as our underwriting function evolves.

The dynamics across all our business segments have varied and we

cover these more specifically in the analysis that follows.

“Strong market conditions, as well as the continuing maturity

of newer lines of business, have allowed us to grow premiums

by 16.9% to $1.9 billion – a record high for the Group.”

Gross premiums written $m Insurance revenue $m RPI

Segment 2023 2022 Variance 2023 2022 Variance 2023 2022

Reinsurance 967.5 842.1 125.4 714.9 560.4 154.5 122% 108%

Insurance 964.2 810.2 154.0 805.0 666.1 138.9 110% 108%

Total 1,931.7 1,652.3 279.4 1,519.9 1,226.5 293.4 115% 108%

15Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

Reinsurance

Our reinsurance segment contains casualty reinsurance, property

reinsurance and specialty reinsurance. There has been significant

premium growth during 2023 of approximately 14.9%, with an

RPI of 122%. This was expected given the continued build-out of

casualty reinsurance and the strong rating environment for property

and specialty reinsurance.

Casualty reinsurance comprises casualty, professional and financial

lines, and accident and health reinsurance. The rating environment for

all these sub-classes has been broadly stable with an RPI of 101%.

Growth came from the continued maturity of the casualty sub-class and

professional and financial lines sub-classes. For the casualty sub-class

we are now close to a mature portfolio and if market conditions remain

broadly stable then we will not see the same levels of growth we have

seen in prior years. We understand that the inflationary and recessionary

environment can bring challenges to some of these longer tail classes.

Having entered these classes very recently, we have no legacy portfolio,

where reserve deterioration can become a negative drag on results, and

rating levels remain at historical highs. Whilst old casualty years written

before our entry into the class have no direct impact on our portfolio,

we continually review loss trends to ensure we are satisfied with the

underlying margin of our book. Our underwriting and reserving approach

to these lines will remain prudent as we build out this portfolio.

Property reinsurance comprises our catastrophe-exposed reinsurance

classes, as well as our excess of loss risk and other property treaty

portfolios. As anticipated, we saw a very dislocated market in 2023;

this is seen in the RPI of 134% for property reinsurance. There was a real

disconnect between demand and supply which resulted in hard market

conditions. Inflationary pressure pushed demand whilst supply was

restricted as carriers pulled back risk levels following multiple years

of inadequate returns. As significant as rate change was, the changes to

product structure and attachment levels meant the reinsurance product

moved toward one of balance sheet protection rather than an earnings

protection for buyers. This means that cedants have to retain more risk

before their reinsurance coverage is triggered. For reinsurers this

insulates the portfolio from the frequency of small to mid-size losses.

The value of these changes in structure was seen in underwriting results

during 2023. Despite a reasonable amount of loss activity, the majority

of losses were small to mid-size, with less impact to reinsurance products

than there would have been in prior years. In line with the Group’s

overall appetite for catastrophe risk, our aim was to keep net catastrophe

risk broadly stable year on year whilst optimising the portfolio. The hard

market conditions allowed us to achieve this objective in 2023. In 2024,

we will continue to optimise the portfolio, and anticipate a more stable

rating level.

Specialty reinsurance comprises our reinsurance offering for classes

such as aviation, marine and energy, as well as our property retrocession

portfolio. The rating environment across all of the sub-classes remained

positive during 2023, with an RPI of 138%. We continue to build out

our specialty treaty account in areas such as energy, marine and political

violence, adding to the already well-established sub-classes of aviation

reinsurance and property retrocession. Much like our property

reinsurance class, our risk appetite for the property retrocession

sub-class was broadly stable as we look to maintain the Group’s

natural catastrophe footprint. In line with the market our retrocession

portfolio increased in attachment point which insulated it from natural

catastrophe losses during 2023, yielding profitable underwriting results.

We have seen significant hardening in the aviation reinsurance market

as prior year market losses have deteriorated and capacity from a

number of carriers reduced. In the specialty classes we had modest

exposure to events, such as political unrest in the Middle East and

some large energy losses.

Insurance

Our insurance segment includes aviation insurance, casualty insurance,

energy and marine insurance, property insurance and specialty insurance.

We have seen another year of growth opportunities across this segment

with rates positive across all classes. The insurance segment RPI for 2023

was 110% with premium growth of approximately 19.0%. A combination

of the positive rating environment, inflationary pressure increasing values

at risk and the continued build out of new teams has contributed to the

growth we have seen in 2023.

Aviation insurance saw a less dramatic year than 2022. As a result of

the uncertainties arising from the Russia / Ukraine conflict the aviation

market hardened again during 2023 as is demonstrated by an RPI of

112%. The aviation industry itself continues to successfully rebound

strongly from COVID-19, with passenger demand continuing to climb

globally which aids demand for the product. Within our portfolio there

are sub-classes that are broadly stable from a rating perspective, given

rates have increased steadily over the past five years but remain at

healthy levels. War/terrorism exposed products have continued to

see meaningful increases in rating levels, which skews the overall RPI

positively. We remain underweight within certain segments of the

aviation portfolio where rating is inadequate for a broader risk appetite.

Should market conditions change, we would broaden our appetite, in

line with our overall underwriting strategy.

.%

increase in gross premiums written

Underwriting review continued

16 Lancashire Holdings Limited | Annual Report & Accounts 2023

Casualty insurance is a small segment of the business and comprises

our accident and health insurance sub-class and a small amount of

professional lines insurance which is adjunct to our casualty reinsurance

class. Market conditions remain positive with an RPI of 102%.

Energy and marine insurance provides products across the spectrum

of the marine and energy sectors. The rating environment has remained

positive, with an RPI of 107% for 2023. Whilst each product was driven

by its own dynamics, all saw rate increases.

The challenges of inflation, volatile commodity prices and political unrest

remain. Both the marine and energy industries have long been exposed

to these risk factors, which we always consider in our underwriting

decisions when assessing risk. Importantly, we consider such events

both in terms of risk, as well as potential opportunity. Growth in our

cargo book, for example, has been aided not only by rate improvement

but also by the value of goods and commodities in transit rising which

increases the values at risk and also the demand for the product and

associated premium volumes. And within certain classes such as

upstream energy, there remains an abundance of insurance capacity

due to relatively low insured losses.

We continue to expand our knowledge and underwriting expertise to

support the transition within the energy sector, in line with our stated

strategy. The industry needs to evolve by offering products and services

that cater to the changing risks our clients face. Insurance will continue

to be a key risk management tool for the industry, supporting global

net-zero goals and the wider transition. Please see the ESG report

starting on page 41 for more information.

Property insurance comprises property direct and facultative

insurance and construction insurance. Trading conditions have been

very favourable with an RPI of 117% which is the highest within the

insurance segment. Premium growth in property insurance this year has

been driven by the favourable rating environment, inflationary pressures

increasing demand, and significantly reduced capacity for natural

catastrophe exposed risks. We anticipated favourable market conditions

but our expectations were surpassed with more rate and demand flowing

through. Our property offering in Australia has continued to mature well

as market conditions have been supportive. We anticipate similar success

in the U.S. with property insurance being a cornerstone product offering

of this new venture. The construction team continued their impressive

development since joining the Group with favourable market conditions

allowing us to develop this class ahead of expectations. Attractive

market conditions continue to support our property insurance segment

in 2024 and this combined with the opening of the U.S. operation should

provide ample profitable growth opportunities.

Specialty insurance comprises our terrorism, political violence and

political and sovereign risks sub-classes. Following the conflict in

Ukraine last year, the terrorism and political violence market saw rate

improvement in 2023 – the first year for many years that has happened.

The RPI of 102% is driven by the positive rate change in terrorism and

political violence sub-classes. The world continues to be an extremely

volatile place amplified in 2023, with the continuation of the conflict in

Ukraine and the conflict in Israel and Gaza both adding further pressure

to global geopolitical tensions. We continue to navigate these challenges

in our underwriting and to date any losses have been very manageable.

As ever we remain vigilant to the ever-changing risk landscape and how

this should influence our underwriting decisions. The political and

sovereign risk portfolio is predominantly non-renewable business and

therefore is not subject to RPIs but the rating levels remain strong

against this backdrop, and the higher-interest rate environment has

seen improvement in the underlying terms and conditions. We have

delivered strong premium growth in these classes with a number of

new opportunities. The outlook for 2024 is currently relatively stable

from a rating perspective but, as the broader landscape remains volatile,

this is a class that could change quite quickly.

We are extremely proud of what the underwriting team achieved

in 2023. We almost certainly have the most robust underwriting

portfolio in our history. Rating adequacy in almost all of our products

is in a very strong position. The successful diversification of product lines,

investment in our underwriting team and growth at the right time in the

market cycle has created an excellent foundation to continue to develop

our underwriting footprint in the coming years.

We have always said that underwriting is a team sport, and the

exceptional underwriting result in 2023 is because of the underwriters

and all those across the business that support them in delivering

together as a team.

“ We almost certainly have the

most robust underwriting portfolio

in our history.”

Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

For the year ended 31 December 2023 31 December 2022

Reinsurance

Insurance

Total

Reinsurance

Insurance

Total

Gross premium written 967.5 964.2 1,931.7 842.1 810.2 1,652.3

RPI 122% 110% 115% 108% 108% 108%

Insurance revenue 714.9 805.0 1,519.9 560.4 666.1 1,226.5

Insurance service expenses (254.2) (442.0) (696.2) (528.3) (466.3) (994.6)

Insurance service result before reinsurance

contracts held 460.7 363.0 823.7 32.1 199.8 231.9

Allocation of reinsurance premium (174.6) (250.2) (424.8) (152.7) (219.1) (371.8)

Amounts recoverable from reinsurers (78.2) 61.4 (16.8) 140.0 141.5 281.5

Net expense from reinsurance contracts held (252.8) (188.8) (441.6) (12.7) (77.6) (90.3)

Insurance service result 207.9 174.2 382.1 19.4 122.2 141.6

Net insurance ratio 61.5% 68.6% 65.1% 95.2% 72.7% 83.4%

Other operating expenses 9.8% 6.8%

Combined ratio (discounted) 74.9% 90.2%

Combined ratio (undiscounted)

82.6% 98.7%

1. The combined ratio (discounted and undiscounted) is the ratio, in per cent, of the sum of net insurance expense plus all other operating expenses to net insurance revenue.

James Irvine

Group Chief Underwriting Officer

– Reinsurance

James Flude

Group Chief Underwriting Officer

– Insurance

Gross premiums written

Gross premiums written increased by $279.4 million or 16.9% during

2023 compared to the same period in 2022. Excluding the impact of

reinstatement premiums and multi-year contracts, underlying growth in

gross premiums written was 17.8%. The Group’s two principal segments,

and the key market factors impacting them, are discussed below.

Reinsurance segment

The increase in the reinsurance segment was primarily driven by new

business in the casualty reinsurance classes as well as the continued

successful build out of our specialty reinsurance classes in a strong

rating environment. The property reinsurance classes also benefited

from strong RPIs and new business, albeit these were somewhat offset

by a lower level of reinstatement premiums than in 2022 due to higher

catastrophe losses in that year. Overall, the RPI was 122% for the

reinsurance segment up from 108% in the prior year.

Insurance segment

The increase in the insurance segment was primarily due to strong

growth in our property insurance lines of business, which include

property direct and facultative and also property construction. In these

classes we are seeing the benefit of a strong rating environment and also

a more mature book of business following the decision to add new teams

in recent years. Gross premiums written in the energy and marine lines

also increased meaningfully with new business across all lines of business

and rate and exposure increases in power and energy liabilities classes.

To a lesser extent, new business contributed to growth across all of our

casualty insurance lines of business. Rate and exposure increases were

the driver of growth in aviation insurance. Overall, the RPI was 110% for

the insurance segment.

Underwriting results

Business review

18 Lancashire Holdings Limited | Annual Report & Accounts 2023

Insurance revenue

Insurance revenue comprises gross premiums earned less inwards

reinstatement premium, and is net of commission costs. Insurance

revenue increased by $293.4 million or 23.9% in 2023 compared to the

same period in 2022. The market factors driving the increase in casualty

reinsurance, property insurance and energy and marine insurance gross

premiums written also drove the increase in insurance revenue

recognised in the period.

Allocation of reinsurance premiums

Allocation of reinsurance premiums comprises ceded earned premium

less outward reinstatement premiums, and is net of outward commission

costs. Allocation of reinsurance premiums increased $53.0 million or

14.3% in 2023 compared to the prior year. This increase was largely

the result of the rate increases experienced upon renewal of the Group’s

outwards reinsurance programme, additional cover purchased for

some of the newer lines of business and a higher level of quota share

reinsurance spend driven by the growth in insurance revenue. Overall

the allocation of reinsurance premiums as a percentage of insurance

revenue was 27.9% down from 30.3% in the prior year.

Net claims

During 2023, the Group experienced net losses (undiscounted, including

reinstatement premiums) from catastrophe, weather and large loss

events totalling $106.1 million. None of these events were individually

material for the Group.

In comparison, during 2022, the Group experienced net losses

(undiscounted, including reinstatement premiums) from catastrophe,

weather and large loss events of $329.4 million. Within this, catastrophe

and weather related losses for the year ended 31 December 2022, were

$232.4 million. This included $181.0 million from hurricane Ian. Large

losses for the year amounted to $97.0 million.

Prior year development comprises the undiscounted movement in loss

reserves, expense provisions and reinstatement premiums. Favourable

development was $78.8 million in 2023 compared to favourable

development of $134.3 million in 2022. In 2023, there were reductions

in reserves for some of the 2022 natural catastrophe events. The 2022

year included reserve reductions from natural catastrophe loss events in

the 2019 and 2018 accident years as well as relatively large beneficial

claims settlements on risk losses in the 2017 accident year.

Net discounting benefit

The table below shows the total net impact of discounting, by financial

statement line item.

For the year ended 31 December 2023

Insurance

contracts issued

Reinsurance

contracts held

Total

Initial discount included in

insurance service result 101.9 (17.2) 84.7

Unwind of discount (84.2) 28.4 (55.8)

Impact of change in

assumptions (14.1) 3.3 (10.8)

Finance (expense) income (98.3) 31.7 (66.6)

Total net discounting

income 3.6 14.5 18.1

For the year ended 31 December 2022

Insurance

contracts issued

Reinsurance

contracts held

Total

Initial discount included in

insurance service result 109.1 (36.6) 72.5

Unwind of discount (39.7) 13.7 (26.0)

Impact of change in

assumptions 59.8 (20.4) 39.4

Finance income (expense) 20.1 (6.7) 13.4

Total net discounting

income (expense) 129.2 (43.3) 85.9

In 2023 discount rates across all our major currencies were at a relatively

high level throughout the year with a small decrease in the fourth

quarter. This drove the high initial discount impact and relatively low

change in assumption impact.

In comparison, 2022 began in a relatively low discount rate environment,

which then experienced significant increases across all currencies

throughout the year. This increase in rates resulted in a favourable

$39.4 million impact from the change in discount rate assumptions.

This was only partly offset by $26.0 million unwind of the initial discount

previously recognised in relation to prior accident years that had been

set in a lower rate environment.

19Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

Investment results

Business review continued

Investments and liquidity

Since inception, the primary objectives for our

investment portfolio have been capital preservation

and liquidity, and we position our portfolio to limit

down-side risk in the event of market shocks. Those

objectives remain unchanged and are more important

than ever in today’s volatile markets. The year started

with elevated yields, which only continued

throughout the year, finishing with a 5.7% return.

The higher yield environment was a positive for

the reinvestment of income, maturities and sales

of securities. While rates were higher, there was

continued volatility with respect to geopolitical

tensions around the world and risk of a U.S. recession,

given the inverted yield curve. However, despite the

inverted yield curve, fundamentals remain strong

in the U.S. and recession risk has reduced toward

the latter part of the year. Given the volatility

and inverted yield curve, we remain cautious

but will look to modestly increase duration in

the first half of 2024. We will continue to maintain

a short, high credit quality portfolio with some

portfolio diversification to balance the overall

risk-adjusted return.

Our portfolio mix illustrates our conservative

philosophy, as shown in the chart below.

Investment performance

Net investment income, excluding realised and

unrealised gains and losses, was $108.5 million in

2023, an increase of 94.8% compared to 2022. Total

investment return, including net investment income,

net realised gains and losses and net change in

unrealised gains and losses, was $160.5 million in

2023 compared to a loss of $76.7 million in 2022.

In a year of continued volatility, the investment

portfolio generated an investment return of 5.7%.

The returns were driven primarily from investment

income given the higher yields during the year. While

the Federal Reserve raised rates by 1.0% this year,

the higher yields and tighter spreads mitigated any

losses on the portfolio. In addition, the risk assets,

notably the bank loans, hedge funds and private

credit, all contributed positively to the overall

investment return.

In 2022, the investment portfolio generated a

negative return of 3.5%. The returns were driven

primarily from interest rate increases and the

widening of credit spreads, resulting in losses in

all asset classes, most of which were unrealised.

Credit quality

Fixed maturities and managed cash

Asset allocation

Total investment portfolio and managed cash

Denise O’Donoghue

Group Chief Investment Officer

Conservative portfolio structure – quality

Duration

1.6 years

Average credit

rating of AA-

AAA:

19%

Private investment funds: 6%

Non-agency

structured products:

10%

AA:

37%

Managed cash and

short term securities:

13%

23%

U.S.

government

bonds and

agency debt:

24%

BB or

below: 6%

Corporate and

bank loans:

40%

Other government

bonds and agency debt:

BBB:

15%

Agency structured products:

20 Lancashire Holdings Limited | Annual Report & Accounts 2023

Other financial information

Hayley Johnston

Chief Executive Officer,

Lancashire Insurance Company

Limited and Reinsurance Manager

John Cadman

Group General Counsel and Chief

Executive Officer, Lancashire

Insurance Company (UK) Limited

John Spence

Chief Executive Officer,

Lancashire Syndicates Limited

Other operating expenses

For the year ended 31 December

2023

2022

Operating expenses – fixed 147.9 118.9

Operating expenses – variable 41.7 9.8

Total operating expenses 189.6 128.7

Directly attributable expenses

allocated to insurance service expenses (82.2) (70.4)

Other operating expenses 107.4 58.3

A significant driver of the increase in operating expenses is the increase

in variable costs related to remuneration of $31.9 million given the

strong financial performance of the Group. Fixed expenses have

increased by 24.4% or $29.0 million largely due to the Group’s growth

and subsequent impact on headcount. IT and consulting expenses also

increased during the year as we focused on upgrading our systems and

data capabilities.

For the year ended 31 December 2023, $82.2 million of operating

expenses were considered directly attributable to the fulfilment of

(re)insurance contracts issued, and have therefore been re-allocated to

insurance service expenses and form part of the insurance service result.

This compares to $70.4 million in 2022.

Bermuda corporate income tax

During 2024, the Group will continue to assess the potential impact of

the Economic Transition Adjustment introduced by the recent Bermuda

Corporate Income Tax legislation. Based on its current plans, the Group

does not anticipate that it will become subject to Bermuda corporate

income tax until 1 January 2030, as it expects to fall within the exclusion

within the Bermuda corporate income tax rules that means groups with

a limited international presence are excluded from scope for a period of

up to five years.

Capital

As at 31 December 2023, total capital available to Lancashire was

approximately $2.0 billion, comprising shareholders’ equity of

$1.5 billion and $0.5 billion of long-term debt. Tangible capital was

$1.8 billion. Leverage was 22.8% on total capital and 25.2% on tangible

capital. Total capital and total tangible capital as at 31 December 2022

was approximately $1.8 billion and $1.6 billion respectively.

Share repurchase

During the period commencing 22 November 2023 and ending on

29 February 2024, the Company had authorised a share repurchase

programme of its common shares of $0.50 each up to a maximum

consideration of $50 million. No shares were repurchased under the

programme. No other share repurchase programmes were conducted

during the year ended 31 December 2023.

Dividends

Lancashire’s Board of Directors has declared a special dividend of $0.50

per common share (approximately £0.39 per common share at the

current exchange rate), which will result in an aggregate payment of

approximately $119.0 million. The dividend will be paid in Pounds

Sterling on 12 April 2024 (the “Dividend Payment Date”) to shareholders

of record on 15 March 2024 (the “Record Date”) using the £ / $ spot

market exchange rate at 12 noon London time on the Record Date.

Lancashire also announces that its Board of Directors has declared a

final dividend of $0.15 (approximately £0.12) per common share, subject

to a shareholder vote of approval at the AGM to be held on 1 May 2024,

which will result in an aggregate payment of approximately

$36.0 million. On the basis that the final dividend is approved by

shareholders at the AGM, the dividend will be paid in Pounds Sterling

on 7 June 2024 (the “Dividend Payment Date”) to shareholders of

record on 10 May 2024 (the “Record Date”) using the £ / $ spot

market exchange rate at 12 noon London time on the Record Date.

21Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

Delivering

for our clients

“If our clients are impacted

by a loss, our aim is to

support them in recovering

as quickly and as fairly as

possible. It is our opportunity

to deliver on our promise to

pay, and we strive to do that

consistently across all claims

in a manner that is clear and

transparent to our client and

broker stakeholders.”

Steve Yeo

Group Head of Claims

22 Lancashire Holdings Limited | Annual Report & Accounts 2023

Enterprise risk management

Over the last five years, as Lancashire has

focused on growing in a strengthening

market, our corporate infrastructure has

developed to manage the changing risk

and support our growth.

Everyone is a

risk manager

“ Our collaborative risk culture

is driven from the ‘top down’

via the Board and the executive

management team to the business,

with the management Risk

Return Committee central

to these processes.”

Louise Wells

Group Chief Risk Officer

Enterprise risk management

23Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

Enterprise risk management continued

Effective risk management, underpinned by a strong collaborative risk

culture, has been vital in our success, enabling the business to deliver

on its strategic objective of balancing risk and return through the cycle.

The risk culture starts with us, the employees: everyone is a risk manager

at Lancashire.

During 2023, the risk management function expanded further to ensure

it had sufficient capacity and expertise to drive the development required

and deliver the expanding remit.

Key areas of development in 2023 were the emerging risk process,

more detail on which can be found on page 27; our forward-looking

risk assessments which articulate our opinion on future trends, risk

mitigation requirements and business actions by risk, and our ESG

reporting, both internal and external.

Our ClimateWise report was published on our website for the first

time in August 2023 and our TCFD report, which complements

our ClimateWise report, starts on page 49 of this report.

Geopolitical risk and macro-economic risks have continued to be

a focus during 2023 and that focus will carry over into 2024.

The ongoing conflict in Ukraine, as well as other potential areas of

conflict, and the increasing tensions in the Middle East, are examples

of issues that are closely monitored by the business to seek to ensure

exposure remains within appetite and expectations. As geopolitical

risks can change and evolve rapidly, these are factors that we carefully

consider in our underwriting decisions. Where appropriate, thematic

reviews are performed to provide a more detailed analysis of the risk

and potential impact.

Cyber security risk has also been a key area of focus in 2023 and again

will continue to be so in 2024. Cyber security risk is included within

the principal risk of operational risk, which is discussed on page 31.

Risk strategy

Our risk management strategy remains closely aligned with the

Group strategy, focused on adding value to the business and providing

assurance over both the most material risks and the emerging risks

to the Group. The Board is responsible for managing risk and retains

responsibility for the oversight of risk management activities.

The risk management function, led by the Group CRO, ensures there

is appropriate risk governance and a risk management framework to

support the Board, CEO and Group Executive Committee in managing

risk. It is critical that the risk management framework can adapt to the

changes associated with the delivery of the Group’s strategy. The risk

strategy is updated annually and the associated plan of work is approved

by the Board.

Risk management framework

The Group takes an enterprise-wide approach to managing risk. The

primary objective being to ensure that the capital resources held are

matched to the risk profile of the Group and that the balance between

risk and return is considered as part of all key business decisions. The

Group risk management framework sets out our approach to identifying,

assessing, mitigating, and monitoring the principal risks the Group faces.

The diagram on page 25 illustrates how the various parts of the risk

management framework come together to form Lancashire’s overall

Own Risk and Solvency Assessment (ORSA) process.

Our ORSA process is an ongoing analysis of the Group's risk profile and

its capital adequacy to support the business strategy over the business

plan horizon. The key activities within this process consider how the

financial and principal risks to which we are exposed may change over

the planning cycle, what drives these changes, and how resilient the

Group's resources are to a range of extreme but possible events. As

such, it is a key business management tool which is used to inform

key business decisions.

The ERM and ORSA activities are underpinned by our risk culture and

governance. Our collaborative risk culture is driven from the ‘top down’

via the Board and the executive management team to the business,

with the management Risk Return Committee central to these processes.

The RRC is the key management tool for monitoring and challenging the

assessment of risk on a regular basis. It seeks to optimise risk-adjusted

returns and facilitate the appropriate use of the Group's internal models,

including considering their effectiveness. Risk culture is also driven from

the ‘bottom up’ through the risk and control affirmation process. The

primary role of the Group CRO is to facilitate the effective operation

of ERM and the ORSA processes throughout the Group and to provide

day-to-day oversight and challenge on risk-related issues.

24 Lancashire Holdings Limited | Annual Report & Accounts 2023

Key activities

• Review of business strategy with challenge from the Board

• Annual approval of a business strategy paper by the Board

• Development of ESG strategy and framework

• Quarterly risk and

control affirmations

• Quarterly emerging

risk working group

• Quarterly internal audit

reports to the Audit

Committee providing an

update on work performed

and analysis of root causes

of audit findings

• External audit reports to

the Audit Committee

• Audit Committee annual

review of the effectiveness

of financial controls

• Monthly CCWG

• Monthly ESG Committee

• Review of risk strategy and

‘attitude to risk’

• Review and measurement

of risk appetite and limits

• Review of Group

risk tolerances

• Management, Board and

subsidiary board approval

and monitoring of risk

appetite and tolerances

• Stress and scenario

testing (business plan)

• Assessment of

management actions

• Group CRO review

of business plan

• Board business

performance review

• Board consideration of

stakeholder engagement

• Review of risk

management policies

• Assessment of

risk management

framework maturity

• Integrated assurance

assessment

• Emerging risk assessment

• ESG framework and strategy

• Review and approval of

business plan by the Board

• Group CRO reports to

Board and Group

Executive Committee

• Production of quarterly

ORSA report for review

and approval by the Board

• Capital and liquidity

management frameworks

• Review of internal model

policies, capital and

solvency appetites

• Full/proxy capital assessments

• Rating agency

capital assessments

• Stress and scenario testing

• Board quarterly review of

capital needs, headroom

and actions

Board sign-off and embedding

Business strategy

Risks

Key elements of ORSA

ERM & ORSA

Strategy review & challenge

Risk identification & assessment

Risk appetite & tolerances

Business planningRisk & business management

Risk solvency & assessment

Capital management

Strategy review

& challenge

Risk

identification

& assessment

Risk appetite

& tolerances

Business

planning

Capital

management

Risk

solvency &

assessment

Risk & business

management

Board

RRC

The ORSA processes are ongoing and operate throughout the year, with

the annual ORSA report summarising their outcome for management

and the Board on an annual basis. The quarterly ORSA update report

provides the Board with a point in time update on the key activities

listed above and the challenge provided by the Group CRO.

Risk governance is a major component of the overall risk management

framework and provides for clear roles and responsibilities in the

oversight and management of risk. It also provides a framework for

the reporting and escalation of risk and control issues across the Group.

Lancashire operates a three lines of defence governance model, which

is highlighted overleaf.

Capital and solvency

Stress and scenario testing

25Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

Key

Risk owners within each business

function are responsible for promoting

a strong risk culture, managing their

risks within risk appetite and ensuring

the effectiveness of their controls.

Provides expert advice, challenge

and guidance together with providing

independent oversight to the first line

of defence to help ensure that risk taking

remains within risk appetite. Includes the

risk, compliance and actuarial functions,

reporting to the RRC via the CRO.

Audit

Committee

Risk Return

Committee

LHL

Board

Three lines of defence – governance framework

line of defence

Executive Management Committee

Investment Risk & Return Committee

Reserving Committee

Reinsurance Security Committee

View of Risk Committee

New Business Committee

ESG Committee

Broker Vetting Committee

Underwriting & Marketing Conference Call

Risk Internal Audit

Actuarial

line of defence 3

line of defence

Compliance

Committee of the Board

Management Committee

Key Control Function

The internal audit team provides

independent assurance to the

Audit Committee, by assessing the

effectiveness of our risk management

processes and that risk controls are being

managed in line with approved policies,

appetite, frameworks and processes,

and helps verify that the internal control

system is effective. The Head of Internal

Audit reports to the Board Audit

Committee on internal control

framework issues.

Underwriting

& Underwriting

Risk Committee

Investment

Committee

Remuneration

Committee

Nomination,

Corporate

Governance &

Sustainability

Committee

Enterprise risk management continued

26 Lancashire Holdings Limited | Annual Report & Accounts 2023

The Board retains responsibility for all risk within the Group and is

responsible for setting and monitoring the Group’s risk appetite and

tolerances, whereas the individual entity boards are responsible for setting

and monitoring entity-level risk tolerances. Risk tolerances represent the

maximum amount of capital, generally on a modelled basis, that the Group

and its entities are prepared to expose to certain risks. The Group’s appetite

for risk will vary marginally from time to time to reflect the potential risks

and returns that present themselves. However, protecting the Group’s

capital and maximising risk-adjusted returns for investors over the long

term are constants. All risk tolerances are subject to at least an annual

review and consideration by management and the respective boards. The

Board and individual entity boards review actual risk levels versus tolerances,

emerging risks, loss event and near miss reporting, key risk indicators, and an

overview of the control environment (driven by key control testing and

control affirmations, and supported by internal audit findings) at least

quarterly. In addition, on at least a monthly basis, management assesses

our PMLs against risk tolerances to ensure that risk levels are managed

in accordance with them.

The Group CRO provides regular reports to the management team

outlining the status of the Group's ERM activities and strategy, as

well as formal reports to the Board.

The Group CRO reports to the Chair of the Board and Group CEO

but ultimately has the right to report directly to the Group and entity

regulators if they feel that management is not appropriately addressing

areas of concern regarding the Group as a whole or any of the individual

operating entities.

We continue to perform a quarterly risk and control affirmation process

whereby the operation of all key controls is affirmed by the control

operators and then reviewed and approved by the risk owners. In

addition, the risk owners are required to affirm that their risks remain

appropriately documented and scored. The risks are scored on both a

gross basis (i.e., inherent risk pre-controls) and a net basis (i.e., residual

risk post the application of controls). The output from this process is

reported to the RRC and the Group and operating subsidiary audit

and risk committees or boards of directors as appropriate.

As at 31 December 2023, all Group entities were operating within

their Board-approved risk tolerances.

The quarterly ORSA reports prepared by the Group CRO to the Group

and subsidiary boards provide a timely analysis of current and potential

or emerging risks, compared against risk tolerances, along with their

associated capital requirements.

The 2024 annual ORSA report will be presented to the Board for review,

challenge and approval at the Q1 2024 Board meeting. The equivalent

reports for the operating subsidiaries will also be presented to their

boards for review, challenge and approval during Q1 2024. As a Lloyd’s

managing agent, LSL falls within the Society of Lloyd’s for Solvency II

reporting, preparing ORSA reports for each syndicate. LSL has its own

ERM framework to ensure it operates in line with the principles for

doing business at Lloyd’s.

Emerging risk process

Emerging Risk Identified

Risk

identification

Risk investigation

& assessment

Risk mitigation

& monitoring

RM team-coordinated investigation

& provisional risk scoring

RM research

Stress & scenario

development

Emerging risk identified by the

business / ER forum

Risk Mgt. team horizon

scanning

Compliance team regulatory

horizon scanning

Regulatory-driven

investigations

Engage with subject matter experts lnput from ER forum

Stress & scenario

development

Business-agreed action

to mitigate risk

Risk level accepted, no

further action required

Outcome recorded into

emerging risk log

Action ongoing: “developing risk”

Emerging risk incorporated into BAU and action closed

Emerging risk

Lancashire defines emerging risk as a change in, or change in

understanding of, the internal or external risk environment that

could impact the validity of assumptions relating to strategy,

decision-making and/or risk management approach. An emerging

risk can arise in three ways:

(as appropriate)

• A genuinely new source of risk that has not existed before;

• A change in the way that an already identified risk can manifest

which may not be adequately managed through Lancashire’s

current risk management procedures; or

• A change in understanding of an already identified risk.

Revised risk scoring indicates materiality & required action

27Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

The process by which emerging risks are identified, investigated, assessed and reported is illustrated in the diagram on the previous page.

A growing number of emerging risks are identified by the business and the emerging risk forum run by the risk management function, a Group-wide

forum with cross-functional membership. A detailed log of all emerging risks identified is maintained including the anticipated impact, likelihood,

time horizon, velocity, longevity, risk sector, risk type and any actions required.

The top emerging risks for the Group are recorded on our emerging risk radar and discussed with risk owners, executive committees, the Board

and entity boards of directors each quarter. The emerging risk radar is therefore subject to an iterative process of review and oversight. Examples

of emerging risks discussed by the Board during the year include: climate change, operational strain (driven by growth), geopolitical risk, inflation,

tax and regulatory change, OECD global minimum tax and Bermuda corporate income tax, and cyber security risks.

Thematic reviews were performed during the year on potential geopolitical areas of conflict and on the potential impact of the OECD minimum

global tax and Bermuda corporate income tax.

Current assessment of principal risks

The Board evaluated the risks disclosed, alongside other factors, in the

assessment of the Group’s viability and prospects as set out in the going

concern and viability statement in the Directors’ report at page 118.

Given the broad reach of climate change and the risks associated with it,

we concluded these risks are most appropriately managed by including

their impact through existing principal risks, rather than a separate

climate change principal risk. The impact of climate change is therefore

covered in the following principal risks: underwriting, investment,

operational and strategic.

Key

Principal risk

Underwriting

(Re)insurance counterparty

Investment and Liquidity

Operational

Reserving

Strategic

2023 2022

Increasing ﬁnancial and non-ﬁnancial consequences

Increasing likelihood

2 5

3 6

Principal risks

28 Lancashire Holdings Limited | Annual Report & Accounts 2023

Principal risks

Principal risk category/risk owner Key mitigating actions How the Board reviews this risk

Underwriting

UURC

Risk description and performance

Inadequate pricing of risk resulting

in insufficient premium to cover

any losses arising.

Failure to monitor exposure

accurately such that losses

exceed expectation.

Our underwriting performance

is discussed on page 14.

Our RPI for the insurance and

reinsurance segments was

122% and 110% respectively.

We remained within tolerance

for all PMLs and RDSs during 2023.

We define our underwriting risk appetite and set risk tolerances as a

percentage of capital we are willing to risk for both natural catastrophe

events and man-made disasters.

PMLs for natural catastrophe perils are modelled monthly, and RDSs

for non-elemental perils are updated quarterly. Both are provided to

the RRC for review.

We model our portfolio against Lloyd’s RDS to assess potential losses.

We apply loads to and stress test stochastic models and develop

alternative views of losses using exposure damage ratios. We review

assumptions periodically to ensure they remain appropriate.

We use our RPI measure to track trends in premium rates for our

renewed business.

The RRC considers accumulations, clashes and parameterisation

of losses and models.

Underwriters’ have individual underwriting authorities they must

comply with.

Reinsurance is purchased to manage exposure and protect our

balance sheet.

The Board delegates oversight of

underwriting risk to the UURC. See

page 96 for how the committee

discharged its responsibilities in

this area. Management reports to the

UURC on underwriting performance,

strategy and risk tolerances.

The Board is engaged in the

development and implementation

of the Group’s underwriting

strategy, including the potential

risks to this such as geopolitical

risks and climate-related physical,

transition and litigation risks. The

Board reviews and approves the

underwriting risk appetite, the risk

tolerances and the structure of the

outwards reinsurance programme

on an annual basis.

The Board reviews performance

against risk tolerances on a

quarterly basis.

Investment & liquidity

Investment Committee

Risk description and performance

The risk of insufficient liquid

assets to pay claims when due.

The Group continues to have

excess liquidity compared to

tolerance and remained within

investment guidelines.

We stress our portfolio to understand the impact of a range of realistic

loss scenarios including risk-on, risk-off and interest rate hike scenarios.

A biannual strategic asset allocation study is performed, the

recommendations from which are discussed at the Investment

Committee and presented to the Board for approval.

The IRRC meets quarterly and reports to the RRC and to the Investment

Committee via the CRO.

External investment managers are used to manage the portfolios.

The Group’s principal investment managers are signatories to the

UN Principles for Responsible Investment.

The Board delegates oversight of

investment risk to the Investment

Committee. See page 94 for how

the committee discharged its

responsibilities this year.

Management reports to the

Investment Committee on

investment performance, strategy

including asset allocation, and

risk tolerances.

The Investment Committee receives

and reviews the investment strategy,

guidelines and policies, risk appetite

and associated risk tolerances and

makes recommendations to the

Board in this regard.

The Committee monitors

performance against risk tolerances,

investment guidelines, carbon

intensity scores and a climate

value at risk measure quarterly.

29Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

Strategic objectives Risk trends Impact trend Appetite trend

Underwriting comes first Stable risk High Acceptable

Balance risk and return

through the cycle

Decreased risk Moderate Reassess

Insurance market

employer of choice

Increased risk Low Unacceptable

Principal risks

Principal risk category/risk owner Key mitigating actions How the Board reviews this risk

Reserving

Audit Committee

Risk description and performance

The risk that established

reserves are inadequate

and claims exceed them.

The confidence level of 88%

is within our desired range.

Lancashire adopts a conservative reserving approach for all new classes

of business until they are established.

Actuarial and statistical data is used to set estimates of future losses.

These are reviewed by underwriters, claims staff and actuaries to ensure

they reflect the actual experience of the business.

Reserves are reviewed and approved by the Reserve Committee whose

members include representation from finance, actuarial and claims;

there are additional attendees from underwriting, legal and risk.

An independent review by external actuaries of reserve adequacy

is performed twice a year.

The Board delegates oversight

of reserving risk to the Audit

Committee. See page 83 for

how the committee discharged

its responsibilities this year.

Management reports to the Audit

Committee quarterly on reserves

for material new claims,

developments on established

reserves, the reserve margin

and confidence levels.

The Audit Committee receives

and considers the report from

the external actuary on reserve

adequacy. The Committee’s review

is also informed by the work

performed by the external auditor.

(Re)Insurance and intermediary

counterparty risk

UURC

Risk description and performance

The risk our reinsurance

counterparties are unable

or unwilling to pay us in the

event of a loss.

The risk of mishandling by,

or failure of, our intermediaries.

The Group was within our stated

risk appetite and tolerance during

the year.

Our Broker Vetting Committee is responsible for the broker vetting

approval process and monitoring credit risk in relation to brokers.

Business is conducted using non-risk transfer TOBAs. Monies are held

by brokers in segregated client money accounts.

Board-approved counterparty credit limits are used, reinsurers must

meet minimum rating standards and collateral agreements are used

where appropriate.

The RSC approves counterparties within the framework set and

monitors first loss and aggregate limits against the approved tolerances.

The UURC receives quarterly

information from management

with regard to broker distribution.

The CRO reports to the Board

on performance against Board-

approved risk tolerances.

Principal risks continued

30 Lancashire Holdings Limited | Annual Report & Accounts 2023

Principal risks

Principal risk category/risk owner Key mitigating actions How the Board reviews this risk

Operational

Audit Committee & Board

Risk description and performance

The risk of inadequate or failed

internal processes, personnel,

systems or (non-insurance)

external events.

The Group did not have any

material operational loss

events during the year.

The Group has a robust quarterly risk and control affirmation process

in place which is supported by detailed control testing.

IT availability risk is mitigated through disaster recovery and business

continuity plans which are tested annually.

IT integrity risk is mitigated through independent penetration tests and

restricting access to key systems to individuals who are qualified and

need to use them.

We have a cyber incident response plan to guide management in the

event a third party gains access to our systems. The annual test of this

is facilitated by a third-party specialist.

KRIs and KPIs are used to monitor performance against our cyber

risk appetite.

The Board delegates oversight

of internal controls and risk

management systems to the Audit

Committee. See page 83 for how

the committee discharged its

responsibilities this year. The Board

retains the responsibility for risk

oversight of IT and cyber risk.

The Group CEO and management

team manage the operation of the

business and report to the Board

and its committees.

The Audit Committee receives a

quarterly report form the Group

CRO summarising the results from

the quarterly risk and control

affirmation process and detailed

control testing, along with the

Group CRO’s opinion on the

overall control environment.

The Audit Committee reviews

this alongside the quarterly update

from the Head of Internal Audit.

The Board receives a quarterly

ORSA update report from the CRO

which includes by exception details

of loss events, performance against

operational risk KRIs, and changes

in the risk and control environment.

The COO reports to the Board on

operational matters, including the

programme of change, IT and

cyber security.

Strategic

Board

Risk description and performance

The risk of failing to devise and/or

implement an effective business

strategy that is aligned with risk

appetite and/or not adapting the

strategy/business plan for the

prevailing market conditions.

Strategic opportunities and capital planning are discussed at a

dedicated session attended by all Directors and members of the

management team.

A clear vision and strategic objectives that are well communicated

internally allowing the whole Group to understand their role and

contribution to the whole.

Town halls with all employees to communicate performance against

the strategic objectives.

Succession planning to ensure awareness of the strength in depth, or

lack of, and the necessary action in the event a key role becomes vacant.

The Board retains responsibility for

the oversight of strategic risk. The

Group CEO and management team

lead in the delivery of strategy.

The Directors are involved in

setting the strategy and approve

the annual business plan.

The Board receives quarterly

updates on the Group’s

performance against the plan

in its execution of the strategy.

31Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

Delivering

for our people

“We believe that giving our

people an opportunity to

feedback on their experience

of working at Lancashire is

vital in ensuring we deliver the

best possible environment, in

which colleagues can thrive

and reach their full potential.”

Sarah Rogers

Group Chief Human Resources Officer

%

of our people say they are

proud to work at Lancashire

32 Lancashire Holdings Limited | Annual Report & Accounts 2023

Our people and culture

A respectful, rewarding

and thriving work environment

Our people strategy helps us deliver one of our key goals –

to make Lancashire an employer of choice.

Gender split of employees

Total number

of employees



(permanent and FTC)

Voluntary annual

employee turnover

.%

% of women

in senior

management

%

Permanent employees

eligible for RSS awards

%

% of women on

the Group Executive

Committee

%

%

%

We are committed to retaining and attracting the best talent across

our markets and focus on delivering a respectful, rewarding and thriving

work environment across our locations.

At the heart of this are the Lancashire values (see insider cover).

These are the bedrock of what we do and how we expect our people

to behave whether in the office or outside with clients, brokers and

other stakeholders.

Lancashire has continued to grow during 2023, and we have

been pleased to welcome a large number of new colleagues to

the business who each bring their own expertise and experiences.

We believe this makes Lancashire both a diverse place to work and

a true catalyst for collaboration.

Average age of employees

<20

24%

32%

26%

14%

Key

20-29

30-39

40-49

50-59

60-69

1-3<1

Years

4-6 7-9 10+

39%

23%

16%

10%

13%

Average tenure of employees

33Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

Collaborative

Hard-working

Respectful

Supportive

Focused

Friendly

Flexible

Results-orientated

Positive

Ambitious

Listening to our people

We believe that giving our people an

opportunity to feedback on their

experience of working at Lancashire is

vital in ensuring we deliver the best

possible environment in which colleagues

can thrive and reach their full potential.

During 2023, we carried out a full survey

which was open to all employees in all

locations to complete.

Importantly, the survey was confidential

and carried out on our behalf by a

third-party. This third-party support also

enables us to benchmark our responses to

organisations of a similar size.

Based on our results and the response

rate, Lancashire was awarded a five-star

employer award from the survey company,

which is given to top-performing employers

based on the surveys it runs for hundreds

of clients. Results were collated both for

the Group and for individual functions and

teams with more than five employees.

We are pleased that the response rate was

extremely high at 87%. This was 13 points

higher than the last survey in 2021.

Our overall engagement score was 90%,

an increase of 2% on the last survey and

14 points higher than the benchmark. The

results were presented to the Boards and

Group Executive Committee. Team

managers were also supplied with

local results to allow them to review

and discuss these with colleagues.

Our highest scores were for being proud

to work at Lancashire, at 94%, while 92%

of responders said they are motivated to

do their best work and would recommend

Lancashire as a great place to work.

We welcome the honest and constructive

feedback, and areas that did not score so

highly will be reviewed and action plans

put in place to address these.

Engagement

score

%

Proud to work

at Lancashire

%

Recommend Lancashire

as a great place to work

%

Response

rate



%

Our people and culture continued

The top ten words used by our employees to describe working at

Lancashire are:

34 Lancashire Holdings Limited | Annual Report & Accounts 2023

Enhancing support for our people

A top ten employer

Lancashire was named a Top Ten employer in Bermuda in the annual

awards run by the island newspaper Royal Gazette. Lancashire was placed

seventh in the top 10 (out of 30+ participating companies). In 2021,

we came eighth. Our employees in Bermuda were instrumental in

our nomination, showing high levels of engagement.

Delivering leadership

Due to the growth of Lancashire in terms of headcount, management

are aware of the importance of communication to create a sense of

community and understanding.

We encourage a culture of meritocracy and openness, and senior

executives are available to discuss issues with employees on both

a formal and ad hoc basis.

Group CEO Alex Maloney communicates regularly with employees

on Company issues. Quarterly town hall meetings are held for all

colleagues where our progress against our strategic goals is reviewed,

and Group-wide corporate activities are highlighted.

A Non-Executive Director attends these events where they are asked

to discuss their role, recent Board discussions, and answer questions.

The Lancashire Employee Network

The Lancashire Employee Network (LEN) was launched in 2023 to

give colleagues an opportunity to get together to share knowledge

and experiences.

The LEN is led and managed by a group of employees from across the

business. Its initial focus is on running ‘lunch and learn’ sessions, hosting

internal and external speakers, and offering ‘soft skills’ training. Events

held during the year included a talk by a former SAS member on how

experiences from differing environments can be carried across to

business operations, a discussion with one of Lancashire’s shareholders

on their expectations of the business, and internal team events focusing

on individual areas of expertise to share knowledge and understanding.

Group CEO Alex Maloney was also interviewed for LEN sessions in

London and Bermuda, discussing his career and offering advice to

employees on maximising the opportunities available to them.

Results-orientated

Positive

Delivering a best-in-class

working environment

During 2023, our London office was expanded and redesigned to

offer our employees a better working environment and our guests

an enhanced experience when visiting.

The work included a new visitor lounge and reception area and

state-of-the-art meeting rooms. Floor space was also reconfigured

to give colleagues more space and further encourage collaboration

within and across functions.

A modern organisation

Following the 2021 employee survey, a number of benefits,

with a particular focus on ‘family-friendly’ employment policies,

were introduced.

These included enhancements to maternity, paternity and adoption

leave, and the addition of a benefit of paid leave for IVF treatment

and pregnancy loss.

In line with other organisations, following the period of remote working

during the COVID-19 pandemic, Lancashire’s UK employees are able to

work flexibly. This includes both flexible working hours and working

from home for a period each week. These are discussed with managers

to ensure business operations continue as normal.

During 2023, we also developed a support framework for employees

experiencing the menopause, as part of our commitment to providing a

safe and inclusive environment and encouraging colleagues to have open

conversations. We recognise that there is no ‘one size fits all’ approach,

but expect people to be supportive of colleagues who may be affected

by the menopause. Additionally, some employees may benefit from

reasonable adjustments at work to support their symptoms.

Recognising long service

Lancashire has a long history of retaining employees, due to the focus we

place on wellbeing, rewarding people appropriately, and developing their

skills and talents.

We benefit from the experience and expertise of our people, many of

whom have spent large parts of their career with us. To acknowledge

this contribution, since 2022, we have offered a sabbatical benefit for

those who have served for 10 years or more.

35Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

Our people and culture continued

Attracting and growing talent

Delivering a diverse talent pool

Lancashire aims to attract people to the business who share

our values and can bring their talents to the benefit of the Group.

We actively recruit new employees at all levels from a range of

backgrounds and through a number of channels, whether direct

outreach, corporate social media, and through our website.

While it is important to attract experienced employees when appropriate

vacancies arise, we also believe that offering less experienced people,

who are beginning their careers, or who are making a significant career

change, is valuable to the business.

Apprentices

During 2023, Lancashire was pleased to welcome a cohort

of apprentices to the business.

The group were recruited into a number of functions including HR

and IT. The Lancashire apprentice scheme aims to give young people

starting their careers an opportunity to learn through on-the-job

practical support and guidance while working towards formal

qualifications. Group HR Apprentice Sienna Ray applied for the

scheme after finding out about it online. She said one of the

attractions was the mix of live work and the ability to study.

“It’s been really good so far and I am lucky

that I can work with people with lots of

different skills and experience. It gives

you a different perspective.”

Sienna will be working towards a Foundation Certificate in People

Practice. “There are several qualifications you can work towards,

right up to degree level. I am really glad I joined Lancashire

as it’s a big step forward in my career,” she said.

IT Business Support Apprentices Tyreque Muhammad and

Jenna Webster also applied for their roles after seeing an online

advertisement for the scheme. Jenna had been studying fashion

but decided that she wanted to move into IT, while Tyreque had

completed a self-taught IT course.

Jenna said: “It’s been really interesting coming from a different

background and into IT – it was a huge jump. I have learnt a lot

already and the team has been really good. The key thing is to

remember that there are no stupid questions – just ask and someone

will help. I am really proud of myself for joining Lancashire and I

wouldn’t have learnt as much just doing a course.”

Tyreque and Jenna will be working towards a professional

qualification as IT Business Support Technicians. Tyreque said:

“There’s been a lot to learn, and it is good to

be able to mix practical work with course work.

I wouldn’t have developed as much at this stage

without being in a team with experienced people,

and actually doing the job.”

This includes recruiting a number of apprentices, who are offered

the opportunity to work with more experienced colleagues and

begin to progress in their chosen field.

In addition to attracting new employees, we are also focused

on developing our existing colleagues and promoting them to

new roles when opportunities arise.

During 2023, 46 colleagues were promoted internally across

our underwriting and support functions.

Our induction programme for new employees includes training

on diversity matters to support our focus on fairness and inclusion.

36 Lancashire Holdings Limited | Annual Report & Accounts 2023

Training and development

To help employees make the best of their talents and meet their

ambitions, Lancashire has a number of training and professional

development initiatives.

We see real benefit in increasing people’s skills, experience

and knowledge – whether at a more junior level or within our

manager community.

During 2023, we carried out a pilot Management Development

Programme in order to gain feedback on the planned training

and ensure that it meets the needs of our team leaders.

The full programme will be rolled out in 2024 for new and existing

managers with three or more direct reports.

It is designed to equip managers with tools and techniques to help drive

individual and team performance across departments. Key objectives

include the role of managers at Lancashire, and what is expected of

them; inclusive leadership; how to appropriately manage team members’

performance; and adapting to change.

Lancashire’s training and professional study programme also offers

employees a range of support through our online ‘LMS – Insurance

Assess’ e-learning platform.

This provides compliance, soft skills, management and health and

wellbeing training, along with (re)insurance-specific training courses.

In some cases, financial incentives for professional qualifications are

available. All employees are encouraged to discuss training requirements

with their manager on an on-going basis and through more formal

performance review discussions.

Compulsory training

Additionally, we have a clear set of policies and procedures to uphold

our high standards of behaviour and to educate our employees on what

is expected of them.

Compulsory training is delivered to all new permanent employees,

including people working part time, and those on fixed-term contracts.

Topics covered include tax/regulatory operating guidelines, disclosure

(including the requirements of the Market Abuse Regulation 2016),

inspections, financial crime, ERM, cyber security, communications

etiquette/equality, diversity and inclusion, GDPR and conduct rules.

New employees are expected to complete this training during the

first three months of employment.

Further training is offered, depending on individual requirements.

The Board receives quarterly updates regarding completion

of these sessions.

37Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

Our people and culture continued

Diversity, equity and inclusion

Since its inception, Lancashire has had a strong focus on diversity, equity

and inclusion (DE&I). We believe that these important themes should

reflect not just gender and ethnicity but also ensure that we have a

range of talents available to the Group.

Our internal initiatives are led by our DE&I working group, which is

formed of employees from across the business. It is important that

our activities match the expectations of our people, and the Group

is reviewing the outputs from the 2023 employee survey and will

set out its agenda for the coming year in early 2024.

For a number of years, Lancashire has actively supported external

initiatives which seek to build more diverse, equitable and inclusive

businesses. These include the Hampton-Alexander and Davies Reviews

on gender diversity; and the FTSE Women Leaders Review, to improve

the representation of women on boards and in leadership positions.

The Group submits data annually to the Review.

The gender and ethnic diversity of the Board and the senior management

group is set out in the tables below. Additionally, the Chair’s statement

on our Diversity Policy is available on our website.

Our efforts in this area are supported by policies that help ensure

people do not face any discrimination as an employee or during

our recruitment process.

We operate a zero-tolerance approach to bullying and harassment and

all employees are encouraged to speak up about any issues of concern.

Our open corporate culture is a key driver in this and our Dispute

Resolution Policy, where issues cannot be initially resolved, can be

used by employees, without fear that they will be penalised in any way.

Our Anti-Harassment and Bullying Policy also offers employees a

mechanism through which they can raise issues of concern.

The tables below set out data about the sex and ethnicity of the Board and executive management as at 31 December 2023, in the format prescribed

by the Listing Rules.

Number of

Board members

Percentage of

the Board

Number of senior

positions on the

Board (CEO, CFO,

SID and Chair)

Number in executive

management

Percentage of

executive

management

Men 7 70 3 4 44

Women 3 30 1 5 56

Other categories – – – – –

Not specified/prefer not to say – – – – –

Number of

Board members

Percentage of

the Board

Number of senior

positions on the

Board (CEO, CFO,

SID and Chair)

Number in executive

management

Percentage of

executive

management

White British or other White (including minority-white groups) 9 90 4 9 100

Mixed/Multiple Ethnic Groups – – – – –

Asian/Asian British – – – – –

Black/African/Caribbean/Black British 1 10 – – –

Other ethnic group, including Arab – – – – –

Not specified/prefer not to say – – – – –

38 Lancashire Holdings Limited | Annual Report & Accounts 2023

Employee support and

industry initiatives

Supporting and rewarding

All permanent employees have an enhanced interest in the performance

and success of the Company through our RSS to ultimately become a

shareholder in LHL.

For a number of years the Group has provided free lunches on

specific days for employees to encourage them to interact in the

office during breaks.

Offering advice and information on health, wellbeing and financial

matters is also part of being a responsible and understanding employer.

During 2023, we held a number of events including marking World

Mental Health Day, highlighting the support available through our

Employee Assistance Programme (EAP), promoting the benefits available

from our health care provider, including health checks, and financial

wellbeing workshops focusing on topics such as cost of living support

and pensions.

Expert telephone support is available 24 hours a day through the EAP,

along with resources and information to support home life, work life

and physical and emotional health, and the opportunity to enrol in

self-help programmes.

The Group has volunteer first aid and wellbeing officers available to

employees, and Lancashire offers non-judgmental support for those

suffering mental health difficulties and ill-health.

Our responsibility as an employer

We comply with all relevant requirements with respect to human

rights, rights of freedom of association, collective bargaining, and

working time regulations.

We believe every employee, and prospective employee, should be

treated with dignity, respect and fairness. As an equal opportunity

employer, we do not discriminate, or tolerate discrimination, on

grounds of race, age, sex, sexual orientation, marital or civil partnership

status, gender reassignment, pregnancy or maternity, disability, religion

and/or beliefs.

All employees have a duty to treat colleagues, visitors, clients,

customers, suppliers and former staff members with dignity at all times.

Employees who believe they may have been discriminated against

are encouraged to raise the matter through our Grievance Procedure.

Abusive or discriminatory behaviour by an employee towards another

will be seriously and confidentially investigated and will be dealt with

in accordance with the Group’s disciplinary procedure.

We are also an Accredited Living Wage Employer, for our business

and our supply chain.

Our Global Employee Handbook, distributed to employees on joining

and available on our internal intranet, is supported by country-specific

supplements where relevant.

Leading market-wide discussion

Lancashire is a partner for the Insider Progress initiative, launched by the

Insurance Insider. Our support will ensure events are free for participants

across the industry from all backgrounds. Insider Progress is designed

to promote discussions around building an insurance workplace for

the future with a focus on DE&I. Our Group CFO Natalie Kershaw is a

member of the Insider Progress advisory board, which sets the agenda

for events and highlights topics and areas for discussion.

Lancashire is also a member of the Insurance Breakfast Club and

offers selected employees the valuable opportunity to participate in

its events. The Insurance Breakfast Club programme involves 10 months

of structured development and provides connections for people at a

crucial time in their careers. Its overall aim is to assist companies in

their development of female talent.

39Lancashire Holdings Limited | Annual Report & Accounts 2023

Strategic report

Delivering

sustainably

“The depth of experience

and insight within our teams

is invaluable in ensuring that

ESG matters are considered

and implemented across the

Company’s operations.”

Jelena Bjelanovic

Chair of the Lancashire ESG Committee

40 Lancashire Holdings Limited | Annual Report & Accounts 2023

The Group’s ESG Committee, chaired by our Group Head of Investor

Relations, reports quarterly to the Board and includes representatives

from across Lancashire’s operations, including senior members of the

underwriting, risk, legal, HR, finance and communications teams. This

depth of experience and insight is invaluable in ensuring that ESG

matters are considered and implemented across the Company’s

operations. Senior management also receive regular reports on the ESG

Committee’s activities and are fully engaged with all decision-making.

We believe our attention and influence is best put to use in focusing

on those areas where we can have a meaningful and more immediate

impact on society, our people and the environment. This includes

developing the potential of our people, and managing our own carbon

emissions through positive action such as carbon offsetting. Additionally,

the activities of the Lancashire Foundation are clear examples of the

importance of putting ESG into action rather than just words.

As in previous years, the discussion around climate change and other

environmental factors, and the best way to respond to those challenges,

has continued at both a governmental and local level in 2023.

As a responsible business, Lancashire actively plays a role in this debate

through our engagement with our clients as they go through their own

transition away from carbon-based energy, and we welcome the

opportunity to utilise our expertise in areas of risk management in

these discussions. During 2023, Lancashire also published its first report

to ClimateWise, which is available on our website, and continued

to support the aims of the Task Force on Climate-related Financial

Disclosures (TCFD). Our full TCFD report can be found on pages 49 to 64

which sets out clearly our progress in the area of climate change

management of risk and opportunity.

Lancashire’s approach to environmental,

social and governance matters continues

to evolve and support our purpose.

Peter Clarke

Non-Executive Chair

Embedding

a sustainable

culture for

a profitable

business

Chair’s introduction

The strong financial results which the Company has delivered in 2023

are a result of our values-driven sustainable business culture. The Board,

and Alex and the management team, have a strong focus on the Group’s

operational effectiveness, which informs much of our debate in the

Board and its committees.

During 2023, the Group made considerable progress in delivering on

the areas of focus aligned with the pillars of our ESG strategy: being

a sustainable and responsible underwriter and investor; operating

responsibly in our own business practices and in managing and

monitoring our own carbon emissions; and delivering social

good through the Lancashire Foundation.

The Board debates and approves the ESG strategy and oversees

its implementation by management and within the business.

A report on the work of the Lancashire Foundation, including the

Project Transform volunteering initiative, can be found on pages 45

to 48 and information on our progress against our strategic

objective to be an employer of choice is outlined on page 33.

Reporting on our own emissions can be found on page 68.

41Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Introduction

During 2023, the Board has continued its active engagement with the

Group’s stakeholders. In particular, our Non-Executive Directors regularly

meet with employees from across the business to discuss a range of

matters on both a formal and informal basis. Board members welcome

the opportunity to attend the quarterly Town Hall events which are

led by Alex Maloney to discuss the work of the Board and to answer

questions from employees. Presentations were also received at various

committees on a range of topics including feedback from the 2023

employee survey, underwriting opportunities within product classes,

and wider corporate developments and enhancements, such as the

plans for a U.S. operation.

Succession planning is also an important part of the Board’s work

to ensure that we have the appropriate skills, experience and expertise

to support the business.

During the year, we welcomed two new Non-Executive Directors to

Lancashire. In April, Bryan Joseph joined the Board and as a member of

the Audit and Underwriting and Underwriting Risk Committees. Bryan

has over 40 years’ experience as an actuary in the global insurance and

reinsurance industry. Later in the year, we announced the appointment

of Philip Broadley as a Non-Executive Director and as the LHL Chair

designate. He is expected to succeed me in that role, subject to

shareholder approval, following Lancashire’s 2024 AGM.

Our Senior Independent Director Robert Lusardi led the search for a

Chair successor and on behalf of the Board. I would like to thank him and

colleagues on the Nomination, Corporate Governance and Sustainability

Committee for their hard work and diligence.

Due to its relatively small size, the appointment or departure of a single

director may temporarily impact Board diversity and that is the case at

present, where the percentage of women on the Board is below our

stated objective of 40%. We plan to address this during 2024 and the

Board will continue to explore opportunities to further improve diversity

within its own make-up and across the wider Group.

We fully recognise the benefits of diversity across the Group, and the

importance of appointing high-quality Directors with a wide range of

backgrounds, skills, gender, ethnicity and diversity of thought. However, the

need to identify the best person for a role to best advance the business

and interests of the Group and all its stakeholders is also important.

With regard to the Group’s disclosure reporting obligations for diversity

targets under listing rule 9.8.6 R (a) the Company is able to report the

following position at the 2023 year end.

The Board has a 40% objective for women Directors on the Board and on

the Group’s principal executive management team. As at 31 December

2023, the percentage of female representation on the Board stood at

30% and within the executive management team at 56%. The Board

intends to take action as part of its succession planning to meet this

objective in the short to medium term. With Natalie Kershaw as our

Group CFO we are able to confirm that the Board continues to have at

least one woman in one of the four most senior positions on the Board.

In line with the recommendations set out in the Parker Review on ethnic

diversity, the Board has adopted the Parker Review objective to have at

least one qualifying Director on the Board by 2024. This objective is

currently met following the appointment of Bryan Joseph in 2023.

As a premium-listed company on the LSE, Lancashire measures its

corporate governance compliance against the requirements of the UK

Corporate Governance Code published by the UK FRC. This requires each

company with a premium listing to disclose how it has complied with

Code provisions or, if the Code provisions have not been complied with,

provide an explanation for the non-compliance. The Board’s Nomination,

Corporate Governance and Sustainability Committee monitors the

Group’s Code compliance quarterly and more information can be

found in the report starting on page 89. In addition, the Company also

monitors compliance with applicable corporate governance requirements

under Bermuda law and regulations. The Company is subject to group

supervision by the BMA, which also regulates LICL, the Group’s

Bermuda-incorporated (re)insurance entity. The Group’s UK insurance

entities are regulated by the PRA and the FCA, and Lloyd’s in the case

of LSL and Syndicates 2010 and 3010.

The Board has continued to focus on proactive and constructive

stakeholder engagement aligned to the Section 172 responsibilities of

boards under the UK Companies Act 2006. While not formally subject

to Section 172 as a matter of law, due to the Company’s incorporation

in Bermuda, we believe that, as a responsible business, complying with

those responsibilities is a matter of importance and that they provide

practical working tools by which we can monitor our engagement. The

Board’s statement regarding matters covered by Section 172 can be

found on page 80 which outlines examples of how the Board and the

business have factored in the needs of our stakeholders in their

discussions and decision-making.

I am pleased to say that, in the judgement of the Board, the Company

has complied with the principles and provisions as set out in the Code

throughout the year ended 31 December 2023, and has appropriately

considered those duties set out in Section 172.

Chair’s introduction continued

42 Lancashire Holdings Limited | Annual Report & Accounts 2023

Our ESG strategy, impact, progress and areas of focus

During 2023, we have continued to deliver on the Group’s ESG strategy and priorities.

• Maintain high levels of engagement and

continue to offer formal and informal

channels for employee feedback.

• Gender Pay Gap reporting.

• Expand activities for Lancashire Employee

Network to include soft skills training,

following feedback.

• Continue to monitor applications to ensure

we attract a diverse talent pool.

• Management Development Programme to

continue to be rolled out in 2024 for new

and existing managers.

• Annual reporting aligned

to ClimateWise requirements.

• ESG insurance underwriting guidelines reviewed

by Board to ensure they are appropriate.

• Maintain ESG-related premium

metrics and report to Board quarterly.

• Continue engagement with ClimateWise

and seek to improve reporting and disclosures

for 2024.

• High levels of employee engagement

measured through 2023 all-employee survey.

• Reported diversity aligned to FCA

disclosure requirements.

• Lancashire Employee Network launched

offering peer-to-peer information sessions

and external speakers.

• Increased use of social media to expand

hiring pool for vacancies.

• New employees continue to receive

training on diversity matters in employee

induction programme.

• ESG insurance underwriting guidelines

reviewed and approved by the Board.

• ESG-related premium evaluated and

reported to the Board quarterly.

• Regular monitoring of energy clients’

transition plans.

• Maintained active dialogue on ESG issues

with clients and brokers.

• Published first public ClimateWise report.

1. People

and culture

Giving our people the environment,

tools, skills and support they need

to thrive in an open, honest and

diverse culture.

2. Sustainable insurance

Ensuring our business considers

climate change and other ESG issues

in our underwriting decision-making.

FocusProgress in 2023

• Continue to monitor principal investment

managers as signatories to the UN Principles

for Responsible Investment.

• Monitor the climate change risk sensitivity, ESG

profile and carbon intensity profile of the Group’s

investment portfolio with regard to developing

expectations and methodologies and keeping

within agreed guidelines.

• 96.7% of the Group’s principal investment

managers are signatories to the UN Principles

for Responsible Investment.

• Continued to review and monitor ESG

investment guidelines as embedded in

external investment managers’ guidelines.

3. Responsible

investment

Demonstrating our commitment

to ESG, including responsibility

for our environment, through the

management of our investments.

• Group emissions reduced per FTE.

• Fully offset calculated 2023 GHG market-based

emissions by purchasing verified credits.

• More than $23 million donated to charitable

organisations since 2007.

• 2023 report submitted to Carbon

Disclosure Project.

• Continued to support and report against

the aims of the TCFD.

• Sustainable lighting installed as part

of London office refurbishment.

4. Operating responsibly

Running our business as a good

corporate citizen, being a responsible

preserver of resources, and holding

our supply chain to the high standards

we apply to ourselves. Supporting

wider society through our corporate

and charitable activities including the

Lancashire Foundation. Meeting and

complying with legal, regulatory and

investor obligations on ESG.

• Monitor and report annually the

Group’s emissions.

• Continue to fully offset calculated GHG

market-based emissions through purchasing

verified credits.

• Maintain and support the work of the Lancashire

Foundation through funding and volunteering.

• Continue to engage with Carbon Disclosure

Project and report against the aims of the TCFD.

• Maintain awareness of emerging frameworks

for future reporting requirements (for example

the Taskforce on Nature-related Financial

Disclosures (TNFD)).

43Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Introduction

Delivering

for our communities

“The Lancashire Foundation’s funding

is linked to the Group’s financial results.

Our employees know that strong

business performance will allow us

to continue to support charities in the

communities where we operate, as well

as in communities around the world.”

Jennifer Wilson

Chair of the Lancashire Foundation

Donations Committee

44 Lancashire Holdings Limited | Annual Report & Accounts 2023

The Lancashire Foundation

The Lancashire Foundation is funded

through a donation pool which is linked

to the Group’s financial results. This

means that our employees know that

strong business performance will assist

in supporting the wider community.

The Lancashire Foundation, which has been a UK-registered charity since

September 2012, receives 0.75% of Group profits with a minimum

threshold of $250,000 to a maximum of $750,000. The Board

periodically receives reports from the Foundation’s Trustees and a

designated Board representative meets with employees involved in

the Foundation annually to discuss the strategy for giving for the

upcoming year.

During 2023, the Lancashire Foundation continued its work supporting

a range of causes in our home markets and further afield. Since it was

formed in 2007, over $23 million has been donated by the Foundation

to charitable organisations.

A number of these causes have long-standing relationships with

Lancashire, and we are proud of the ongoing support we have

given them.

During 2023, the Foundation has focused on supporting causes working

to protect the environment. This followed a successful programme of

support for social causes in 2022.

The Foundation made a $50,000 donation as part of our partnership

with the charity Waterstart Bermuda, which plans to open a sustainable

campus and other initiatives on Burt Island. It will ultimately serve as

a microcosm of an ideal community and a role model in Bermuda and

more widely. Waterstart Bermuda’s mission is to promote personal

growth and environmental awareness through experiential education.

Our support is our way of giving back

The British Mountaineering Council’s Access and Conservation Trust was

also a beneficiary of a £45,000 donation. This charity funds projects to

protect cliffs, uplands, mountains and outdoor spaces across the United

Kingdom and Ireland.

The Foundation has also supported the Bermuda Underwater Exploration

Institute’s 2023 Youth Climate Summit. The week-long event engages

young people on global climate issues and is the foundation for a year of

youth-led activities focused on local climate action on conservation and

sustainability. Over 150 students aged 13 to 22, from across Bermuda,

were involved.

More widely, the Foundation has also helped those in need following

earthquakes in Turkey and Syria in early 2023. A donation of £50,000

was made to the Disasters Emergency Committee (DEC) via the British

Red Cross. The DEC is a group of 15 UK aid charities that work together

to raise funds quickly and efficiently at times of crisis overseas.

The Foundation also matched all employee donations to the DEC/British

Red Cross.

The Foundation also donates funds to enhance the impact of a range

of activities undertaken by colleagues.

For example, during 2023, colleagues in Bermuda took part in the

Relay for Life to raise funds to increase access to cancer prevention,

early detection, treatment and support at the Bermuda Cancer and

Health Centre.

Alongside a donation from the Foundation, employees made generous

personal donations via the proceeds from a silent auction and bake sale.

Lancashire’s people raised almost $21,000 and the overall event raised

over $800,000.

m

Since it was founded in 2007, over $23 million has been

donated by the Foundation to charitable organisations.

,

donation as part of our partnership with the charity

Waterstart Bermuda which plans to open a sustainable

campus and other initiatives on Burt Island.

£,

The Foundation has also helped those in need following

earthquakes in Turkey and Syria in early 2023 donating to the

Disasters Emergency Committee via the British Red Cross.

45Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Sustainability

The Lancashire Foundation continued

Our long-standing partnerships

The Family Centre in Bermuda

Lancashire has been supporting The Family Centre in Bermuda since

2007 to aid their work helping children suffering from emotional, social,

behavioural and trauma-based challenges. Assistance is available to any

Bermuda resident that meets the criteria and has the need. During the

year, in addition to the ongoing donation, a $100,000 donation was

made in honour of the Family Centre’s founder, Martha Dismont,

who passed away in 2023.

Tomorrow’s Voices

Tomorrow’s Voices is a Bermudian autism early intervention centre

which has been helping the community since 2007. It aims to assist

people diagnosed with autism or on the autism spectrum, starting

at the age of two.

Cancer Research UK

Cancer Research UK is the world’s largest independent cancer

research organisation and is dedicated to saving lives through

research, influence and information.

Causes close to our people

Importantly, the Foundation also encourages employees to nominate

charities that they believe would benefit from funding. We know that

even a relatively small single donation can have a big impact. More

than $56,000 was donated to organisations nominated by employees

during 2023. Donations to employee-nominated charities are a

minimum of £2,000. The Foundation’s Donations Committee

meets quarterly to review submissions from employees and make

recommendations for donations. The Committee is made up of

employees and their recommendations are submitted for approval

by the Foundation’s Trustees. Additionally, the Foundation provides

matching donations for fundraising endeavours such as marathons,

triathlons, and other activities by employees.

St Giles Trust

The Lancashire Foundation is proud to have been supporting the

St Giles Trust for 10 years.

The charity helps people held back by poverty, dealing with addiction

or mental health problems, caught up in crime or a combination of

these issues and others.

During 2023, employees Sharyl Jauod and Florinda DeMaio volunteered

their time to restock the St Giles Trust pantry in London. The pantry

offers high-quality, nutritious and healthy food to those struggling

to feed themselves and their families.

“ We are proud of the ongoing support

we have given to our long-term partners.”

46 Lancashire Holdings Limited | Annual Report & Accounts 2023

Just some of the charities nominated by employees

which received funding from the Foundation during 2023.

Forget Me Not

Support Group

Supporting bereaved parents

and families of babies.

Waves Music Therapy

– Toby’s Fund

Assisting children suffering

from complex trauma and/or

emotional and behavioural issues

through specialist music therapy.

Crohn’s & Colitis UK

Funding research into potential

cures and treatments and also

supporting those suffering from

these illnesses.

The Royal Marsden

Cancer Charity

Improving diagnosis

and personalised care

for cancer patients.

SCARS Bermuda

Reducing the risk of child sexual

abuse by raising public awareness,

educating adults on prevention,

and lobbying decision-makers

to protect children.

WeSeeHope

Helping vulnerable children in

Southern and Eastern Africa

through early childhood

development, educational and

vocational-based training.

The Kevin Bell

Repatriation Trust

Assisting bereaved families

to repatriate the bodies of

loved ones.

Home for Good

Providing a home for every child

who needs one via fostering,

adoption or supported lodgings.

Haven House

Children’s Hospice

Providing high-quality palliative

and holistic care services to

babies, children and young

people and their families.

Friends of Treetops School

Refurbishing a sensory room for

children with disabilities.

George’s Windmills

Supporting children’s wards

and family areas connected

to hospitals.

Plymouth Hospitals Charity

– Derriford Children’s Wards

Improving a hospital ward or area

that needs extra care to make it

more friendly or calming for

people who need it.

Usher Kids UK

Serving the needs of children and

young people and their families

living with Usher syndrome – a

rare cause of progressive deafness

and blindness.

Oakhaven Hospice

Providing support through

hospice and home care services.

It Takes a Village Foundation

Supporting vulnerable women

with education, food vouchers

and other necessary items, not

currently offered by the statutory

authorities or other charitable

organisations in Bermuda.

Trees for Cities

Creating high-quality green

spaces in socially and

environmentally deprived

areas. They hope to plant

their 2,000,000

tree

in 2024.

47Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Sustainability

Project Transform

During 2023, Lancashire was pleased to relaunch Project Transform,

which offers employees the opportunity to take part in volunteering

activities overseas.

The first Project Transform visit took place in 2010 in the Philippines

and since then annual trips have been arranged, with a pause during

the COVID-19 pandemic. The Tanzania programme was organised

with the International Volunteer HQ organisation.

Figures from the UN Development Programme show that more than

57% of the population in Tanzania lives in poverty, making assistance

initiatives, such as Project Transform, extremely valuable.

The 2023 activity saw 12 employees from across the Group travel to

the country to assist with a construction project to build a new home

for 68-year-old widow Beatrice.

Team member Jamie Grant said: “When we arrived, she welcomed us

into her current house, a tumbledown shack with a low tin roof (secured

with rocks), no windows but plenty of holes in the mud walls, and only a

narrow sofa for a bed.”

During the week-long programme, the team helped clear an adjoining

plot, dig and pour the foundations and begin the construction of the new

home. The group were welcomed by members of the local community.

Team member Kelly Turner said: “Saying farewell to the local children

was very tough. These kids had been with us all week – watching our

progress, entertaining us with their singing and their dancing, as well as

taking every opportunity to encourage us to down tools and join them

in a game of street football.”

“The project team had coordinated gift bags for 25

children, colouring books and pencils for the younger

ones and exercise books and maths sets for the older

ones who were soon to be heading to senior school.”

“The team left Tanzania after a truly amazing

experience, with many team members having been

inspired to consider further volunteering work

when back in the UK/Bermuda, or further afield.”

48 Lancashire Holdings Limited | Annual Report & Accounts 2023

Sustainable insurance and responsible investment

2023 TCFD report

Meeting the challenges and

opportunities of ESG and climate

issues has been a focus within the

Lancashire business for many years.

Our underwriting mindset is grounded in a pragmatic understanding of

potential perils, their nature, and mitigation factors. The risks of climate

change on the insurance industry affect the asset and liability side of the

balance sheet. That double exposure drives us to work with our clients

to assist them with risk solutions that help them recover from the impact

of catastrophic events, including those associated with climate change.

We also act as a partner with our clients during their journey through

this phase of global carbon transition.

Lancashire operates in a subscription market that allows us to adjust

our insurance solutions and provide policyholders with flexibility as

their needs change to address climate-related challenges and planning.

Our approach to reporting

Every year, we build upon our increasing knowledge to move discussions

further in identifying the opportunities to work alongside our clients,

investors, and other stakeholders to address complex climate change

issues. The summary on the following pages details our disclosures,

which are consistent with the TCFD’s four core elements – governance,

strategy, risk management, and metrics and targets – underpinned

by 11 recommendations.

About this report

In compliance with the Financial Conduct Authority (FCA)

listing rules, these disclosures are consistent with the TCFD

recommendations and recommended disclosures.

Lancashire is a TCFD supporter and recognises the value of

consistent disclosures. Annual reporting against TCFD allows

us to understand climate-related business risks and opportunities.

Some additional guidance in the October 2021 TCFD Annex

requires more time for us to consider fully. We will continue

this review throughout 2024.

Our Scope 3 disclosures relate to the measurable emissions

referable to our own operations, as more specifically detailed

in this report. At this time, there is no commonly-adopted

methodology, nor the available data for accurate and comparable

measurement and apportionment of Scope 3 emissions referable

to the economic activity associated with the Group’s investment

portfolio or its (re)insureds; further details on our approach can

be found in the Strategy section of this report.

This report complements Lancashire’s ClimateWise Report dated

August 2023, our Principles for Sustainable Insurance disclosures

and our CDP submission.

Governance

The organisation’s governance

around climate-related risks

and opportunities

Strategy

The actual and potential

impacts of climate-related

risks and opportunities on

the organisation’s business,

strategy and financial planning

Risk Management

The processes used

by the organisation to

identify, assess, and manage

climate-related risks

Metrics and Targets

The metrics and targets to

assess and manage relevant

climate-related risks and

opportunities

Governance

Strategy

Risk Management

Metrics and Targets

The Four Core

Elements of

the TCFD

Lancashire’s TCFD roadmap

In 2023, the Board assessed the prominent risks facing the Group,

including those that could threaten our business model, future

performance, solvency, or liquidity. This review stressed the 2023

business plan for several severe but plausible scenarios, including

climate change and the impact on capital evaluated. Since then, we

have completed annual disclosures relating to GHG emissions, focusing

on continuous improvement over time. Looking at our progress to date,

we can identify areas to focus on and prioritise combining short- and

long-term actions and commitments that support meeting the UK

government’s net-zero target by 2050.

49Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Sustainability

Sustainable insurance and responsible investment continued

Core areas of TCFD disclosure

Governance

Disclosure elements 2023 Practice

Board’s oversight of climate-

related matters

See page 51

• Continued to evolve Board oversight and monitoring of climate-related risks and opportunities,

actioned through Board committees with climate-specific related duties.

• Oversaw the strategic planning process and approved the annual update of the strategic plan,

including building on climate change risks and opportunities.

Management’s role in assessing

and managing climate-related

matters

See page 51

• Continued to focus on the actual and potential impacts of climate-related risks and opportunities

through our underwriting, risk and exposure management with wider oversight by the ESG

Committee across the business.

• Carried out climate-related risk and opportunities analysis, governed by the RRC, facilitated

by our Group CRO and delivered through strategic business units and functional groups.

Strategy

Disclosure elements 2023 Practice

Climate-related risks and

opportunities identified over the

short, medium and long term

See page 54

• Identified climate-related risks and opportunities using an internal view of risks and the impact

of physical and transitional risks.

Impact of climate-related risks

and opportunities

See page 57

• Continued to explore opportunities and manage risks and the impact they have on all aspects

of our business and strategy.

• Linked underwriting guidelines to our formal risk appetite and focused on assisting the broader

set of efforts to mitigate climate change’s impact on the economy and society.

Resilience to climate-related risks

using scenarios analysis

See page 59

• Conducted stress and scenario testing as part of our business planning process to get insight

into the impact natural catastrophe events could have on our business.

• Supplemented the underwriting approach with several sophisticated models that model

exposures and predict losses for hurricanes and other weather occurrences.

• We manage our capital by reference to sophisticated modeling using actuarial inputs relating

the Group’s exposure to major catastrophic events, including climate-driven catastrophes.

Risk Management

Disclosure elements 2023 Practice

Processes for identifying,

assessing and managing

climate-related risks

See page 60

• Continued dialogue with risk owners and subject matter experts across the Group including

annual underwriting strategy days to review current and anticipated climate risks.

• Continued to monitor PMLs of top elemental perils and continued to manage climate risk as a part

of underwriting and investment risk considerations and as a driver of our capital requirements.

• Continued to monitor ESG-related premiums to identify transition risk with these premiums

reviewed by the Board every quarter.

Integration into risk

management framework

See page 61

• Embedded climate-related risk into our ERM framework, by using qualitative and quantitative

risk analysis, and our risk appetite statements.

• Integrated climate risk tolerances in Group and individual entity risk appetite statements,

which are assessed at least annually.

• Continued to enhance the process for identifying climate-related risks and opportunities

with tools and frameworks used across the Group.

Metrics and Targets

Disclosure elements 2023 Practice

Metrics used to assess climate-

related risks and opportunities

See page 62

• Reported on PMLs and the outputs of how risk is monitored against various perils in different

global regions.

• Continued to test assumptions with external models challenging the macro and specific account levels.

Scope 1, 2, 3 GHG emissions

See page 63

• Reported Scope 1, 2 and 3 operational GHG emissions, relating to our own emissions, and

progress towards our path to the UK carbon net-zero in 2050.

• Disclosed operational emissions per full-time employee (FTE) against our target of a further

reduction in emissions per FTE of 15% by 2030.

Targets used to manage

climate-related risks and

opportunities

See page 64

• Monitored our net-zero target for 2050 for our own operations’ emissions and continually sought

innovative ways to make improvements.

• Established corporate policies in place and a commitment to offset our emissions for our own operations.

50 Lancashire Holdings Limited | Annual Report & Accounts 2023

Governance

Board’s oversight of climate-related matters

Our governance structure for managing the Group’s climate-related risks and opportunities is the same as for any other key risks and opportunities

identified on our risk register. Below is an overview of the organisational structure and how climate-related risks and opportunities are embedded

in our governance structure.

Board and Board Committees

Management Committees and Forums

Management Oversight

Board Oversight

ESG Committee

Disclosure Committee

Investment Risk and Return Committee (IRRC)

Risk and Return Committee (RRC)

Reinsurance Security Committee (RSC)

View of Risk Committee

Group Chief

Financial Officer

Group Chief

Operating Officer

Group General

Counsel and Chief

Executive Officer

Lancashire

Insurance Company

(UK) Limited

Chief Executive

Officer, Lancashire

Syndicates Limited

Group Chief

Risk Officer

Group Chief

Human Resources

Officer

Chief Executive

Officer Lancashire

Insurance Company

Limited and

Reinsurance

Manager

Group Chief

Underwriting

Officer and

LCM CEO

Executive Committee

Chief Executive Officer

Oversees and responsible for providing strategic direction and implementation regarding climate-related goals, risks, and disclosures.

Board of Directors and its Committees

Oversees and approves our climate strategy and how we manage climate risks and opportunities.

Nomination,

Corp Governance &

Sustainability Committee

Oversees issues of

sustainability, including

developments in climate

change risk management

and reporting. Committee

makes recommendations to

the Board regarding the

ESG responsibilities of

the Company.

Oversees the investment risks,

including sustainability risks, by

monitoring the portfolio’s

climate change risk sensitivity,

performance against a climate

Value at Risk (VaR) appetite

statement and the carbon

intensity of certain investment

assets as part of the regular

quarterly reporting process.

Oversees the Group’s

remuneration packages,

including the Group’s

remuneration structure,

ensuring they are in line

with the Group’s business

and ESG strategy.

Oversees our financial

reporting, internal and

external audit oversight,

internal controls and risk

management systems.

Oversees the disclosures of

the Group’s ESG strategy,

carbon accounting footprint

and offsetting, and the

Group’s TCFD report.

Investment Committee

Underwriting

& Underwriting

Risk Committee

Remuneration Committee Audit Committee

Oversees the impacts as an

influence on insured perils of

climate change and transition

risk, as well as the broader

ESG risks, and articulates

appropriate appetites and

tolerances for the Group.

Governance

51Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Sustainability

Sustainable insurance and responsible investment continued

Examples of Board ESG and climate change

oversight in 2023

Annual review and approval of the Group’s:

• Strategy including ESG factors;

• Risk appetite statements, including climate-related reports

for the asset and liability side of our business; and

• Tolerances for elemental PMLs and non-elemental RDSs.

Review and approval of the Group’s:

• Insurance underwriting guidelines including ESG

considerations;

• Annual ORSA report and quarterly reporting, which contains

information on all risk categories highlighting material risk

considerations, including climate-related risk where

appropriate; and

• Stress test outputs as part of the annual business planning

exercise and the annual ORSA reporting process, including

climate-related scenarios.

Monitors performance against:

• VaR risk appetite statement as part of the regular quarterly

reporting process;

• Preference for the financial impact of the Climate VaR on

the Group’s actual fixed maturity portfolio;

• Investment portfolio performance referencing the MSCI

carbon sensitivity and ESG profile tool;

• Business underwritten within the Group against the strategic

plan and the Board-approved risk tolerances, including those

linked to climate-related catastrophe loss events; and

• ESG-related premium as a percentage of total premium

written.

Board oversight

The LHL Board is responsible for the oversight of climate-related risks

and opportunities. It oversees the Group’s ERM activities and receives

regular updates on material risks, including ESG-related risks and

opportunities. This is done through the Nomination, Corporate

Governance and Sustainability Committee, the Underwriting and

Underwriting Risk Committee, and the Investment Committee.

The Board’s five reporting committees provide oversight and

challenge management on progress against goals and targets.

The Nomination, Corporate Governance and Sustainability

Committee monitors issues of sustainability, including developments

in climate change risk management and reporting.

The Underwriting and Underwriting Risk Committee monitors the

Group’s underwriting exposure to catastrophic risks including those

influenced by the impacts of climate change on the transition and

physical risks, as well as strategic planning of ESG risks, and articulates

appropriate risk appetites and risk tolerances for the Group. The

Committee also monitors exposures versus the Board-approved

risk tolerances on a quarterly basis.

The Investment Committee monitors climate change risk sensitivity,

the ESG, and the carbon intensity profile of the Group’s investment

portfolio and investment risk parameters, which include specific

Board-approved climate-related investment guidelines applied

across the Group’s fixed maturity portfolio.

Director development

In 2024, our Group CRO will deliver a session on climate risk for Board

members. The objective is to share current and emerging risk practices,

regulatory developments, and evolving climate-related ESG issues. This

will build on the existing quarterly ORSA updates that the Group CRO

prepares, which informs on climate-related risk and capital implications.

ORSA updates report on the Group’s risk exposures and compare them

against risk tolerances, including natural catastrophe perils. Were

material breaches to occur, they would be presented and mitigation

strategies would be recommended. Emerging risks, including climate-

related financial risks are discussed, including their potential impact

on the business plan.

Management’s role in assessing and managing climate-related matters

At the Executive Management level, the Group CEO is accountable for the development and execution of the Group strategy, setting the right

tone company-wide, and establishing our ESG priorities, including managing climate-related risks and opportunities and overseeing the process

for calculating the Group’s GHG emissions for its own operations and for the related purchase of offsetting credits.

The Group CUO is ultimately responsible for the business written by the Group, assisted by the segment and subsidiary CUOs and active underwriters.

Climate-related risks and opportunities related to the business written are assessed as part of the underwriting process. Each underwriter has

underwriting authority, in which climate-related underwriting guidelines are embedded.

The Group CRO is responsible for the implementation of the risk management framework, which includes facilitating the identification, assessment,

evaluation, and management of existing and emerging risks, and for ensuring these risks are considered and are properly included in management and

the Board oversight and decision-making process.

Governance

52 Lancashire Holdings Limited | Annual Report & Accounts 2023

Management reporting

The key areas of monitoring the overall governance processes

and management reporting processes are:

• Achievement of strategic objectives;

• Business performance;

• Investment performance and liquidity;

• Concentration exposure;

• Reserving adequacy;

• Capital requirements;

• Material risks faced by the business;

• Risk appetite and tolerance;

• Effectiveness of the control environment; and

• Compliance with laws and regulations.

ESG-linked compensation

The Group CEO and CFO’s performance-related compensation is

based on Company-wide performance and personal performance

objectives with a 75%/25% weighting. Their personal objectives

include ESG-related objectives. Achieving our ESG targets is a

fundamental component of our incentive plan, which the Board

approves. By aligning our incentive compensation awards to our

ESG performance, we have created a direct link between ESG-related

criteria and executive compensation.

Management-level ESG Committee

The ESG Committee, which was established by management in 2021,

is tasked with the oversight, co-ordination and internal management

of the Group’s ESG strategy. The ESG Committee reports to the

Nomination, Corporate Governance and Sustainability Committee

quarterly and regularly to the Group Executive Committee and is

supported by the Diversity, Equity & Inclusion Working Group.

Key developments are reported to the Nomination, Corporate

Governance and Sustainability Committee, as well as the Investment

and the Underwriting and Underwriting Risk, Audit and Remuneration

Committees as appropriate, and ultimately to the Board via the Group

CRO’s quarterly reporting and periodic reporting from the ESG

Committee Chair.

Management-level Risk and Return Committee

The RRC evaluates and monitors the Group’s modelled underwriting

PMLs and RDSs against the Group’s tolerance levels on a monthly and

quarterly basis, respectively. Lancashire underwrites predominantly

short-tail business, with loss exposures usually crystallising within a

policy period of 12 months. As a result, with PML levels updated monthly

and shared internally, we ensure we closely track both market pricing

and coverage conditions and the Group’s modelled climate-related loss

exposures; this information, in turn, is communicated quarterly to the

Board. Please see page 150 for more information.

Management-level Investment Risk and Return

Committee

The IRRC actively monitors the potential impacts of climate change-

related transitional risk on assets within the Group’s investment

portfolio. We work with our external portfolio managers to monitor

the carbon and ESG profile of the Group’s investment portfolio. The

requirement to monitor, develop and implement ESG and TCFD

principles is included within its terms of reference.

The Group CRO is a member or attendee of all the committees described

above and provides a link between each individual forum and the Group

Executive Committee.

Group-wide teams supporting climate initiatives

Our governance structure supports the effective oversight, management,

and execution of our climate-change ambitions across our business.

Our exposure management team — led by the Group Chief Actuary

— works alongside the Group Head of Exposure Management and

modelling professionals to ensure that climate-related physical risks

are modelled, with the sensitivity of peril parameters (frequency and

severity) assessed. The results inform decision-making with regards

to our strategy and portfolio.

In our underwriting operations, we manage climate risk by sharing

knowledge and guidance on the insurance underwriting guidelines that

are part of each underwriter’s authority. Adherence to underwriting

authority forms part of the annual performance appraisal process.

Our internal modelling expertise is supplemented with external vendor

models that support complying with the tolerances and preferences

created to manage our exposure, including loss events that climate

change trends may have shaped.

Governance

53Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Sustainability

Sustainable insurance and responsible investment continued

Strategy

Short-term

We predominantly underwrite short-tail business, so the principal impact of climate-related risks and opportunities is on short-term strategy.

Potential impacts are mitigated by our ability to consider new data regarding the frequency and severity of elemental catastrophe events,

re-evaluate the portfolio annually, re-price physical risks and reset exposure levels.

Medium-term

Over the last several years, we have seen increased climate-related information provided in the underwriting process. We recognise that climate

change impacts the longer-term strategy regarding emerging risks. The Group’s casualty risk exposures, which have a medium-term time frame,

are not typically heavily influenced by catastrophic climate change-related loss events.

Long-term

Management works with some of the leading external catastrophe model providers to better capture the latest science that underlies and informs

developments in the short- and long-term climate-related assumptions in their stochastic models. These developments are included in the Group’s

management and Board-approved business strategy with a view towards 2030, which is reviewed and updated annually. More information can be

found on page 120.

The process by which management identify emerging risks, including those which are climate-related, is described on page 27 of the enterprise risk

management section. As part of this process the potential impact of the risks is assessed including magnitude, likelihood and time horizon. Risk

mitigation and monitoring plans are then put in place using a risk based approach to prioritise those considered most material and likely to impact

the business.

Board oversight of strategy

While our strategic planning is based on the period to 2030, the Board’s strategic discussions are informed by consideration of potential global future

trends in the medium- to longer-term scenarios. The Board examines the impacts of transitional climate change risk on our business, the Group’s

underwriting and investment portfolios, and associated strategies.

Short-term Medium-term Long-term

15-30 years

from now

5-15

years

Up to

5 years

Strategy

We integrate climate-related opportunities into our business to build on our

strengths and capabilities.

The Group analyses its investment portfolio and uses tools to understand the resilience to climate-related scenarios, the carbon intensity of assets

and other ESG-related considerations. The Group does not yet have a sufficiently robust set of analytical tools and data to articulate a GHG baseline

for the investment portfolio, which might be used in target setting, but intends to work with its portfolio managers to refine the analytical tools and

available data in the coming years. Similarly, there is no insurance industry-wide common methodology for calculating and reporting GHG emissions

relating to an insured portfolio, and the Group does not yet have the data or a commonly accepted methodology to establish a meaningful baseline

or associated target for its underwriting activities. The Group intends to continue engaging with industry bodies and think tanks to develop its strategic

thinking in these areas, mainly through our participation in ClimateWise.

Climate-related risks and opportunities identified over the short, medium, and long term

Strategy and planning time frames

When evaluating the actual and potential impacts of climate-related risks and opportunities on our strategy and financial planning, we scrutinise three

sets of time frames.

54 Lancashire Holdings Limited | Annual Report & Accounts 2023

Wildfire

United States & Europe

Inland Flood

United States & Europe

Capital

Constraints

Declining

Energy

Premium

Declining

Transport

Premium

External Factors

e.g. regulation

Tropical Cyclone

United States

Tropical Cyclone

Japan

Emergent

Region Perils

Litigation

Extratropical Cyclone

Europe

Climate change risk radar

Time horizon

Long-term: 15-30 years from now

Medium-term: 5-15 years

Short-term: up to 5 years

Impact on insurance

service results

High

Medium

Low

Key

Decarbonising economy to net-zero

Decarbonising the power sector is expected to be a key driver in transitioning the global economy. Globally, the shift will be to swap to alternative

energy sources. Investments and risk coverage will need to run parallel to this new lower carbon economy.

The Group may face the transitional risk of a declining premium environment in the traditional oil and gas sector, and transportation classes over

time, and/or the risk of exposure to climate change-related litigation. As the economy transitions from a carbon-based one towards a net-zero

future, we have considered the impact of new technology and how it will influence the whole energy sector including renewable energy risks,

which we underwrite.

We can mitigate loss of revenues from these declining sectors by working with clients as they transition, and insuring the infrastructure and assets

required for the transition.

Internal view of risk

In 2021, we developed a Climate Risk Radar, which was refreshed in 2023. It illustrates Lancashire’s current internal view of the physical and transition

risks from climate change, including the potential time horizon over which they may be faced, the potential magnitude of financial impact, and the

geographical region (for physical risks). It allows us to map the climate dependencies to understand where the disruption might occur and financially

impact our business from a physical or transition risk.

Strategy

The arrows pointing inward indicate shortening time-frames for these risks.

55Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Sustainability

Sustainable insurance and responsible investment continued

Potential effects of climate risk

Annual strategy days

The two annual underwriting strategy days for our insurance and reinsurance segments included the assessment of climate-related risks of current

and anticipated future risks. This includes but is not limited to transition risk arising from a decline in the value of assets to be insured, changing

energy costs, and liability risks that could arise from climate-related litigation. Physical, transition, and liability risks are considered by business

segment and geographical location, and the expected impact from the risks identified are tested for magnitude and timescale.

Over the last several years, we have continued to identify and articulate the financial impacts of physical and transitional climate-related risks;

examples are:

Strategy

Extreme Weather

• Flooding

• Drought

• Rising sea levels

• Rising temperatures

• Wind

• Forest fires

• Convective storms

Physical risk to our own operations is less material. We

do not have significant physical assets to be impacted by

physical risk, with the main impact of physical risk arising

from our underwriting portfolio as losses from elemental

catastrophic events. We do, however, have robust business

continuity processes in place.

Loss amplification factors, time frame, and magnitude

are considered for each extreme weather physical risk

identified, as are metrics by which these risks can be

monitored and reported.

Transitional risks that the Group may face include

the probability of a declining premium environment

in the traditional oil and gas sector or transportation

classes over time, or the risk of exposure to climate

change-related litigation.

The potential impact in terms of premium is thought

to range from low to medium for the relevant subsidiary

writing the business. However, the financial impact of

these risks on the Group ranges from very low to low due

to the inherent responsiveness in the Group’s underwriting

strategy. The impact would be expected to be felt in both

business segments, i.e., insurance and reinsurance.

• Legal and regulatory

• Technology

• Market

• Reputational

Physical risks Transitional risks

56 Lancashire Holdings Limited | Annual Report & Accounts 2023

Impact of climate-related risks and opportunities

Climate-related opportunities

As a (re)insurer, the Group accepts and mitigates risk; for every risk identified, there is the potential for an opportunity. Opportunities will arise from

the investment in infrastructure required for the world’s transition to a lower-carbon economy; this infrastructure will require insurance which lies

within the Group’s existing classes of business and risk appetite. The demand for new environmental insurance products and services is also expected

to increase. We will work closely with existing clients to provide the insurance they need as they transition and access new market offerings in the

form of new assets and locations requiring insurance coverage.

A summary of the opportunities, their likelihood, time frame, and magnitude of impact on insurance service result is included in the table below.

Risk Description Market Opportunity Time frame Likelihood Magnitude

Political risk

insurance

Currently, a strong uptick in ESG-related funding

from our existing client base and this trend is expected

to continue.

Natural catastrophe

(re)insurance

Additional limit purchased by insureds and reinsurers

at improved pricing levels as catastrophe risk increases

with both earnings protection and capital protection

being sought.

Renewables The trend for global renewable electricity generation

is fully expected to continue. As our clients transition

from fossil fuels to renewable energy, there will be

sizeable opportunities in the market to grow this

part of our portfolio.

Decommissioning

insurance:

Oil & gas assets

Energy transition will accelerate the decommissioning of

many offshore platforms and complexes. As these assets

reach the end of their commercial life, there will be

increased pressure to ensure that their decommissioning

is done in an environmentally friendly way with

appropriate risk management solutions.

Carbon capture:

injection of CO

into

depleted gas fields

Offshore carbon capture and storage may play a

major role in global efforts to reduce emissions

with appropriate risk management solutions.

Environmental

insurance products

Environmental insurance provides coverage for loss

or damages resulting from unexpected releases of

pollutants typically excluded in general property

and liability policies.

Parametric (weather)

insurance products

for food and

agriculture industry

Industries will look at new ways of managing weather risk

where parametric triggers are more likely to offer a form

of indemnity.

High High

Medium Medium

Low Low

Likelihood MagnitudeTime frame

Long-term 15-30 years from now

Medium-term 5-15 years

Short-term up to 5 years

Short- to medium-term

Medium- to long-term

Strategy

57Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Sustainability

Sustainable insurance and responsible investment continued

Managing risk

Lancashire is exposed to the risk of heightened severity and frequency

of weather-related losses, which may be influenced by climate change.

We manage this risk using stochastic models from third-party vendors

with a long history of quality data governance. In addition, we adapt

these models based on our views of climate risk and our clients’

exposure data to create aggregate loss scenarios.

The modelling data and the capital deployment are closely monitored

by executive management. Likewise, the Board monitors this quarterly

as part of strategic risk and capital management, with the testing of

the models leading to changes in risk levels, reinsurance purchasing

and structuring strategy as required.

As part of the financial planning process, the assumptions within the

underwriting portfolio are reviewed, including the expected rate adequacy

and losses for each class of business. Several factors, including climate

change-related factors such as frequency and severity of elemental events

and the potential for associated claims inflation, drive our assumptions.

The level and availability of capital, as well as capital utilisation by

class of business, are also key considerations in the financial planning

process. The business mix is also reviewed, with new products and

lines considered where rates prove attractive and accretive.

Underwriting guidelines

Climate-related insurance underwriting guidelines have been embedded

within our Underwriting Authority framework since their development

in 2021. The guidelines monitor and guide underwriting in the more

carbon-intensive industries, restricting insurance policies covering

targeted activities in specific global regions. When a risk is unclear,

a referral process is in place. We continue to enhance how we track

premiums and policies according to their climate profile. We continue

to engage with our clients in the more carbon-intensive industries to

understand their progress on their net-zero commitments.

Business continuity processes

Lancashire’s exposure to physical risk in our operations is modest.

As a business with an office in Bermuda, we recognise that this area of

the world is vulnerable to catastrophic windstorm events and may be

affected by future climate change trends. All Lancashire offices have

business continuity processes (BCPs) and disaster recovery plans in

place. Specifically, the Bermuda management team and Board consider

hurricane and tsunami risks within the Bermuda office’s BCP.

Risk partnerships

Outside of physical risk, Lancashire has been a risk partner of businesses

operating in the aviation, marine and energy sectors worldwide for many

years. The risk solutions we provide help deliver the wider social benefits

of safer operations in a properly regulated environment with access to

capital resources to repair quickly and remediate damage in the event of

accidents or catastrophic failure.

Lancashire has strong relationships with brokers distributing our products

via larger international firms and smaller independent intermediaries. We

strive to be a trusted partner and add value through our expertise in risk

management and risk transfer. We will continue to support our clients in

meeting their business needs and in their journey to transition away from

carbon-based forms of energy.

Investment portfolio

We have tools to identify, measure, and manage the potential

impact of ESG and climate-related risks and opportunities on the

Group’s investment portfolio. This information is reviewed and reported

through the IRRC, the RRC, and the Board’s Investment Committee.

For the past three years, we have collaborated with our external portfolio

managers to monitor the carbon intensity and ESG profile of the Group’s

investment portfolio. The Group’s investment guidelines restrict

investments in companies that rely on thermal coal for power generation

or derive revenues from oil sands or Arctic oil/gas, as well as investments

in fixed maturity securities with high carbon intensity ratings. Compliance

with the investment guidelines is monitored every month and any

adjustments are approved by the Board and Investment Committee.

Every quarter, we monitor the climate VaR against the MSCI benchmark

by analysing the underlying securities measured by MSCI. Management’s

target preference is for the impact of climate change to be less detrimental

on our portfolio than the relevant benchmark at the same level.

Lancashire monitors the ESG profile of its fixed maturity portfolio for

those securities covered by the MSCI ESG rating tool. The majority of the

portfolio for the year-end of 2023 was designated within the “average”

ESG category. Please see the Investment Committee report starting

on page 94 for further information.

Strategy

External investment managers

As of 31 December 2023, 96.7% of our external investment portfolio was

administered by managers who are signatories to the United Nation’s

Principles for Responsible Investment. After stress testing, our year-end

analysis has shown that our investment portfolio, specifically the fixed

maturities, is more resilient to the impacts of climate change than the

relevant benchmark, which we have linked to a 1.5°C future pathway

scenario. In our last strategic asset allocation study, we recommended a

target percentage to be invested in a sustainable fund. In 2023, a portion

of the funds has been dedicated to an ESG sweep facility product, an

investment tool that directs cash into a money market fund account daily.

In 2024, we will continue to look at other suitable sustainable funds. We

are committed to working with external portfolio managers to refine our

analysis further.

Lancashire total MSCI benchmark

AAA AA A BBB BB B CCC

MSCI overall rating (%)

Percentages for the MSCI Benchmark data are up-scaled to compare with the Lancashire

securities that are covered by the MSCI.

58 Lancashire Holdings Limited | Annual Report & Accounts 2023

Resilience to climate-related risks using

scenarios analysis

Stress and scenario tests

Stress and scenario testing and reverse stress tests are performed as part of

the annual business planning process and the yearly ORSA reporting process

that includes climate-related scenarios. The capital impacts from various

scenarios, including climate-related risks and opportunities, are presented to

the RRC and Board for review and discussion. We test against the prescribed

underwriting loss event scenarios outlined in the Bermuda Solvency Capital

Requirements (BSCR) every year. In 2023, stress testing was performed on

the Group’s business plans to understand the impact should the recent high

catastrophe event experience be more indicative of the average experience

than that currently predicted by the third-party catastrophe models.

Climate scenario used

The key climate change scenario used in the business plan and ORSA was

one where the timeline for the onset of climate change related risk was

deemed to accelerate. The scenario included physical risk assumptions with

regards to frequency and severity of major hurricanes, and transition risk

assumptions resulting in a stressed impact on inwards premiums and

outwards premiums. Loss ratios were increased and an inflationary impact

added, expenses were increased and investment return decreased. Overall,

the scenario reduced key metrics such as Diluted Book Value Per Share,

profit and return on average equity by circa 30%, but had sufficient capital to

meet regulatory and rating agency requirements. This led management to

conclude the Group has resilience to the impacts of climate change risk in its

strategy and business model.

New modelling tool

In 2022, we transitioned to a different catastrophe model provider to

increase the range of secondary perils we can model. As part of this

transition and our annual model review, we have explicitly considered

the impact of climate change to ensure our hazard selections within the

model are appropriate for our understanding of the current environment

and impact with respect to climate change.

In addition, our exposure management team has licensed a new tool

to perform climate-related scenario testing looking at the impact of

changes in the frequency and severity of hurricanes and the impact

of storm surge for specified temperature increases.

All material new models and model changes are validated via the View

of Risk Committee.

Historic modelling

Every quarter, we model the Lloyd’s catastrophe RDSs for our current

portfolio to understand the present-day impact of their re-occurrence.

Such events include, but are not limited to, a Japanese typhoon based

on the 1959 typhoon Vera, Florida windstorms landing in Miami-Dade

County, and Pinellas County, Gulf of Mexico windstorm, Northeast

windstorm and Carolinas windstorm.

Wind scenarios 2°C of warming

The Group calculates its outputs for modelled wind exposures which

are estimated for a 2°C warming scenario, with frequency and severity

assumptions for this scenario drawn from published scientific research

reviewing multiple underlying published estimates of hurricane changes.

The high-level stress testing looked at the relative impact using current

Lancashire exposure values, applying established relationships for windspeed

changes in terms of both severity and frequency under the differing response

parameters, compared to current assumptions. The change in Lancashire

exposure (based on current values) is shown below, which we estimate has

a slightly lower impact than that for our estimate of the impact of overall

industry exposures, using the same set of climate scenario assumptions

and modelling.

Scenarios shown consider only the impact of the physical response of 2°C of

global warming upon hurricane activity in terms of estimated wind impacts

and do not consider the impact of additional physical parameters such as

changes in the level of expected storm surges or rainfall patterns. Frequency

and severity estimate of hurricane response under projected global climate

change are inherently uncertain, with individual modelling studies generating

significant variations in results for different hurricane metrics and regions, as

a result of using different underlying resolutions of climate models with

different underlying emission scenarios and warming ranges and/or different

temperature change baselines.

Reviews of individual studies apply methods and assumptions to standardise

results into common climate baselines, with then our own expert

interpretation applied to selected ranges for the most appropriate values for

our exposure footprint. Limitations of the scenarios are that calculations

assume exposure responses, and insurance conditions remain constant as per

today’s relationships to hurricane frequency and severity parameters. No

consideration is given to any specific mitigations (e.g., the construction of

additional sea defences) or specific adaptions (e.g., strengthened local

building codes, zoning regulations, etc.), or wider changes in policy responses.

Scenarios assume no changes in exposure values through inflation or from

underwriting decisions.

Resilience in our strategy

The following key factors lead the Board and management to conclude there is resilience in the Group’s strategy and business model to the impacts of

climate change risk: i) our book of business is largely short-tail; ii) we are able to model the geographical indications and economic impacts of climate

risk on the products we sell; and iii) we price based on flexible and dynamic risk analysis.

Wind only – example 1

Metric Lancashire percentage change in exposure (based on the current portfolio)

Scenarios chosen: 0% change in frequency, 4% increase in severity (for 2°C of global warming)

Occurrence exceedance probability every 1 in 200 years 10%

Wind only – example 2

Metric Lancashire percentage change in exposure (based on the current portfolio)

Scenarios chosen: 15% decrease in frequency, 4% increase in severity (for 2°C of global warming)

Occurrence exceedance probability every 1 in 200 years 8%

Strategy

59Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Sustainability

Sustainable insurance and responsible investment continued

Processes for identifying, assessing and

managing climate-related risks

Identifying climate risks

Climate-related risks are identified and assessed as part of the usual risk

identification and management process, including dialogues with risk

owners and subject matter experts across the Group, and discussions

at the Group’s Emerging Risk Forum and the ESG Committee.

Risk management

One of Lancashire’s keyoperating principles, which supports the Group’s strategy

to produce an attractive risk-adjusted total return to shareholders over the long term,

is to balance risk and return through the cycle.

Risk Management

Our approach to managing the effects of climate change is through an enterprise risk

management (ERM) framework.

The impact of climate-related risks is managed within an existing ERM framework that functions as an active partner in business

decision-making, see risks page 27.

Some examples of risks identified include the assets to be insured,

their physical location, weather-related perils that have impacted

that location, historical frequency, severity, and expected short- and

long-term changes.

The potential impact of all material risks is assessed through:

• the development and monitoring of early warnings or triggers that

allows timely consideration of, and adequate response to, material risks;

• the development and regular use of measurement techniques to

determine the relative materiality of identified risks at a Group

and entity level;

• the identification of risks that are elevated relative to business

preference, to enable the prompting of remedial actions where

appropriate;

• the development of processes for regular monitoring and updating

of risk assessments in response to changes to the internal and

external risk environment; and

• the assessment of the adequacy of the internal control framework

in aggregate at a risk, entity or Group level.

Risk management methods include:

• transferring part of the risk elsewhere;

• treating or mitigating the risk;

• accepting or tolerating the level of risk;

• eliminating or terminating the risk; or

• revising risk appetite levels or tolerating the breach for a defined

period of time.

These risks are managed similarly to others: identified, monitored,

mitigated, and reported upon against tolerance as appropriate.

The emerging risk process on page 27 explains how emerging risks

are assessed for potential impact to the business, and the process for

establishing mitigating actions and ongoing monitoring. In addition to

these conversations, our insurance underwriting guidelines and our

processes and controls allow us to identify any risks written outside

predetermined criteria.

Climate-related risks specific to the (re)insurance portfolios are identified

and assessed as part of the day-to-day underwriting process by individual

underwriters in their analysis of specific risk information and, more

broadly, in the context of the wider portfolio during the daily UMCC

and the fortnightly RRC meetings.

Climate risks are a part of the

Group’s underwriting and

investment risk considerations

60 Lancashire Holdings Limited | Annual Report & Accounts 2023

Integration into risk management framework

The Group subscribes to a ‘three lines of defence’ governance model

with respect to the identification, ownership, monitoring and mitigation

of risk. Please see page 26.

The management of climate-related risk falls within this same

framework, which is fully embedded throughout the Group and includes

discussions on climate change as the core agenda item for the ESG

Committee. Read more on page 41 and page 53.

Annual review of risk tolerances

All risk tolerances are subject to at least an annual review and

consideration by the individual boards of directors. A yearly assessment

of risk tolerances enables designing a contrasting but appropriate risk

assessment. The Board is actively involved in identifying and considering

a balanced risk and reward trade-off as they establish the Risk Profile,

Risk Appetite, and Risk Tolerances to be used. The Board considers the

capital requirements of the business on at least a quarterly basis.

The Group’s exposure to natural catastrophe risks is one of the

key drivers of the capital held by the Group to support

its underwriting activities.

Underwriting strategy days

The underwriting strategy days for the insurance and reinsurance

segments also provide a good platform for reviewing current and

anticipated future climate-related risks. Examples of such risks include

transition risks arising from a decline in value of assets to be insured,

changing energy costs and liability risks that could arise from climate-

related litigation. Physical, transition and liability risks are considered by

business segment and geographical location, and the expected impact

from the risks identified is considered with respect to both magnitude

and timescale.

Engaging with stakeholders

We actively engage with our clients to understand their net-zero

transition pathways, evaluate new risk solutions, and provide insurance

cover for their business needs, including climate risk-related solutions.

We will work with our clients through a period of global energy transition

to help manage their operational and catastrophe-exposure risks in a

controlled and responsible way.

Monitoring and reporting PMLs

The PMLs related to the top perils are monitored and reported monthly

to the RRC and quarterly to the Board. These elemental perils are

primarily those that are directly influenced by global warming.

We monitor our PMLs as a percentage of tangible capital; the chart

on page 63 shows this for our 100-year Gulf of Mexico wind net PML

at 31 December.

Risk management

Climate change may influence the severity and frequency of eventsthat impact

policyholders, and Lancashire’s quick response tosuch post-loss situations can,

therefore, be seen as a competitive advantage.

61Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Sustainability

Sustainable insurance and responsible investment continued

Metrics and Targets

We are committed to measuring, tracking and reporting our operational performance against

our path to attaining our carbon net-zero ambition in 2050.

We have engaged with ClimatePartner to calculate our corporate carbon footprint through their five-step climate action strategy.

Metrics used to assess climate-related risks and opportunities.

Our risk appetite for underwriting risks is defined as a percentage of capital we are willing to lose in a specific event, and we set a capital loss tolerance

for and track the Company’s modelled PMLs to weather-related hurricane perils. Our underwriting strategy is based on several factors, (including but

not limited to):

• market conditions;

• available capital;

• market opportunities; and

• pricing adequacy

Impact of climate-related risk on the current portfolio

In the Strategy section starting on page 54, we described the work undertaken in 2023 to identify and articulate the financial impacts of climate-

related risks. The table below sets out the possible financial impact of physical risk based on our current portfolio. If exposure was to change materially

the financial impact could be more significant. However, the longer term impact to the Group should be managed by our ability to reprice contracts if

needed and develop new products.

Further detail is also included in the insurance risk disclosures on pages 149 to 153, where we have noted the geographical area of risks insured and the

Group’s exposure to certain peak zone elemental losses by geography as a percentage of tangible capital over a 100-year and 250-year return period.

Physical: acute and chronic Time frame Magnitude of impact Potential financial impact Group net PML/ % of capital

Tropical Cyclone

U.S. Windstorm – Gulf of Mexico Medium High $300.5 million/16.9%

U.S. Windstorm – Non-Gulf of Mexico Medium High $237.9 million/13.4%

Japan Typhoon Medium Medium $134.0 million/7.6%

Extratropical Cyclone

European Windstorm Medium – Long Medium $161.4 million/9.1%

Mitigation

• Positive feedback loop in pricing models that reflect heightened risks from climate change

• Lancashire adjusts gross risk appetite wherever the risk is viewed as inappropriately priced for the exposure

• Outwards reinsurance is adapted to reflect the changing exposures

• Robust internal controls ensuring PMLs are monitored monthly by the RCC

• Additional secondary perils now modelled

• We continue to develop views on other perils

62 Lancashire Holdings Limited | Annual Report & Accounts 2023

Our PMLs are derived using stochastic models licensed from third-party vendors. These models include perils such as windstorm, convective storm,

wildfire and flood. The View of risk committee assesses the assumptions within the licensed model and, where appropriate, applies loadings to it.

Model outputs are regularly challenged at both the macro and specific account levels. The RRC reviews our PMLs and the actual in-force exposure

versus tolerance on a monthly basis. The loadings applied to the model are reviewed by the View of Risk Committee periodically to assess their

ongoing appropriateness.

Additionally, risk learning can be performed following a large catastrophe event to compare the actual loss versus the modelled loss to assess further

the appropriateness of the assumptions and loadings within the model and establish whether further adjustments are required.

Carbon intensity of fixed-income

The IRRC is cognisant of the potential impact transitional risk has on the Group’s assets within the investment portfolio. Carbon intensity limits have

been added to our fixed-income managers’ guidelines. We monitor our fixed-income portfolio’s carbon intensity and transition risk. Updates on these

metrics, including the investment portfolio’s exposure to climate-related risk, for those securities covered, as compared to the MSCI Climate VaR is

monitored and reported to the Investment Committee quarterly. The Lancashire Fixed Maturity portfolio has a target preference for the aggregate

climate risk measured by Climate VaR by MSCI, at the 1.5°C degrees global warming goal, in line with the Paris Accord, to have a lesser financial

impact than the relevant MSCI ESG benchmark.

Most of the investment portfolio at year-end 2023 comprised of fixed maturity securities, making up 83.8%, of which almost half were government-

related securities. We had 34.5% allocated to corporate bonds, of which we had a small exposure to climate-related risks. Further insight into the

structure of our financial portfolio can be found on page 20.

Scope 1, 2, and 3 GHG emissions

Measuring and offsetting

The Group is committed to managing the environmental impact of its business. We measure our carbon footprint to minimise its negative impact

through mitigation strategies and offsetting 100% of our greenhouse gas (GHG) emissions from our own operations to remain carbon neutral.

The ClimatePartner certification program provides insight into the effectiveness of our efforts to make progress on our 2050 net-zero ambition. Our

approach to reporting GHG emissions is to be transparent, aiming to continually refine our processes to reflect relevant standards, methodologies,

and, where appropriate, best practices.

During 2022, we instructed ClimatePartner to calculate and facilitate offsetting our carbon emissions; a report on the metrics collected can be found

on page 68.

CDP submission

The Group CRO and the Board oversee the Company’s annual submission to the CDP (previously known as the ‘Carbon Disclosure Project’) and note

that the information which is requested as part of that reporting process is aligned with the recommendations of the TCFD.

2013 2014 2015 2016 2017 2018 2019 2020 2021 20232022

PML as a percentage of GWP

The chart below illustrates the Gulf of Mexico one in a 100-year event, and how the PML as a percentage of gross written premium has been managed

over time.

Metrics and Targets

63Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Sustainability

Sustainable insurance and responsible investment continued

Digital capabilities

With global operations in London, Bermuda, Australia, and recently

in the U.S., as well as clients and brokers around the world, the

Lancashire Group has incurred the bulk of its carbon footprint from

business travel. Timely communication and knowledge sharing are

critical to our operation for employees to perform their jobs effectively.

We have adopted several digital solutions in our offices to reduce

inter-office travel and facilitate remote work and virtual collaborations.

All our offices have video and telephone conferencing capabilities at

all individual workstations and meeting rooms. As travel restrictions

started to lift in 2022, in-person conferences and events recommenced,

which saw an uptick in travel when it was considered safe for our

employees. Following the global pandemic, travel levels during 2023

are back to what we consider normal and necessary for our business

to maintain good relationships with our clients and stakeholders.

Targets used to manage climate-related

risks and opportunities

Net zero in 2050 objective

In 2021, the Group expressed its objective to meeting the UK

Government’s net-zero target by 2050. Our baseline year, 2015,

was selected because it was the first full year in our London office

at 20 Fenchurch Street, an energy-efficient building with a BREEAM

“Excellent” rating.

The following diagram shows our path to carbon net-zero in 2050,

illustrating the planned downward trajectory of our emissions per FTE

and the intended increase in offsetting projects that remove carbon from

the atmosphere.

Offsetting emissions

The Group commits to continue to offset 100% of Scope 1 and 2

emissions and 100% of the Scope 3 emissions pertaining to our

operations, which we are able to accurately calculate and exercise

sufficient control over at this time. These include business travel,

waste generated in operations, our employees’ commuting, and fuel

and energy-related activities not included within Scope 1 or Scope 2.

As a financial services company, we consider some emissions categories

to be either not applicable to our operations or that we have minimal

operational control over them. We are working with a specialist third

party and alongside others in the industry to understand how to

accurately calculate and track emissions within the unreported

categories where applicable.

Going forward

The Group will continue to benefit from the 100% renewable electrical

energy from our 20 Fenchurch Street London office location, a BREEAM

“Excellent” rated building. As the Group continues to search for

innovative ways to reduce our own emissions, we will continue to

challenge the status quo and propose ideas for consideration outside of

those related to business travel. We are always looking at ways to reduce

paper usage further, reduce water waste, improve recycling, and

eliminate single-use plastics. A list of the full metrics can be found in the

GHG disclosure section on pages 69 and 70.

For the Group’s investments, we continue to have a target of managing

the impacts of our fixed maturity portfolio by reference to a Climate

VaR appetite statement, as discussed in the risk management section.

For our underwriting exposure, Lancashire limits its tangible capital at

risk by referencing a series of PML loss exposure scenarios, including

climate-related loss scenarios. PMLs are regularly monitored and

reported to the Board every quarter and reflect real-time changes in

the Group’s underwriting portfolio. The Group’s stated tolerance is to

expose not more than 25% of its tangible capital by reference to any

one of its principal PMLs. More information on the reported outcomes

of this process can be found in the Financial Statements section under

Risk disclosures, see page 150; it further shows the details of the Group’s

principal PMLs, including those related to catastrophic weather loss

events linked to climate change risk.

Carbon emissions neutralised

emissions

2015 2020 2030

-16% CO

per FTE

-15%

per FTE

2050

Carbon emissions removed from atmosphere

Lancashire’s path to carbon net-zero in 2050

Metrics and Targets

In terms of the Group’s own emissions targets and the Group’s business

travel emissions, we have travel policies in place to reduce our impact

on the environment whilst balancing the needs of our employees and

Directors. For instance, our policy is not to ordinarily book a business

class airline ticket if the flight is less than five hours long.

64 Lancashire Holdings Limited | Annual Report & Accounts 2023

Delivering responsibly

We understand that we have an obligation to ensure we operate in a

responsible, respectful and sustainable way. Central to this is maintaining

high standards of business supported by appropriate policies, controls

and oversight.

We aim to be a good corporate citizen and a responsible preserver of

resources. To that end, the Group operates in line with all relevant

regulatory and legal requirements, giving particular regard to the

environmental, social and governance regulations of the BMA, PRA, FRC,

FCA, Lloyd’s, UNEP-FI, TCFD, Mandatory Greenhouse Gas Emissions

reporting/Streamlined Energy and Carbon Reporting (SECR), and Home

Office (Modern Slavery Statement Registry).

Society

and the

environment

Brokers Regulators Suppliers

Our

shareholders

and investors

Our

policyholders

Our

people

Our stakeholder responsibilities

A responsible approach to protect and support

Policy / area Our approach Stakeholder impact Board oversight

Health and safety We are less exposed to major incidents due to our operations being based in an office

environment. However, to ensure our people and visitors are supported and protected

we regularly consult with employees on health and safety issues.

We maintain risk assessments for tasks carried out by employees where potential danger has

been identified. Business Continuity, Disaster Recovery, and Fire Safety training, is mandatory

for all employees.

Our full Health and Safety Policy is communicated to employees on joining and is available

on the intranet.

Our people

Brokers

Regulators

Our shareholders

and investors

Society and the

environment

Yes

Whistleblowing Each Group entity has a designated whistleblowing champion, a Non-Executive Director, who

can be contacted if employees would prefer to raise concerns with them.

We encourage people to report any activity that may constitute a violation of laws, regulation

or internal policy, and reporting channels are provided to staff for this purpose within a

whistleblowing policy available on the Group intranet.

Our people

Regulators

Our shareholders

and investors

Yes

Data protection

and privacy

As part of our day-to-day operations, the Group collects and uses information about its

employees, policyholders, shareholders and others.

Information, however it is collected, recorded and used, must be handled and dealt with

correctly and in line with our data protection policies.

The Audit Committee of the Board has overall responsibility for data protection and privacy

and receives a quarterly report for review.

The Group fully endorses and adheres to the principles of data protection as set out in the

relevant UK data protection legislation. All employees are expected to familiarise themselves

and comply with the regulations.

Our policyholders

Our people

Brokers

Regulators

Suppliers

Our shareholders

and investors

Yes

65Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Sustainability

Sustainable insurance and responsible investment continued

Policy / area Our approach Stakeholder impact Board oversight

Information

security

During 2023, we developed enhanced Information Security and Acceptable Usage Policies.

These policies provide good practice security principles presented in easily accessible terms

and designed to keep employees, the Company, and its information safe.

Our people

Regulators

Our suppliers

Our shareholders

and investors

Yes

Cyber incident

response

Lancashire is aware of the risks from cyber security incidents and has a number of

technologies, processes and procedures in place to mitigate and respond to any issues

that may arise. These include ‘table-top’ exercises to stress test our plans, which are

attended by colleagues from appropriate functions across the Group.

Our policyholders

Our people

Brokers

Regulators

Suppliers

Our shareholders

and investors

Yes

Anti-slavery and

human trafficking

We are proud of the conditions of employment for all our employees throughout the

Lancashire Group. We consider that there is minimal risk that, within either the Lancashire

Group or the very limited supply chains which support our business activities, the Lancashire

Group is involved in, supportive of, or complicit in slavery and human trafficking.

The Group’s Anti-Slavery and Human Trafficking Statement is available on our website.

Our policyholders

Our people

Society

Brokers

Regulators

Suppliers

Our shareholders

and investors

Yes

Anti-Money

Laundering,

Bribery and

Financial Crime

Policy

The Group has appropriate procedures to prevent and/or report incidents of money

laundering, bribery and other forms of financial crime. A training programme is active to

ensure a widespread understanding of our policies. All Group employees are required to

report to their local Money Laundering Reporting Officer any potentially suspicious activity.

A report is received by the Audit Committee of the Board on a quarterly basis.

Our policyholders

Our people

Regulators

Our shareholders

and investors

Yes

Procurement Lancashire engaged with a strategic IT vendor (SCC) in 2023 to establish recycling services

for technology assets (e.g. mobile phones, laptops, servers, etc.) that are no longer required.

This partnership enables Lancashire and SCC to securely and environmentally process items

that are refurbished, remarketed or recycled.

Suppliers

Society

Sanctions Lancashire looks to ensure compliance with all applicable sanctions legislation in the

jurisdictions in which the Group operates. These include the sanctions regimes of the United

Nations, United Kingdom, Bermuda, United States and European Union. The processes and

systems are documented and approved annually by the LHL and relevant subsidiary boards.

Quarterly reports are provided to LHL and subsidiary boards to confirm whether there have

been any breaches, or not, during the period.

Our policyholders

Society

Brokers

Regulators

Yes

Share dealing The Group’s Share Dealing Code places restrictions on the trading of LHL’s securities for

employee shareholders and, along with the Group’s Disclosure Policy, restricts the

disclosure of any confidential information.

Regulators

Our shareholders

and investors

Our people

66 Lancashire Holdings Limited | Annual Report & Accounts 2023

Understanding the role we play

A culture of responsibility

We understand that successfully operating a modern business comes

with increased responsibility.

We embed our values across our operations including showing

appropriate leadership and acting as a good corporate citizen

and a responsible preserver of resources.

Our regulators, rating agencies and lenders

The Group has an active programme of engagement with the

relevant regulatory bodies which provide the Group with supervision

and oversight.

This includes meetings, regular reporting or engaging with routine

regulatory reviews. The Board and management monitors changes

in regulatory and supervisory requirements closely.

Lancashire and its insurance subsidiaries are assessed for financial

strength and creditworthiness by three major rating agencies: A.M. Best,

S&P and Moody’s. We engage with each regularly to discuss financial

performance and when significant events occur, such as loss events.

We underwrite business successfully in all major regulated global

(re)insurance markets and purchase reinsurance coverage as

part of our capital management and regulatory compliance.

We operate in compliance with our credit facilities, which

support underwriting obligations.

Additionally, the syndicates benefit from Lloyd’s current ratings,

resources, brand and network of global licences.

The Group requires the flexibility to execute its strategy and react to

economic conditions, and values its strong relationships with its lenders.

Tax authorities

The Group maintains proactive relationships with relevant tax authorities

in order to comply with all its tax obligations. This requires us to keep

abreast of developments in tax legislation and to work with the tax

authorities to manage our tax risk.

Collaboration with third parties

During the course of our business operations, Lancashire utilises a

number of third-party suppliers. These providers complement our

in-house skills and we recognise the importance of these partnerships

and that success comes through openness and collaboration.

We strive to receive assurance that employers within the ancillary

services and limited supply chains used by the Group pay a Living Wage.

Payments to service providers are made in accordance with the

individual payment terms agreed. The Group’s UK subsidiary, LUK,

complies with its statutory reporting duty for payment practices and

performance in relation to qualifying contracts on a half-yearly basis.

Lancashire has its own responsibilities to those within its limited supply

chain. Any concerns arising over the ethical practices and human rights

records of insureds and potential clients would be considered as part of

the underwriting process.

67Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Sustainability

Sustainable insurance and responsible investment continued

GHG reporting

Environmental impact and offsetting

The Group is committed to both understanding and managing the

environmental impact of its business operations and has engaged

ClimatePartner to calculate its corporate carbon footprint (CCF),

for the 2023 reporting year. The CCF reflects the total CO₂ emissions

released by the Company’s own business operations, within defined

system boundaries and for a specified period of time, with the

calculations based on the guidelines of the Greenhouse Gas Protocol

Corporate Accounting and Reporting Standard (GHG Protocol).

We are committed to measuring our carbon

footprint for our own operations annually,

to minimise its negative impact through

mitigation strategies, and to offsetting at least

100% of our calculated GHG emissions.

Historically, the Group has achieved its carbon-neutral status

for its own operations through the purchase of carbon credits,

predominantly in carbon avoidance programmes, which assist in

the creation and/or maintenance of systems and technologies that

replace carbon intensive processes.

In 2021, for the first time, the Group offset 15% of its emissions via a

carbon sequestration project, which aims to actively remove carbon

from the atmosphere, with the remainder of our carbon credits procured

via carbon avoidance projects.

We followed the same approach for 2022, but have increased the

allocation to carbon sequestration projects for 2023. This year we have

procured 20% of our carbon credits via a carbon sequestration project

with the remaining 80% offset in a carbon avoidance programme. We

report the emissions data for the Group in the table on page 69.

GHG overview and methodology

Our GHG inventory is used as a tool for meeting the Group’s carbon

reduction goal, understanding our energy consumption, identifying ways

to reduce our footprint, understanding energy and emission trends, and

improving our methodology in data collection.

Emissions data was calculated using the Company’s consumption data

and various emission factors researched by ClimatePartner. Wherever

possible, primary data was used. If primary data was not available,

secondary data from highly credible sources was used, with emission

factors taken from scientifically recognised databases such as ‘Ecoinvent’

and DEFRA.

Operational boundaries

Lancashire used an operational control approach to assess its boundaries

and identify all the activities and facilities for which it is responsible.

Per the ISO 14064-1 guidance, operational control is defined when an

organisation has control over its operation, and they have full authority

to introduce and implement its operating policies at the operational

level. We have reported 100% of our Scope 1 and Scope 2 CCF, along

with areas of our Scope 3 CCF with high levels of operational control.

Employee commuting

For the last two years, the Group has reported emissions associated

with its employees’ commuting and home working within its Scope 3

emissions. For this reporting period, a more detailed survey regarding our

employees’ commuting habits was undertaken, which was completed by

over 40% of employees globally. This change led to a significant

improvement in both the volume and quality of data collected, with a

subsequent reduction of estimated data employed by our consultant in

these CCF calculations. As a result of this improved data quality, we note

a reduction in our employee commuting emissions of 67.6%, from 515.8

tCO

e in 2021-2022 to 166.9 tCO

e, in this 2022-2023 reporting period.

International operation footprint

With active commercial operations in four countries, along with clients

and brokers around the globe, the Group has typically incurred the bulk

of its carbon footprint within Scope 3 due to airline travel. Historically,

these emissions were calculated based upon all the flights booked within

the reporting period. For the past two years, in order to improve the

accuracy of our reporting, we have changed the methodology to only

include the flights that were taken within the period.

Our offices

Our London office is already well optimised, as 20 Fenchurch Street has

a BREEAM ‘excellent’ certified performance rating. The building sources

100% renewable electricity on a tariff that is backed up by associated

Renewable Energy Guarantees of Origin (REGOs), with an appropriate

residual grid factor applied for our operations in Bermuda and Australia.

Representatives from the London office have engaged with the building

management’s ‘Green Building’ meetings and the property’s energy-

saving initiatives. We continue to work with the respective building

management teams in both Bermuda and Australia, in order to

participate in any applicable initiatives for the business, in each location.

FTE as intensity metric

Lancashire uses tCO

e per full time employee (FTEs) as its intensity

metric in its CCF. As the company grows, the FTEs count has increased

year-on-year, with significant recruitment in 2023. Although there

has been a small increase in total emissions, emissions per FTE have

decreased in this reporting period. The progress against our 2030 target

table on page 70 depicts the Group’s CCF for the current and prior

reporting period, noting the change in the reporting period and the

emissions broken down by source.

68 Lancashire Holdings Limited | Annual Report & Accounts 2023

Streamlined energy and carbon reporting disclosure – 1 July 2022 to 30 June 2023

Current 2023 reporting year

(market-based)

1 July 2022 to 30 June 2023

Previous 2022 reporting year

(market-based)

1 July 2021 to 30 June 2022

UK & Offshore UK Only UK & Offshore UK Only

Emissions from the combustion of fuel or the operation of any facility

including fugitive emissions from refrigerants use / tCO

e 101.6 92.1 154.1 150.5

Emissions resulting from the purchase of electricity, heat, steam or cooling by

the company for its own use / tCO

e 280.6 – 265.1 –

Gross emissions (Scope 1,2) / tCO

e 382.2 92.1 419.2 150.5

Energy consumption used to calculate above emissions /kWh 1,320,545.0 944,270.0 2,004,830.0 1,366,540.0

Total gross emissions (Scope 1, 2, 3) / tCO

e 2,642.8 2,407.7

tCO

e per FTE 7.3 7.8

We have purchased a total of 2,907 carbon credits, to support our continued carbon-neutral status.

Fully offset own emissions

The Group has fully offset its calculated GHG market-based emissions

for 1 July 2022 to 30 June 2023 with ClimatePartner, by purchasing

verified credits in both carbon avoidance and carbon sequestration

programmes. A safety margin of 10% was applied to the total carbon

footprint incurred, to compensate for uncertainties in the underlying

data that naturally arise from using database values, assumptions,

or estimates.

Carbon credit breakdown

80% carbon avoidance renewable energy projects in Asia

20% carbon sequestration renewable energy in Chile and tree

planting in the UK

These offsetting proposals were discussed and agreed with the Group CEO.

69Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Sustainability

Types of emissions Activity

1 July 2022 –

30 June 2023

1 July 2021 –

30 June 2022

Scope 1

Direct emissions from Company facilities

Heat (self-generated) 77.2 135.6

Refrigerant leakage 24.4 18.5

Scope 2

Purchased electricity for own use Electricity (stationary) 280.6 265.1

Scope 3 Business travel (flights, hotel nights, vehicles, and rail) 2,006.4 1,348.0

Employee commuting and home office 166.9 515.8

Fuel- and energy-related activities (upstream emissions for

electricity and heat) 79.1 116.0

Purchased goods and services (office paper and water) 6.9 7.0

Waste generated in operations 1.3 1.7

Gross emissions (tCO

e) (market-based) 2,642.8 2,407.7

Gross emissions per FTE (tCO

e/FTE) 7.3 7.8

Carbon credits 2,907.0 2,648.5

Total net emissions after offset (tCO

e) – –

Please note: all numbers quoted have been rounded to one decimal place.

Upstream fuel- and energy-related activities include Well-to-Tank and Transmission & Distribution emissions. These are emissions associated with the upstream processes of

extracting, refining and transporting raw fuel and the emissions associated with the electrical energy lost during transmission to our business.

Progress against our 2030 target

The following diagram shows the change in the Group’s emissions per FTE from the baseline year of 2015 against our current target of a further

reduction in emissions per FTE of 15% by 2030.

Encourage and support employees

The Board will continue to monitor the Group’s emissions from its own operations and be mindful of the Group’s strategic and business operational

requirements. We encourage the use of public transport, walking and cycling to commute to our places of work. As a result of the employee

commuting surveys completed in 2022 and 2023, we note that the majority of our employees commute to their place of work via public transport.

We continue to provide incentives for our London office employees to support this with a season ticket loan scheme as well as assistance in purchasing

bicycles, with all of our offices having designated storage.

Gross emissions per FTE (tCO

e/FTE) Target

202320222021202020192018201720162015

Sustainable insurance and responsible investment continued

70 Lancashire Holdings Limited | Annual Report & Accounts 2023

Delivering as a

responsible business

“Strong corporate

governance is central

to Lancashire’s

long-term success.”

Peter Clarke

Non-Executive Chair

71Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

Board of Directors

Delivering oversight

B I

Skills, experience and qualifications:

Peter Clarke was Group Chief Executive of Man Group plc between April 2007 and February 2013. In 1993,

Mr Clarke joined Man Group plc, a leading global provider of alternative investment products and solutions

as well as one of the world’s largest futures brokers. He was appointed to the board in 1997 and served in a

variety of roles, including Head of Corporate Finance and Corporate Affairs and Group Company Secretary,

before becoming the Group Finance Director in 2000. During this period, he was responsible for investing

in and developing one of the leading providers of third-party capital insurance and reinsurance products.

In November 2005, he was given the additional title of Group Deputy CEO. Mr Clarke has previously

served as the Chair of the National Teaching Awards Trust. Mr Clarke took a first in Law at Queens’

College, Cambridge and is a qualified solicitor, having practised at Slaughter and May, and has

experience in the investment banking industry, working at Morgan Grenfell and Citibank.

External appointments/Other roles:

Mr Clarke is currently a Non-Executive Director of RWC Partners Limited, RWC Holdco Limited,

RWC Midco Limited and Lombard Odier Asset Management.

Date of appointment to the Board: 9 June 2014

Board meeting attendance: 4/4

Peter Clarke

Non-Executive Chair

Skills, experience and qualifications:

Alex Maloney joined Lancashire in December 2005 and was appointed Group Chief Executive Officer in

April 2014. On joining, Mr Maloney was responsible for establishing and building the energy underwriting

team and account and, in May 2009, was appointed Group Chief Underwriting Officer. Since November

2010, Mr Maloney has served as a member of the Board. Mr Maloney has also been closely involved in the

development of the Group’s Lloyd’s strategy. Mr Maloney has over 30 years’ underwriting experience and

has also worked in the New York and Bermuda markets.

B U

Date of appointment to the Board: 5 November 2010

Board meeting attendance: 4/4

Alex Maloney

Group Chief Executive Officer

Skills, experience and qualifications:

Philip Broadley was appointed as a Non-Executive Director to the Board and as Chair designate of the

Lancashire Board in November 2023. Mr. Broadley was Group Finance Director of Prudential plc from

2000 until 2008 and subsequently held the same position at Old Mutual plc from 2008 until 2014. He has

served as Chairman of the 100 Group of Finance Directors and as a member of the Code Committee of The

Takeover Panel. He chaired the Group Audit Committee of Legal & General for six years. Prior to his board

roles, Mr. Broadley began his career at Arthur Andersen in 1983, becoming a partner in 1993, where he

specialised in auditing banks and insurance companies. Mr. Broadley is a Fellow of the Institute of Chartered

Accountants in England and Wales. Mr. Broadley graduated in Philosophy, Politics and Economics from St.

Edmund Hall, Oxford, where he is now a St. Edmund Fellow. He holds an MSc in Behavioural Science from

the London School of Economics.

External appointments/Other Roles:

Mr. Broadley is Senior Independent Director and Audit Committee Chair at AstraZeneca PLC and a

Non-Executive Director of Legal & General Group Plc. He is Treasurer of the London Library and Chair

of the Board of Governors at Eastbourne College.

Date of appointment: 8 November 2023

Board meeting attendance: 0/0

Philip Broadley

Non-Executive Director and Chair Designate

72 Lancashire Holdings Limited | Annual Report & Accounts 2023

Skills, experience and qualifications:

Michael Dawson has more than 40 years’ experience in the insurance industry, having started his career

at Lloyd’s in 1979. He joined Cox Insurance in 1986 where he was the Chief Executive from 1995 to 2002.

In 1991, Mr Dawson formed and became the underwriter of Cox’s and subsequently Chaucer’s specialist

nuclear syndicate 1176, where he remains the active underwriter. Between 2005 and 2008, Mr Dawson was

appointed Chief Executive of Goshawk Insurance Holdings PLC and its subsidiary Rosemont Re, a Bermuda

reinsurer. Mr Dawson served on the Council of Lloyd’s from 1998 to 2001 and on the Lloyd’s Market Board

from 1998 to 2002.

External appointments/Other roles:

Mr Dawson is Deputy Chair of the Management Committee of Nuclear Risk Insurers Limited. He is also a

director of Knoll Investments Limited, Dawmouse Limited and Glengau Limited, all private family companies.

B N R U

Date of appointment to the Board: 3 November 2016

Board meeting attendance: 4/4

Michael Dawson

Non-Executive Director

Skills, experience and qualifications:

Jack Gressier has over 30 years’ experience in the insurance industry, including as Chief Operating Officer

of Axis Capital Holdings Ltd. and the Chief Executive Officer of its Insurance segment. He served as an

underwriter at Charman Underwriting Agencies from 1989 until 1998, when acquired by ACE Limited.

At ACE, he served in a number of senior roles including as a member of the Global Markets Executive

Underwriting Committee and was appointed Joint Active Underwriter of Syndicate 2488 and director

of the ACE Agency Board, where he served until joining AXIS in 2002.

External appointments/Other roles:

Currently serving as Non-Executive Chair to strategic intelligence ﬁrm, Herminius Holdings Ltd.

B R U A

Date of appointment to the Board: 26 July 2022

Board meeting attendance: 4/4

Jack Gressier

Non-Executive Director

Skills, experience and qualifications:

Natalie Kershaw joined Lancashire in December 2009 as the Group Financial Controller and has also

held the positions of Chief Financial Officer of Lancashire Insurance Company Limited and Group Chief

Accounting Officer. She has over 20 years’ experience of the insurance/reinsurance sector with previous

roles at Swiss Re, ALAS (Bermuda) Ltd and PwC. Ms Kershaw graduated from Jesus College, Oxford in 1996

with a first class degree in Geography and is a Fellow of the Institute of Chartered Accountants in England

and Wales.

Date of appointment to the Board: 1 March 2020

Board meeting attendance: 4/4

Natalie Kershaw

Group Chief Financial Officer

Key

Board of

Directors

Investment

Committee

Audit

Committee

Nomination, Corporate

Governance and

Sustainability Committee

Remuneration

Committee

Underwriting and

Underwriting Risk

Committee

Chair

73Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

N R U

Key

Board of

Directors

Investment

Committee

Audit

Committee

Nomination, Corporate

Governance and

Sustainability Committee

Remuneration

Committee

Underwriting and

Underwriting Risk

Committee

Chair

Skills, experience and qualifications:

Bryan is a Fellow of the Institute and Faculty of Actuaries with over 40 years of experience in the insurance

and reinsurance industry. Having started his career as a trainee actuary in Legal & General, Bryan held a

number of senior roles in the industry including partner and global chief actuary for PwC. Bryan left PwC in

2015 and founded Vario Partners LLP, an ILS consultancy specialising in transforming underwriting risk into

capital markets. In 2016, Bryan joined XL Catlin (now AXA XL) as an independent non-executive director

serving in a variety of non-executive director and committee Chair roles within the AXA XL group including

as Chair of the audit committees, and as Chair of XL Insurance Company SE, the group’s European and Asia

Pacific focused entity, overseeing its move to the Republic of Ireland and merger with AXA. Bryan stepped

down from all AXA XL Directorships in 2023 to take on his role with Lancashire.

External appointments/Other roles:

Bryan is a partner of Vario Partners LLP and a director of Vario Global Capital Limited, the Vario operating

company. Bryan was appointed as a Non-Executive Director for Sabre Insurance Group plc in June 2023.

B A U

Date of appointment to the Board: 26 April 2023

Board meeting attendance: 2/2

Bryan Joseph

Non-Executive Director

Board of Directors continued

B A I R

Skills, experience and qualifications:

From 1980 until 1998, Robert Lusardi was an investment banker in New York, ultimately as Managing

Director of the insurance and asset management industries. From 1998 until 2005, he was a member of

the Executive Management Board of XL Group plc, first as Group CFO then as CEO of one of their three

operating/reporting segments; from 2005 until 2010 he was an EVP of White Mountains (an insurance

merchant bank) and CEO of certain subsidiaries; and from 2010 to 2015 he was CEO of PremieRe Holdings,

a private insurance entity. He has been a director of a number of insurance-related entities including

Symetra Financial Corporation, Primus Guaranty Ltd., OneBeacon Insurance Group Ltd., Esurance Inc.,

Delos Inc., Pentelia Ltd. and FSA International Ltd. He received BA and MA degrees in Engineering and

Economics from Oxford University, an MBA from Harvard University and PhD from Barry University.

External appointments/Other roles:

He is also on the boards of Symetra Financial Holdings, Inc., a life insurer, and a Board member of Oxford

University’s 501(c)3 charitable organisation.

Date of appointment to the Board: 8 July 2016

Board meeting attendance: 4/4

Robert Lusardi

Senior Independent

Non-Executive Director

Skills, experience and qualifications:

Irene McDermott Brown most recently held the position of Chief Human Resources Officer at M&G plc,

a FTSE 100 international savings and investments firm, retiring from that role on 31 December 2021. Her

executive career has included international human resources roles at Barclays, BP, and Cable and Wireless.

Ms McDermott Brown’s UK experience includes over 12 years at Mercury Communications, Digital

Equipment Company and the Electricity Supply Industry. She has an MSc from the London School of

Economics in Industrial Relations and is a Fellow of the Chartered Institute of Personnel and Development.

Date of appointment to the Board: 28 April 2021

Board meeting attendance: 4/4

Irene McDermott Brown

Non-Executive Director

74 Lancashire Holdings Limited | Annual Report & Accounts 2023

B IA N R

Skills, experience and qualifications:

Christopher Head is a qualified solicitor and joined Lancashire in September 2010. He was appointed

Company Secretary of LHL in 2012 and advises on issues of corporate governance and generally on legal

affairs for the Group. He also advises on the structuring of Lancashire’s third-party capital underwriting

initiatives, which have included the Accordion and Kinesis facilities. Prior to joining Lancashire, he was

in-house Counsel with the Imagine Insurance Group, advising specifically on the structuring of reinsurance

transactions. He transferred to Max at Lloyd’s in 2008 as Lloyd’s and London Counsel. Between 1998

and 2006, Mr Head was Legal Counsel at KWELM Management Services Limited, where he managed an

intensive programme of reinsurance arbitration and litigation for insolvent members of the HS Weavers

underwriting pool. Mr Head worked until 1998 at Barlow Lyde & Gilbert in the Reinsurance and

International Risk Team. Mr Head has a History MA and legal qualification from Cambridge University.

Christopher Head

Company Secretary

Skills, experience and qualifications:

Sally Williams has more than 30 years’ experience in the financial services sector, with extensive risk,

compliance and governance experience, having held senior positions with Marsh, National Australia

Bank and Aviva. Ms Williams is a chartered accountant and spent the first 15 years of her career with

PricewaterhouseCoopers, where she was a director specialising in financial services risk management

and regulatory relationships. She also undertook a two-year secondment from PwC to the Supervision

and Surveillance Department at the Bank of England. Ms Williams is also a Director of Lancashire

Insurance Company (UK) Limited.

External appointments/Other roles:

Ms Williams is a Non-Executive Director of Family Assurance Friendly Society Limited (OneFamily),

where she is chair of both their Audit Committee and their With Profits Committee, and a member

of the Risk, Nominations and Member and Customer Committees. Ms Williams is also a Non-Executive

Director of Close Brothers Group plc and Close Brothers Limited, where she is a member of their Audit

and Risk Committees.

Date of appointment to the Board: 14 January 2019

Board meeting attendance: 4/4

B N

Sally Williams

Non-Executive Director

Director skills matrix

i. Including legal, regulatory

and compliance

ii. Including business

development and M&A

iii. Including equity, debt and

corporate funding projects

iv. Including investment treasury,

portfolio and asset-liability

management

v. Including internal control

and internal audit processes

vi. Including sustainability

and climate change

vii. Including senior management

experience, people

management, succession,

culture and communication.

viii. Including oversight of data

management, information

security and cyber

0 1 2 3 4 5 6 7 8 9 10

Listed Capital Markets Experience

Digital and Technology oversight and resourcing

viii

Leadership

vii

ESG

Risk Management

Actuarial / Reserving

Investment

Corporate Finance

iii

Insurance / Reinsurance

Accounting / Audit

Strategy

Corporate Governance

Number of Directors with relevant skills

75Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

Corporate governance report

Board Committees

Board and Committee administration

The Board of Directors is responsible for the leadership, strategy and

control and the long-term success and sustainability of Lancashire’s

business. The Board has reserved a number of matters for its decision,

including responsibility for setting the Group’s values and standards,

and approval of the Group’s strategic aims and objectives. The Board

has delegated certain matters to Committees of the Board, as described

below. Copies of the Schedule of Board-Reserved Matters and Terms of

Reference of the Board Committees are available on the Company’s

website at www.lancashiregroup.com.

The Board has approved and adopted a formal division of responsibilities

between the Chair and the Group CEO. The Chair is responsible for the

leadership and management of the Board and for providing appropriate

support and advice to the Group CEO. The Group CEO is responsible

for the management of the Group’s business and for the development

of the Group’s strategy and commercial objectives. The Group CEO

is responsible, along with the executive team, for implementing the

Board’s decisions.

The Board and its Committees meet on at least a quarterly basis. At the

regular quarterly Board meetings, the Directors review all areas of the

Group’s business, strategy and risk management and receive reports

from management on underwriting, reserving, reinsurance, finance,

investments, capital management, internal audit, risk, legal and

regulatory developments, compliance, climate change risk, ESG and

sustainability and other matters affecting the Group. Management

provides the Board with the information necessary for it to fulfil its

responsibilities. In addition, presentations are made by external advisers

such as the independent actuary, the investment managers, the external

auditors, the remuneration consultants and the corporate brokers. The

Board Committees are authorised to seek independent professional

advice at the Company’s expense.

The Board also meets to discuss strategic planning matters in addition

to the customary schedule of quarterly meetings. The Board dedicated

time to strategic opportunities and capital planning at a dedicated Board

strategy session which was held in April 2023 in which all Directors and

invited members of the management team participated.

The Chair holds regular meetings with the Non-Executive Directors,

without the Executive Directors present, to discuss a broad range of

matters affecting the Group. The Chair also holds regular meetings

with the Chairs of the Group’s principal operating subsidiaries: LICL,

LUK, LSL and LCM.

All Directors attended the scheduled quarterly proceedings of the 2023

Board and their relevant Committees meetings, with the exception of

Peter Clarke who was unable to attend the November Investment

Committee meeting due to illness.

The Directors

Appointments to the Board are made on merit, against objective criteria,

and with due regard to the right balance of skills, experience, knowledge,

independence and diversity required for the Board to operate effectively

as a whole. These areas are considered in detail by the Nomination,

Corporate Governance and Sustainability Committee. The Board

considers all the Non-Executive Directors to be independent within

the meaning of the Code. Michael Dawson, Robert Lusardi, Jack Gressier,

Irene McDermott Brown and Sally Williams are independent, as each

is independent in character and judgement and has no relationship

or circumstance likely to affect his or her independence. Peter Clarke

was independent upon his appointment as Chair on 4 May 2016.

Bryan Joseph joined the Board as a Non-Executive Director with effect

from 26 April 2023. The appointment of Mr Joseph was facilitated by the

specialist recruitment agency Per Ardua Associates Ltd which conducted

a Non-Executive Director search exercise under the direction of the

Nomination, Corporate Governance and Sustainability Committee and

Peter Clarke as the Company Chair. Per Ardua Associates Ltd prepared

an independent candidate report which was considered at the

Nomination, Corporate Governance and Sustainability Committee.

Close consideration was given to the balance of skills and experience

on the Board. The Board also considered the question of Mr Joseph’s

independence of character and judgement, and determined that he

should be considered independent on his appointment. Bryan Joseph

was appointed, during 2023, as a member of the Audit and the

Underwriting and Underwriting Risk Committees.

Philip Broadley joined the Board as a Non-Executive Director and as

the Board Chair designate with effect from 8 November 2023. The

appointment of Mr Broadley was facilitated by the specialist recruitment

agency Spencer Stuart which conducted a Non-Executive Director search

exercise under the direction of the Nomination, Corporate Governance

and Sustainability Committee. Robert Lusardi as the Senior Independent

Director oversaw the Board process for the selection of the Board Chair.

Spencer Stuart prepared an independent candidate report which was

considered at the Nomination, Corporate Governance and Sustainability

Committee meeting held on 7 November 2023. The Board considers

that Mr Broadley has a range of skills and experience appropriate to

providing the required strategic leadership to the Board and the business.

The Board also considered the question of Mr Broadley’s independence

of character and judgement, and considered that he should be

considered independent on his appointment. Subject to shareholder

approval at the Company’s 2024 AGM , Mr Broadley will assume the

role of LHL Board Chair at the conclusion of the AGM on 1 May 2024.

Please see the Nomination, Corporate Governance and Sustainability

Committee Report on page 89 for more details of the appointment

process and the consideration of the respective skills of Mr Joseph and

Mr Broadley within the context of Board succession planning and the

need for an appropriate balance of skills and perspectives on the Board

and its Committees. The question of Mr Broadley’s Committee

memberships will be considered during the course of 2024.

76 Lancashire Holdings Limited | Annual Report & Accounts 2023

At the Board meeting held on 5 March 2024, further to a

recommendation by the Nomination, Corporate Governance and

Sustainability Committee, the Board affirmed its judgement that

seven of the ten members of the Board are independent in their roles as

Non-Executive Directors. The Board noted that Peter Clarke, having been

appointed as a Non-Executive Director on 9 June 2014, and the Chair

on 4 May 2016, had completed his ninth full year of service as a Director

to the Company and would no longer be considered independent under

the guidance of the Code. Peter Clarke will therefore not stand for

re-election at the 2024 AGM. Therefore, in the Board’s judgement, the

Board’s composition complies with the Code requirement that at least

half the Board, excluding the Chair, should comprise Non-Executive

Directors determined by the Board to be independent.

In accordance with the provisions of the Company’s Bye-laws and the

Code, and for 2024 with the exception of Peter Clarke, all the Directors

are subject to election (in the case of Mr Broadley and Mr Joseph) or

re-election annually at each AGM.

Information and training

On appointment, the Directors receive written information regarding

their responsibilities as Directors and information about the Group.

An induction process is tailored for each new Director in the light of

his or her existing skill set and knowledge of the Group and includes

meetings with senior management and visiting the Group’s operations.

Information and advice regarding the Company’s official listing, legal

and regulatory obligations and on the Group’s compliance with the

requirements of the Code are also provided on a regular basis. An

analysis of the Group’s compliance with the Code is collated and

summarised in quarterly reports together with a more general summary

of corporate governance developments, which are prepared by the

Group’s legal and compliance department for consideration by the

Nomination, Corporate Governance and Sustainability Committee.

That Committee also receives reports from the ESG Committee Chair

on its work. The Directors have access to the Company Secretary and

the Group General Counsel who are responsible for advising the Board

on all legal and governance matters.

The Directors also have access to independent professional advice as

required. Regular sessions are held between the Board and management

as part of the Company’s quarterly Board meetings, during which

in-depth presentations covering areas of the Group’s business are

made. During these presentations the Directors have the opportunity

to consider, challenge and help shape the Group’s commercial strategy.

The Directors are also encouraged to seek supplementary know-how

training suitable to their roles offered by the many external providers of

training pertinent to governance, in particular the roles of Non-Executive

Directors, and to consider their training needs and priorities as part of the

year-end performance evaluation for the Board and its Committees.

Board performance – 2023 evaluation

A formal performance evaluation of the Board, its Committees and

individual Directors is undertaken on an annual basis and the process

is initiated by the Nomination, Corporate Governance and Sustainability

Committee led by the Chair of the Board. The aim of this work is to

assess the effectiveness of the Board and its Committees in terms of

performance and risk oversight, strategic development, stakeholder and

employee engagement, composition, skillset, supporting processes and

management of the Group. The evaluation is forward-looking in terms

of identifying strategic priorities and actions as well as considering

performance, training and development needs for the Directors within

the context of the work of each Committee and that of the Board.

The 2023 evaluation process for the Board and each of its Committees

was conducted internally and was based on a set of questionnaires which

were prepared by the Company Secretariat and agreed with the Board

Chair and the Chairs of each of the Committees and made available

to participants using a web-based platform. The Group’s principal

operating subsidiaries, LICL, LUK, LSL and LCM also carried out

performance appraisals facilitated by the respective company secretaries.

The reports covering the subsidiary boards and relevant committees

including recommendations were discussed with the respective

subsidiary chairs and have been discussed within the relevant subsidiary

boards. Key themes from those subsidiary evaluations were also reported

to the LHL Board.

The 2023 LHL Board and Committee evaluation process involved each

Director as well as the Company Secretary, the Group CRO, Group

General Counsel and other Committee members and members of

senior management who were invited to review and complete online

questionnaires. Further to this process the Company Secretary prepared

an evaluation report for the Board which collated feedback from the

responses on an anonymised basis and identified a series of themes

covering both areas of effectiveness and potential actions and areas for

further discussion or development. The summary reports were discussed

between the Company Secretary and the Board Chair and the relevant

Committee Chairs before being distributed to each of the Directors. The

Chair invited feedback on key findings in the evaluation reports prior to

their finalisation.

The performance evaluation reports were formally tabled and

discussed at meetings of the Nomination, Corporate Governance and

Sustainability Committee and the Board held in March 2024, and each

of the other Committees discussed the report pertinent to its own

operation and performance. The reports identified a number of key

strengths of the Board and its Committees, including; dynamics and

chairing; skills and expertise of both Non-Executive and Executive

Directors; effective oversight of strategy and performance; effective

shareholder and stakeholder engagement; strong Committee reporting;

an open, candid and collaborative Board culture; effective risk

management and controls; an effective Group structure and governance;

and good company secretariat support. The Board discussions on the

reports were led by the Chair.

77Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

In summary, in its consideration of the 2023 performance evaluation

reports, the Board concluded that it operates effectively and has a good

blend of insurance, financial, regulatory and other relevant expertise. All

Non-Executive Directors are committed to the continued success of the

Group and to making the Board and its Committees work effectively.

Attendance at Board meetings was found to be good. The Group CEO

and the Group CFO, the Company’s Executive Directors, were also found

to be operating effectively.

The Board also concluded that appropriate infrastructure, processes

and governance mechanisms are in place to support the effective

performance of the Board and its Committees. The Board is also

considered to manage risk effectively. Furthermore, the number

of Directors on the Board and the balance of skills is considered

to be appropriate.

The Board acknowledges the need to actively address the gender

and diversity balance of the Board in its succession planning.

Further to the Board engagement with the evaluation process and

consideration of the reports, the Board concluded that Board and

Committee oversight of strategy, risk tolerances and controls had

operated effectively. Management’s presentation to the Board of

strategy had generated a useful discussion of the longer term strategic

trajectory of the Group and good progress had been made in the

establishment of a Group U.S. underwriting presence. The processes for

Board and Chair succession had been well managed and had operated

effectively. Implementation of the IFRS 17 accounting reporting standard

during the year had been well implemented by management and

discussed effectively within the Board and its Committees.

Engagement between the Board and the workforce was considered to be

generally strong and beneficial to the operation of the business. Effective

workforce engagement will continue to be a priority for the Board. For

further information on workforce engagement, please see Peter Clarke’s

introduction to the Sustainability and Governance sections starting on

page 41 and the report from the Nomination, Corporate Governance

and Sustainability Committee starting on page 89.

Other strategic priorities identified by the Board for the year ahead

included ensuring a balance between the maintenance of a robust capital

base for the Group, capable of supporting the strategic growth plans for

the business and the Group’s strategic objective of actively managing its

capital. The Board and management are also committed to maintaining

a close focus on recruitment, skills, employee retention and training to

further strengthen and build a workforce equipped to deliver the Group’s

strategic growth plans.

The Board identified a number of areas for training and specific themes

for monitoring over the coming year, including the following:

• To review strategic opportunities for growth and the related

resourcing requirements;

• To monitor the progress in the establishment of the Group’s new

U.S. underwriting platform;

• To continue to monitor expected legislative and regulatory changes

in the area of UK financial reporting, audit and associated regulation;

and

• To monitor changes to the Bermuda, UK and global tax rules and

to consider the strategic implications.

The Board will continue to review its procedures, training requirements,

effectiveness and development during 2024.

The Chair’s performance appraisal was led by the Senior Independent

Director, who consulted with the Non-Executive Directors with input

from the Executive Directors during August 2023. The Chair was

considered to be effective in facilitating strategic decision-making,

whilst ensuring an appropriate level of challenge and a culture of

constructive discussion.

Following the year-end, the Chair met with the Group CEO, and the

Group CEO met with the Group CFO, to conduct a performance

appraisal in respect of 2023 and to set targets for 2024. The results

of these performance evaluations were discussed by the Chair and

the Non-Executive Directors and are reported in the Directors’

Remuneration Report commencing on page 101.

Relations with shareholders

During 2023, the Group’s Head of Investor Relations, usually

accompanied by one or more of the Group CEO, the Group CUO, the

Group CFO, the Chair or a senior member of the underwriting team,

made presentations to major shareholders, analysts and the investor

community. Formal reports of these meetings were provided to the

Board on at least a quarterly basis.

Conference calls with shareholders and analysts hosted by senior

management are held quarterly following the announcement of the

Company’s quarterly financial results or trading statements. The Group

CEO, Group CUO and Group CFO are generally available to answer

questions on these calls.

Shareholders are invited to request meetings with the Chair, the Senior

Independent Director and/or the other Non-Executive Directors by

contacting the Group Head of Investor Relations. All of the Directors are

expected to be available to meet in person or virtually with shareholders

at the Company’s 2024 AGM.

The Chair of the Remuneration Committee led a shareholder advisory

exercise with the Group’s largest shareholders regarding the Board’s

remuneration plans during early 2024.

The Company commissions regular independent shareholder analysis

reports, and also receives periodic reports from the Group’s Head of

Investor Relations on feedback from shareholders and analysts.

The Company’s bye-laws are governed by Bermuda Company Law

and subject to approval of shareholders in a general meeting. The

bye-laws are available on the Company website. A copy of the

Company’s bye-laws is also available for inspection at the

Company’s registered office.

Corporate governance report continued

78 Lancashire Holdings Limited | Annual Report & Accounts 2023

Enterprise risk management

The Board is responsible for setting the Group’s risk appetites, defining

its risk tolerances, and setting and monitoring the Company’s risk

management and internal control systems, including compliance with

risk tolerances. During 2023, the Board carried out a robust assessment

of the emerging and principal risks affecting the Group’s business model,

future performance, solvency and liquidity and the operation of internal

control systems.

Further discussion of the emerging and principal risks affecting the

Group, as well as the procedures in place to identify and manage them,

can be found in the ERM section of this report on page 23 and in the risk

disclosures section on page 148. The Group’s reporting of climate change

risk and its management within the business can be found in the TCFD

Report starting on page 49.

Each of the Committees is responsible for various elements of risk (see

the various Committee reports from page 83 for further detail). The

Group CRO reports directly to the Group and subsidiary boards and

facilitates the identification, evaluation, quantification and control of

risks at a Group and subsidiary level. The Group CRO provides regular

reports to the Group and subsidiary boards covering, amongst other

things, actual risk levels against tolerances, emerging risks, loss events

and near misses, key risk indicators, and an overview of the control

environment (driven by key control testing and control affirmations,

and supported by internal audit findings). The Board considers that

a supportive ERM culture, established at the Board and embedded

throughout the business, is of key importance. The facilitating and

embedding of ERM and helping the Group to improve its ERM practices

are a major responsibility assigned to the Group CRO. The Group

CRO’s remuneration is subject to annual review by the Remuneration

Committee. The Board is satisfied that the Company’s risk management

and internal control systems have operated effectively for the year under

review. In this regard, please see the Audit Committee report on page 83.

Committees

The Board has established Audit, Investment, Nomination, Corporate

Governance and Sustainability, Remuneration, and Underwriting and

Underwriting Risk Committees. Each of the Committees has written

Terms of Reference, which are reviewed regularly and are available on

the Company’s website. The Committees’ Terms of Reference were

reviewed by the Board during 2023 and considered again as part of the

2023 year-end performance evaluation process. The Committees’ Terms

of Reference are considered to be in line with current best practice.

The Committees are generally scheduled to meet quarterly, although

additional meetings and information updates are arranged as business

requirements dictate. Director attendance at the 2023 Board meetings

is set out on pages 72 to 75. A report from each of the Committees,

which covers Committee attendance, is set out at the front of each

of the Committee reports.

79Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

We engage with a range of stakeholders

through the course of our operations. We

value those relationships and aim to create

a healthy and sustainable corporate culture

that delivers on their expectations.

Our people

We aim to attract and retain the best talent across our underwriting and

support functions. Our positive and distinctive culture is supported by our

values which guide the way that we operate. We ask our people to tell

us their opinions on their experience with the Group through our annual

employee survey and value and act on their feedback. We believe in

offering the best possible working environment for employees and, during

2023, we enhanced our London office space and facilities. The Group is

committed to providing a range of policies that protect and support

colleagues in their day-to-day work and more widely. When attracting

new employees to the business, we value diversity, equity and inclusion

and train our hiring managers to ensure all candidates are treated fairly.

Our policyholders

We have long-standing relationships with many policyholders and use

our diverse product offering to foster effective partnerships with new

clients. Our policyholders are at the centre of everything we do, and

we strive for excellence in all our activities on their behalf.

Our experienced teams include our claims specialists, who have specific

and detailed knowledge of our diverse product lines and are focused on

ensuring a timely and equitable claim resolution for our clients. We aim

to adopt an approach to the claims handling process, which is proactive

and efficient, as well as transparent and flexible, while acting in

accordance with the terms and conditions of the (re)insurance policy

provided. This enables our clients to recover from the impact of loss

events as soon as practicable. We also operate in a highly-regulated

market, seeking to engage constructively with the Group’s regulators.

This regulation helps reinforce management’s focus on maintaining

an open culture, good risk management and a strong capital base.

Brokers

Lancashire strives to be a trusted partner to brokers distributing (re)

insurance solutions to our policyholders and, since inception, we have built

strong relationships with large international firms and smaller independent

intermediaries. Our expert understanding of risk management and transfer

adds value to our discussions with broker partners and we actively look

for new ways to further strengthen and enhance our relationships. Our

underwriters attend a number of industry events and conferences each

year where they are able to discuss our products and appetite for various

types of business with broker representatives. During 2023, these included

events in Monte Carlo, Baden-Baden, and Singapore. Our marketing

activities through corporate social media, our Company website and

hosting face-to-face events with brokers also encourages a good

understanding of our business and priorities. A new reception area

and visitor suite was also opened at our London office in 2023 to

create a professional and comfortable space for guests.

Our shareholders and investors

As a premium-listed company on the LSE we pride ourselves on our

mutually beneficial relationships with our shareholders and those

entities which lend to the Group. We maintain open and transparent

communication channels with them and work hard to foster good

relations through our active programme of engagement. Our relationship

with our shareholders is led by our Group Head of Investor Relations, in

collaboration with members of the Board and the wider Executive team.

This includes an Investor Day which was most recently held in London in

November 2023, which included presentations from our senior leaders on

our strategy, capital management, claims and reserving and our Lloyd’s

syndicates. These presentations are followed by a questions and answers

session. The Group’s corporate brokers provide guidance on investor

priorities and perception and meet regularly with the Board. We maintain

a regular and open dialogue with the Group’s main ratings agencies.

Society and the environment

Lancashire measures and offsets carbon emissions for our own

operations and seeks to be a responsible underwriter and investor.

We align our activities to the global transition to net-zero. Within

underwriting, we continue to support our clients as they transition and

reduce GHG emissions and through active engagement with them with

regard to our ESG Underwriting Guidelines. The Lancashire Foundation

makes a tangible difference to communities across our markets and

beyond, through charitable donations and utilising the talent and

energy of our people for good.

Our universe of stakeholders

Section 172 – Delivering responsibly

for stakeholders

Our

policyholders

Our

people

Our

shareholders

and investors

Society and the

environment

Board

engagement

and decision-

making

Lenders

Rating

agencies

Communities

Lancashire

Foundation

Brokers

Government

and regulators

Service

providers

Corporate governance report continued

80 Lancashire Holdings Limited | Annual Report & Accounts 2023

Responsible Board decision making

The Code requires formal disclosure around the interests of and engagement with stakeholders, and the duties falling upon boards under Section 172

of the UK Companies Act 2006. Although the Company is incorporated in Bermuda and is therefore not subject to the UK Companies Act

requirements, the Board continues to pay close attention to developments in English law and governance best practice.

In this 2023 Annual Report and Accounts, we give an overview of how both the Board and the business have factored in the needs of our stakeholders in

their discussions and decision making in all areas of performance review, strategy, risk and capital management. To that end, this section should be considered

together with the rest of this report as the Company’s comprehensive summary of its Directors’ compliance with their equivalent Section 172 duties.

Section 172 responsibilities in focus

Due to the robust capital position of the Group, arising from the strong operational performance of the business during 2023, the Board approved a

special dividend of $0.50 per common share, which was paid to shareholders on 15 December 2023. Additionally, the Board approved expenditure of

up to $50 million to repurchase Lancashire’s shares. No shares were repurchased under the programme. Including the final and interim dividends paid

during 2023 the total dividend to shareholders during the year amounted to $0.65 per common share. In taking these capital deployment decisions,

the Board considered the capital requirements for the business to support its underwriting and wider business plans for 2024. The Board also discussed

requirements for capital held in light of the Group’s regulatory capital requirements and with regard to the market credit rating agency models. The

Board concluded that Lancashire’s performance and diversification strategy over recent years has both improved its capital efficiency and strengthened

its overall capital position. The Board also actively considered the needs of the Group’s policyholders as a key part of capital planning. The Company’s

financial security and balance sheet strength is a key part of its offering to its (re)insured policyholders. Additionally, the Board noted that employees

who are members of the RSS were eligible to share in the company’s strong performance through the special dividend.

Capital return to shareholders

Criteria considered (See table)

Relevant stakeholders

Our shareholders

Our people

Our policyholders and brokers

Government and regulators

During 2023, two new appointments to the Board were approved. In November, Philip Broadley was appointed as a Non-Executive Director and as

the LHL Chair designate. His appointment as Chair is expected to take effect immediately following Lancashire’s 2024 AGM, subject to shareholder

approval. The search for a Chair successor was led by Robert Lusardi, Lancashire’s Senior Independent Director, who assumed the role of Chair for all

relevant Board and Committee discussions. The appointment process was conducted through Lancashire’s Nomination, Corporate Governance and

Sustainability Committee and approved by the LHL Board. In April, Bryan Joseph was also appointed as a Non-Executive Director and a member of

both the Audit and Underwriting and Underwriting Risk Committees. Philip and Bryan bring significant additional expertise to the Board to help us

deliver on our strategic ambitions.

Board succession planning

Criteria considered (See table)

Relevant stakeholders

Our policyholders and brokers

Government and regulators

Our shareholders

Our people

Society

Environment

Lancashire continued to grow premiums written in 2023 with an increase of 16.9%. This growth included business written in both existing and newer

lines of business. The Board discusses the growth strategy of the business at its quarterly meetings and meets with senior underwriters to understand

current market dynamics, risks and opportunities. Additionally, all Board members attend the quarterly UURC. During 2023 the Board also considered

and approved the expansion of the business through the launch of Lancashire Insurance U.S. Lancashire Insurance U.S. will operate under a delegated

underwriting arrangement with Lancashire’s UK company platform and is expected to begin underwriting in early 2024. The U.S. operation will be

complementary to our existing capabilities. This growth strengthens the policy offering to our clients and further enhances the societal benefits of

the risk management (re)insurance products we offer, delivers opportunity for our people, and generates returns for our investors. It is implemented

with due regard to legal and regulatory requirements and close consideration of the capital demands of our business.

Growth in premiums written and

geographic expansion

Criteria considered (See table)

Relevant stakeholders

Our policyholders and brokers

Government and regulators

Our shareholders

Our people

Society

Environment

81Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

Section

172(1):

Duty to promote the success of the

company, with regard to: For further details, see:

The likely consequences of any decision

in the long term;

The Group’s statement of purpose – page 9

The Group’s business model – page 9

The Group’s strategic goal and three priorities: that Underwriting comes first; balancing risk

and return through the cycle; operating as an insurance market employer of choice – pages

10 and 11

Embedding a sustainable culture for a profitable business – page 41

The Board’s assessment of the Group’s viability and prospects as set out in the going concern

and viability statement – page 120

The interests of the company’s

employees;

The importance of our people, and the business’s focus on Lancashire’s values, culture,

diversity & inclusion, training and development and workforce engagement – page 33

The need to foster the company’s

business relationships with suppliers,

customers and others;

Our business depends upon the strong business relationships that we build and maintain

with our core and broader stakeholders. All Board members attend the quarterly UURC and,

during 2023, gave close consideration to business development opportunities as summarised

in the Committee’s report – page 96

The impact of the company’s operations

on the community and the environment;

Society and the environment form part of our ‘core’ set of stakeholders. The Board is

engaged with the impact of the Company’s operations through its oversight of the

Lancashire Foundation, the Group’s submission to the CDP, the annual offsetting of our own

operations’ GHG emissions, and our commitments to report against the UNEP FI Principles

for Sustainable Insurance (see our website for details) and address the requirements of the

TCFD – page 49 to 64.

The desirability of the company

maintaining a reputation for high

standards of business conduct; and

Through its compliance with the Code, the Company strives to operate in line with high

standards of governance expectation and business conduct. A healthy and sustainable

corporate culture is embedded throughout the business, which is assessed by the Board

through various channels – page 92

The Audit Committee oversees the Group’s implementation of whistleblowing

arrangements, and other systems and controls for the prevention of fraud, bribery and

money laundering – page 88

The need to act fairly as between

members of the company.

The Board is committed to treating the Company’s shareholders fairly, and engaging with

them through a broad programme of investor relations activities, meetings (including the

AGM), and targeted consultations; be that with our substantial shareholders, the Company’s

own employees, private individuals, or via shareholder advisory groups. See ‘Section 172

responsibilities in focus’, regarding the Board’s consideration of the balance between

underwriting opportunities and the payment of dividends – page 81

Corporate governance report continued

82 Lancashire Holdings Limited | Annual Report & Accounts 2023

Committee membership

The Audit Committee comprises four independent Non-Executive

Directors and is chaired by Sally Williams. The qualifications for each of

the Committee members are detailed on pages 72 to 75. The Committee

members bring a diverse range of experience in finance, risk, control

and business, with particular experience in the specialty insurance and

reinsurance sectors. The Board has confirmed that the members of the

Committee have the necessary expertise to provide effective challenge

to management; this includes the chair.

The Group’s internal and external auditors have the right of direct

access to both the management team and the Audit Committee.

The Audit Committee’s detailed Terms of Reference are available

on the Group’s website.

Committee members Meetings attended

Sally Williams (Chair) 4/4

Simon Fraser 2/2

Jack Gressier 1/1

Bryan Joseph 2/2

Robert Lusardi 4/4

Following the 2023 AGM Simon Fraser stepped down as a Director of the Board

and Committee member with effect from 26 April 2023. As part of the Board’s longer

term succession planning, Bryan Joseph joined the Committee on 26 April 2023 and

Jack Gressier became a member on 9 August 2023.

Audit Committee

Committee reports

“ The Audit Committee has worked closely with Natalie Kershaw and

the finance team in overseeing the implementation of the IFRS 17

and IFRS 9 accounting standards, effective from 1 January 2023. I

would like to thank all those within the business who have worked

hard in embedding these new standards, and in ensuring that the

Committee has been given the appropriate tools for oversight of

their implementation. The Committee hasremained focused on

challenging the key accounting judgements, assessing the integrity

and fair presentation of the Group’s financial reporting, and

reviewing the maintenance and effectiveness of the Group’s internal

controls. The Committee also monitored and reviewed the activities

and performance of internal and external audit.”

Sally Williams

Chair of the Audit Committee

Principal responsibilities of the Committee

• Monitoring and reviewing significant accounting judgements;

• Monitoring the integrity of financial and narrative reporting

including recommending to the Board if this is fair, balanced

and understandable;

• Reviewing the activities and effectiveness of Group internal audit;

• Reviewing the effectiveness and quality of the external audit process,

the independence of the external auditor and the findings from the

audit with the external auditor;

• Recommending the appointment of the external auditor and the

approval of their fees;

• Overseeing the effectiveness of the Group’s internal controls and

risk management systems; and

• Monitoring compliance, whistleblowing, speaking up mechanisms

for financial irregularities, risk and fraud.

Specific details of the Committee’s responsibilities and activities in

these principal areas during the year are set out in the table on the

following pages.

83Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

IFRS 17 and IFRS 9 implementation

2023 was the year in which both IFRS 17 and IFRS 9 accounting

standards were implemented. Preparing for this new standard has been a

multi-year project requiring significant change to accounting systems

and processes. The Committee recognises the very considerable efforts

by our finance and actuarial teams in delivering this successfully.

The Committee devoted additional time to reviewing reports received

from the finance team relating to the assumptions, judgements,

restatements, changes to APMs and other changes arising from this

implementation, together with the related disclosures in the financial

statements.

Significant areas of judgement and estimation

An annual paper is presented by management to the Committee that

details the areas of judgement and estimation in the preparation of the

consolidated financial statements. This is scrutinised and challenged by

the Committee. Key areas of judgement and estimation challenged by

the Committee during the year are discussed below.

Measurement of insurance contracts issued and

reinsurance contracts held

The most significant area of judgement and estimation considered

by the Committee during 2023 related to the Group’s measurement

of insurance contracts issued and reinsurance contracts held. These are

recognised on the statement of financial position as ‘insurance contract

liabilities’ and ‘reinsurance contract assets’. As a result of the judgemental

nature of these balances, changes in assumptions made may materially

change the fulfilment cashflows that make up these balances. The

estimation of the fulfilment cashflows is a complex actuarial process

which incorporates a significant amount of judgement, in particular

in relation to the estimation of the liability for incurred claims and

the asset for incurred claims (i.e. the gross and net loss reserves).

The Committee’s primary areas of focus and challenge relates to the

adequacy of these gross and net loss reserves. The Committee held

regular sessions with the Group Chief Actuary and the Group Head of

Claims during the year to discuss reserving and claims developments.

The Committee also received independent estimates of the Group’s

loss reserves from an external actuary and compared these third-party

estimates to those of the Group at its second and fourth quarter Audit

Committee meetings.

During the year the committee discussed and challenged:

• developments in reserves across the Group’s entities;

• reserving for loss events which occurred during the year, together

with reserve developments in respect of prior year losses;

• the impact of inflation on the Group’s approach to reserving and

related assumptions;

• developments in the Group’s reserving approach;

• the IFRS 17 risk adjustment maintained within insurance contract

liabilities above the established actuarial best estimate; and

• the IFRS 17 confidence level for the Group’s margin adjusted reserves.

KPMG LLP conducted a detailed re-projection of the Group’s loss

reserves as part of the annual financial statement audit.

Having reviewed and challenged these areas, the Committee concurred

with management’s valuation of the Group’s loss reserves and the

relevant disclosures around loss reserving and related assumptions

in the Group’s consolidated financial statements.

Assessment of premium allocation approach

(“PAA”) eligibility

The Committee’s work in this area relates to the implementation of

the IFRS 17 accounting standard. IFRS 17 includes an option to apply

the premium allocation approach, which is designed to simplify the

measurement of insurance and reinsurance contracts. Judgement is

applied when performing the PAA eligibility assessment on insurance

and reinsurance contracts with a coverage period of more than 1 year.

The Committee discussed and agreed with management the basis on

which the Group would apply judgment in determining that it is eligible

to apply the PAA measurement model to its portfolios and groups of

contracts as the measurement of the liability for remaining coverage

and asset for remaining coverage is not reasonably expected to differ

materially from that calculated under the general measurement model.

This assessment was made following detailed modelling of the Group’s

insurance contracts under IFRS 17.

Risk culture and controls and

financial reporting

Other key areas of review and challenge by the Committee were in areas

of the effectiveness of the business’s control environment; the continued

integrity of external financial reporting; and the oversight of corporate

and risk culture through the reporting of the internal audit and risk

management functions.

Going concern basis of accounting and

longer term viability

The Audit Committee reviewed and challenged the going concern

assessment prepared by management at both its July 2023 and March

2024 meetings, with particular consideration of capital management,

the current underwriting and loss environment, the composition

and liquidity of the investment portfolio, long-term debt financing

arrangements, strategic and financial forecasts over the business

planning horizon, and stress and scenario testing (including climate-

change risk scenarios). These factors are also relevant in providing

assurance to the Board on the longer term viability of the Group’s

business strategy.

Having reviewed and challenged these areas, the Committee concurred

with management’s going concern assessment, together with the

relevant disclosures in respect of going concern and longer term

viability within the Group’s consolidated financial statements.

Summary of key areas of Audit Committee challenge

Committee reports continued

84 Lancashire Holdings Limited | Annual Report & Accounts 2023

How the Committee discharged its responsibilities

Financial and narrative reporting

Committee

responsibility Committee activities

Monitors the integrity of

the Group’s consolidated

financial statements,

including its annual and

half-yearly reports, annual

reporting arising under

applicable supervisory rules,

interim management

statements, preliminary

announcements and any

other formal statements

relating to the Group’s

financial performance.

Reviews and reports to

the Board on significant

financial reporting issues

and judgements contained

in the consolidated

financial statements.

At each meeting the Committee reviewed the Group’s management accounts, including the annual

consolidated financial statements, as well as the Annual Report and Accounts, and other public financial

disclosures for the purpose of recommending their approval by the Board. The Group’s annual regulatory

reports, prepared in accordance with the BMA’s reporting requirements, were reviewed in April 2023 at the

Audit Committee meeting prior to their recommendation to the Board for approval. The Committee also

monitored the activities of the Group’s Disclosure Committee and reviewed the Group’s financial releases

and accompanying earnings call investor presentations.

During 2023, the Committee received, discussed and challenged regular and ad hoc reports and presentations

from management in the following areas.

• Loss reserving, and developments to the Group’s reserving process (see the Summary of key areas of Audit

Committee challenge section above).

• The implementation of IFRS 17 and IFRS 9 and the related enhancements to the Group’s finance procedures

and IT framework.

• Discussing financial reporting related changes arising from the implementation of IFRS 17 and IFRS 9 and

other new or significant accounting treatments (including related party transactions).

• Developments in accounting and financial reporting requirements impacting the consolidated financial

statements.

• The new Bermuda corporate income tax rules established in 2023.

• Changes made to APMs due to implementation of IFRS 17.

• The activities of the finance team.

• The 2023 assessment of the Group’s ability to continue as a going concern and the longer term viability

of the business (see narrative above and page 120 for further details).

• Key risk and controls including those relating to information security as part of regular risk controls

reporting, together with quarterly confirmatory compliance statements from the Group’s legal and

compliance function.

• The activities of LHL’s subsidiary companies boards and audit committees.

• Reports from the external auditors and discussion with them, covering audit planning, the results of

the external auditor assessment of key financial statement judgements and estimates, control testing,

misstatements identified and other audit and accounting matters.

The Committee also attended a training session delivered by the management team to the Board on the

Group’s implementation of the IFRS 17 and IFRS 9 accounting standards.

The Audit Committee continued its practice of holding engagement sessions with the Group CFO, the Group

Head of Internal Audit, the Group Chief Actuary and the External Auditor without management present.

Judgements and estimation in the consolidated financial statements

The Committee gave detailed consideration to the areas of significant judgement and estimation uncertainty

applied in preparing the consolidated financial statements involving a range of views and challenge from the

Committee members, the management team and the external auditors. See the summary on the significant

areas of judgement and estimation uncertainty applied by management on page 84.

Reviews the content of

the Annual Report and

Accounts and advises the

Board on whether, taken as

a whole, it is fair, balanced

and understandable, and

provides the information

necessary for shareholders

to assess the Group’s

performance, business

model and strategy.

The Committee reviewed the early drafts of the 2023 Annual Report and Accounts in order to keep apprised

of its key themes and messages. Ahead of presentation to the Committee, a thorough review process of the

Annual Report and Accounts was conducted to help ensure disclosures were balanced and accurate. The

Committee carefully reviewed the Group’s performance and reporting in light of the principal and emerging

risks. The Committee carefully reviewed the clarity of the new disclosures made in accordance with IFRS 17

and IFRS 9, and relating to APMs, including consideration of the overall presentation of APMs to ensure that

they are properly explained, reconciled and not given undue prominence. The Committee reviewed the final

draft of the 2023 Annual Report and Accounts at the March 2024 Audit Committee meeting, together with

the external auditor’s report. The Committee advised the Board that, in its view, the 2023 Annual Report and

Accounts, taken as a whole, is fair, balanced and understandable, and provides the information necessary for

shareholders to assess the Group’s performance, business model and strategy.

85Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

How the Committee discharged its responsibilities continued

External audit oversight

Committee

responsibility Committee activities

Oversees the relationship

with the Group’s external

auditors, approves their

remuneration and terms of

engagement, and assesses

annually their independence

and objectivity, taking into

account relevant legal,

regulatory and professional

requirements, together with

the Group’s relationship

with the external auditors

as a whole. This includes an

annual assessment of the

qualifications, expertise

and resources, and

independence of the

external auditors and the

effectiveness of the external

audit process.

The Committee considered the appropriateness of the annual external audit plan, and whether appropriate

professional scepticism was applied by KPMG LLP to key accounting judgements such as reserving. The

committee noted that KPMG LLP’s work included a detailed re-projection of the Group’s loss reserves.

Following its review, the Committee was satisfied that the external audit plan was appropriate and hence

did not need to request changes to this plan. Following the Committee’s approval of the external audit plan

the Committee received regular reports from the external auditors, including an ongoing assessment of the

effective delivery of the audit compared to the plan.

KPMG LLP’s terms, scope of engagement and fees were discussed, challenged and subsequently approved by

the Committee during the year.

Following the 2022 year-end audit, the Committee performed an assessment led by the Committee Chair,

of the effectiveness of the external audit process. This year the evaluation focused on the following areas:

independence, professional scepticism and culture; the quality of audit expertise; auditor quality control; audit

planning; and audit performance and evaluation. The assessment was discussed at the April 2023 Audit

Committee meeting. The process identified a number of potential areas for enhancement that were factored

into the audit planning process for 2023. Overall, the Committee was able to conclude that the external audit

process was operating effectively, both with respect to the service provided by KPMG LLP and management’s

continued support of the audit process.

The Committee reviewed a letter from the external auditor to the management team setting out certain

findings and recommendations in respect of the control environment observed during the 2022 audit, together

with management responses in each area identified.

The Committee reviewed the independence of the external auditors at the half-year and year-end meetings,

taking into account any non-audit services provided and related fee arrangements. The Committee concluded

that KPMG LLP remain independent.

The development and

implementation of a formal

policy on the provision of

non-audit services by the

external auditors, taking

into consideration any

threats to the independence

and objectivity of the

external auditors.

Pursuant to its annual review process, the Committee received a recommendation from management and

approved and adopted a formal non-audit services policy in April 2023. The policy stipulates the approvals

required for various types of non-audit services that may be provided by the external auditors, as well as those

from which the external auditors are excluded, and is made available on the Group’s website. During 2023,

KPMG LLP provided $0.6 million of non-audit services to the Group relating to the half-year reporting review,

PRA Solvency II and Lloyd’s regulatory returns. The Committee gave careful consideration to the nature of the

non-audit services provided, the suitability of KPMG LLP as the supplier of the non-audit services and the level

of fees charged and has determined that they do not affect the independence and objectivity of KPMG LLP

as auditors.

Makes a recommendation

to the Board, to be put to

shareholders for approval

at the AGM, in relation

to the appointment,

re-appointment or

removal of the Group’s

external auditors.

The 2023 financial year was the seventh financial year in which KPMG LLP acted as the Group’s external

auditors. The incumbent lead audit partner is Salim Tharani, who assumed this role in February 2022 and

has now completed two full years as the designated KPMG LLP lead audit partner. In conformance with the

required rules, provisions and good corporate governance, the Group will be required to tender for the external

audit ahead of the 2027 year end. The Committee will consider in due course its plan for the tender process.

The external audit fee arrangements across the Group were agreed after discussion between the Committee,

management, and KPMG LLP.

The Committee and the Board are recommending the re-appointment of KPMG LLP as external auditors at

the 2024 AGM.

The Committee monitored the developing corporate governance and regulatory landscape relating to the

governance, delivery and conduct of the external audit.

Committee reports continued

86 Lancashire Holdings Limited | Annual Report & Accounts 2023

How the Committee discharged its responsibilities continued

Internal audit oversight

Committee

responsibility Committee activities

Monitors and assesses the

role and effectiveness of

the Group’s internal audit

function in the overall

context of the Group’s

risk management system,

ensuring it has unrestricted

scope, and the necessary

resources and access to

information to enable

it to fulfil its mandate

in accordance with

appropriate professional

standards.

The Group’s internal audit function reports directly to the Committee. The Committee oversaw the

appointment of a new Head of Group Internal Audit during the year. The Group Head of Internal Audit

presented the annual internal audit strategy and plan to the Committee for review, discussion and approval.

The internal audit plan considers current and emerging risks which impact the business and adopts a risk

weighted approach.

The Committee received reports from the Group Head of Internal Audit summarising the status of the

internal audit plan; findings from internal audits conducted in the period; and the status of actions taken

by management to implement recommendations arising. The internal audit programme also covers the

assessment of the Group’s culture, including risk culture, for each audit undertaken. An overall summary

of observations identified in respect of the Group’s culture is presented to the Committee and discussed

in open and closed Committee sessions.

The Committee reviewed and approved the Internal Audit Charter, which can be viewed on the Group’s

website. The Chair of the Committee undertook an annual review of the effectiveness of the internal audit

function and its activities. At its November 2023 meeting, the Committee discussed the report and its findings

and concluded that the internal audit function had operated effectively in the overall context of the Group’s

risk management system, has appropriate standing within the Group, and that the Group Head of Internal

Audit has the appropriate reporting lines to maintain independence.

Internal controls and risk management systems

Reviews the adequacy and

effectiveness of the Group’s

internal financial controls

systems that identify,

assess, manage and monitor

financial risks, and other

internal control and risk

management systems.

Reviews and approves the

statements to be included

within the Annual Report

and Accounts concerning

internal control, risk

management, including

the assessment of principle

and emerging risks, and the

statements regarding going

concern and viability.

The Board has ultimate responsibility for ensuring the maintenance of a robust framework of internal control

and risk management systems across the Group and has delegated the monitoring and review of these systems

to the Committee. The Committee reviewed and challenged the Group’s control environment, the results of

the risk and control affirmation review and testing work performed and the ongoing effective operation of

key controls.

At each meeting the Committee is presented with a report from the Group Head of Internal Audit, and reviews

findings relating to the control environment and management responses. In addition, the Committee received

from the Group Head of Internal Audit an annual assessment of the effectiveness of the Group’s governance,

risk and control framework for discussion, together with an analysis of themes and trends from the internal

audit work performed and their impact on the Group’s risk profile. The Group Head of Internal Audit gave

explicit consideration to management’s fraud risk assessment as part of this work. Fraud risk and the associated

controls were, otherwise, ordinarily considered by the Group internal audit function as part of the planning

phase for each audit conducted. The Committee and Board were satisfied that the governance, risk and

control framework continue to remain strong and appropriate for the Group, whilst noting those areas for

enhancement, action and improvement which had been identified through the Group’s established processes,

or internal audit and risk and controls monitoring. The Committee assisted the Board in determining the

appropriateness of adopting the going concern basis of accounting and in performing the assessment of

the viability of the group, as more fully described in the Directors’ Report at page 120.

87Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

How the Committee discharged its responsibilities continued

Compliance, speaking up and fraud

Committee

responsibility Committee activities

Reviews for adequacy

and security the Group’s

compliance, speaking

up and fraud controls.

The Committee conducted an annual effectiveness review of the Group’s policies and procedures relevant to

financial controls, and recommended the adoption by the Board of updated policies and procedures in respect

of: anti-money laundering; the prevention of bribery and financial crime (including the detection of fraud);

conflicts of interest; whistleblowing arrangements; and sanctions monitoring. The operation of the controls

that are documented in these policies and procedures are reported to the Committee on a quarterly basis in

the form of confirmatory compliance statements from the Group’s legal and compliance function, members

of which include the Group’s Money Laundering Reporting Officers and Group Data Protection Officer. The

Committee also keeps under review the adequacy and effectiveness of the Group’s legal and compliance

function, and receives regular updates on compliance training delivered to employees across the Group.

The Group’s whistleblowing policy and procedures provide an internal mechanism for the reporting,

investigation and remediation of any workplace wrongdoing, with arrangements in place that allow for the

independent investigation of such matters and appropriate follow-up action. A whistleblowing champion

has been appointed to each of the Group’s principal operating subsidiaries, as well as at a parent company

level, with the Chair of the Audit Committee serving in such capacity. The appointed whistleblowing champions

have responsibility for ensuring and overseeing the integrity, independence and effectiveness of the Company’s

policies and procedures on whistleblowing. The Group places a high priority on employees’ understanding of

this process to enable them to speak out with confidence when appropriate. This message, as well as the

arrangements that are in place, is regularly communicated to all employees.

Priorities for 2024

• To maintain the focus on the effectiveness of the Group’s control environment, the operation of the business’s financial reporting systems

and the integrity of external financial reporting;

• To continue to monitor and embed aspects of positive business culture in quarterly reporting, in particular regarding the Group’s financial

and risk control environment;

• To continue to monitor emerging practice in IFRS 17 reporting to enable the Committee to consider whether further refinements could

be made to the Group’s reporting; and

• To continue to monitor developments and implement recommendations relating to anticipated changes in the corporate governance,

corporate reporting, audit practice landscape, ESG, sustainability and climate reporting.

Committee reports continued

88 Lancashire Holdings Limited | Annual Report & Accounts 2023

Committee membership

The majority of the Nomination, Corporate Governance and

Sustainability Committee members are independent Non-Executive

Directors. The Committee Chair is Peter Clarke, who is also the Chair

of the Board.

Committee members Meetings attended

Peter Clarke (Chair) 4/4

Michael Dawson 4/4

Sally Williams 4/4

Irene McDermott Brown 4/4

Nomination, Corporate Governance

and Sustainability Committee

“ The Committee has had a very active year, engaging fully with the

processes for Board and Chair succession. We appointed Bryan Joseph

asan independent Non-Executive Director in April 2023 and, under

the leadership of Rob Lusardi as our Senior Independent Director, the

Committee monitored and managed the process for the identification

and engagement with a range of potential candidates to join the Board

as its Chair designate. This culminated in the appointment of Philip

Broadley in November 2023. As I reach the end of my tenure as Board

and Committee Chair, I am confident that the Board benefits from

a broad diversity and has the right balance of skills and perspectives

to deliver strong, challenging, engaged and supportive governance

for our business for the years ahead.”

Peter Clarke

Chair of the Nomination, Corporate Governance and Sustainability Committee

Principal responsibilities of the Committee

• Reviews the structure, size and composition (including the skills,

knowledge, independence, experience and diversity) of the Board

and oversees Board engagement with the workforce;

• Considers succession planning for the Directors and other senior

executives;

• Nominates candidates to fill Board vacancies;

• Makes recommendations to the Board concerning Non-Executive

Director independence, membership of Committees, suitable

candidates for the role of Senior Independent Director, and the

re-election of Directors by shareholders;

• Reviews the Company’s corporate governance arrangements

and compliance with the Code;

• Monitors and makes recommendations to the Board regarding

the environmental, social and governance responsibilities of the

Company; and

• Makes recommendations to the Board concerning the charitable

and corporate social responsibility activities of the Company and

donations to the Lancashire Foundation.

89Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

How the Committee discharged its responsibilities

Corporate governance

Committee

responsibility Committee activities

Chair succession The Committee approved the appointment of Spencer Stuart as the independent external recruitment

consultancy to carry out a search for candidates for the role of Board Chair, to succeed Peter Clarke in that role

following the conclusion of the 2024 AGM. The Chair search process was led by the Board’s Senior Independent

Director (SID) Robert Lusardi.

The Committee agreed a detailed specification, which was structured with regard to the requirements of both

the Chair role and broader Board succession considerations, and held regular meetings with representatives

of Spencer Stuart during the course of 2023. Numerous meetings were held between Directors, members of

management and the candidates. The Company Secretary assisted in conducting due diligence and in giving

advice around governance requirements for candidates under consideration. All Directors were involved in

meeting and approving the principal candidates emerging from the search process.

The Committee considered questions of experience, skills, fitness and a formal paper on independence

(with due regard to the requirements of the Code) in recommending to the Board the appointment of Philip

Broadley. The Board determined Mr Broadley to be independent in character and judgement on appointment.

The Committee and Board paid close regard to the agreed role specification and noted Mr Broadley’s 40 years’

experience in the insurance and financial services sectors, including as executive and non-executive director on

a number of UK listed boards. The Committee and the Board concluded that Mr Broadley brings a wealth of

strategic and leadership skills to Lancashire’s Board and is a suitable candidate for the role of Board Chair.

Mr Broadley was appointed as a Non-Executive Director with effect from 8 November 2023, and, subject

to shareholder approval at the 2024 AGM, will assume the role of Board Chair following the 2024 AGM

on 1 May 2024. A detailed induction programme has been arranged for Mr Broadley.

Committee reports continued

90 Lancashire Holdings Limited | Annual Report & Accounts 2023

How the Committee discharged its responsibilities continued

Corporate governance

Committee

responsibility Committee activities

Board and Committee

composition and

effectiveness and succession

The Committee discussed in its meetings the balance of skills and experience on the Board and its Committees.

The Committee regularly discussed Board succession and skills planning over the year and monitored the

diversity of the Board members.

The Committee formally considered the questions of independence, the skills and fitness in recommending to

the Board the appointment of Bryan Joseph, who was appointed as a Non-Executive Director with effect from

26 April 2023. The Committee paid close regard to the agreed role specification and noted Mr Joseph’s many

years’ experience as an actuary in the global insurance and reinsurance industry and his wider board experience,

including his service as director, audit committee chair and chair of an insurance company within the Axa XL

group and his knowledge and expertise within the insurance and reinsurance third party capital sector.

The Committee also approved the appointment of Mr Joseph to the Underwriting and Underwriting Risk

Committee and the Audit Committee.

During the year, the Committee also oversaw the appointment of Jack Gressier as a member of the Audit

Committee.

The Committee reviewed the composition of the Board at its November 2023 meeting, and it considered that

the balance of skills, knowledge, independence, experience and diversity continues to be appropriate for the

Group’s business to meet its strategic objectives. The Committee noted in its discussions that the Board had

met its Parker review objective for the Board of having at least one director from a minority ethnic background.

The Committee has also noted that, due to the appointment of two male Non-Executive Directors during

2023, the gender balance of the Board has decreased slightly. The Committee and Board remain committed

to an objective of having at least 40% female membership of the Board and intends to address this as part

of its succession planning over the next couple of years.

The Committee oversaw the process for the year-end review of the effectiveness of the Board, the Committees

and each of the Directors, which was facilitated internally by the Company Secretariat team, and led by the

Chair of the Board. The Committee and the Board were satisfied that the Board and each of its Committees

were operating effectively. Further details of the 2023 performance evaluation process and its outcomes can

be found on page 77.

In accordance with the provisions of the Code, all of the Directors are subject to annual (re)election by

shareholders. With the exception of Bryan Joseph and Philip Broadley who were appointed after the April

2023 AGM, all of the Group’s current Directors were elected or re-elected by shareholders at the 2023 AGM.

With the exception of Peter Clarke, who will not submit himself for election or re-election having completed

nine years’ service as a Director, all other serving Directors will be submitted for election or re-election at the

2024 AGM.

The Committee reviewed the Group’s fit and proper policy for Board appointments.

UK Code compliance The Committee keeps under review the Company’s corporate governance arrangements, particularly the

Company’s compliance with the Code. The Committee reviewed the Company Secretariat’s checklist record

of the Company’s compliance with the Code on a quarterly basis.

Governance documentation Each Committee considered its Terms of Reference as part of the 2022 year-end evaluation process and has

recently completed a similar exercise as part of the 2023 evaluation. In light of this work the Committee

recommended a change to the Audit Committee Terms of Reference, relating to oversight of cyber, data and

IT security risks and controls, and a minor change to the Investment Committee Terms of Reference to capture

requirements for ESG and carbon data reporting for the investment portfolio. The Committee concluded that

the Terms of Reference for all the Committees were fit for purpose. The Committee reviewed and approved

changes to the Company’s Bye-Laws which were recommended to shareholders and which were approved at

the April 2023 AGM. In August 2023, the Committee reviewed and recommended to the Board minor revisions

to both the Board’s Schedule of Reserved Matters and to the document describing the division of

responsibilities between the Group CEO and the Chair.

91Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

How the Committee discharged its responsibilities continued

Corporate governance

Committee

responsibility Committee activities

Management and staff

appointments and

succession planning

The Committee reviewed and recommended the approval and adoption by the Board of the Group’s succession

plan and talent management and development programme for the senior management population in

November 2023. The business has the objective of fostering a skilled and diverse workforce to meet the needs

of the business. The Committee engaged with Sarah Rogers, the newly appointed Group Chief HR Officer and

discussed with her plans for the enhancement of data collection and reporting for employees. The Committee

reviewed training and development proposals for a number of key employees across the Group as part of the

succession planning process.

Workforce engagement With regard to its arrangements for workforce engagement the Board does not use the suggested methods

set out in the Code, but an alternative arrangement involving the designation of non-executive directors on a

rotating basis. During 2023, the Group continued the practice of the Group CEO holding ‘town hall’ meetings

with employees following the announcement of the Group’s quarterly results. In order to further enhance

arrangements for engagement between the Non-Executive Directors and members of the workforce, the

Committee arranged for these town hall meetings to be attended by the Chair of the Board or another

Non-Executive Director. In addition to Mr Clarke, the Non-Executive Directors participants in the town hall

meeting held during 2023 were Simon Fraser, Sally Williams and Bryan Joseph. The Board and Committee

also received the results of an employee engagement survey undertaken during 2023 which covered topics

including staff satisfaction and engagement (see page 33 for further details of the survey). The Directors

once again had the opportunity to meet with employees less formally at lunches and other social gatherings

organised around the time of the Board’s regular meetings in Bermuda. The Committee considered these

and other tools for workforce engagement at its November 2023 meeting and discussed arrangements

for workforce engagement during 2024. The Committee, and the Board, consider that the mechanisms

for workforce engagement and feedback have an appropriately high profile and this, in turn, informs

debate within the relevant Committees, the Board and the wider Group.

Legal, regulatory

and governance

developments reform

The Committee monitored developments in the areas of law, regulation and guidance relevant to the Group

and its operation. Topics covered included proposals for reform to corporate reporting requirements for UK

listed entities, developments in audit market reform and guidance, UK guidance with regard to ethnicity pay

data and developments in ESG regulation and practice.

Subsidiary boards The Committee and Board monitored the composition and appointments and changes to the Group’s

subsidiary boards.

Sustainability

Sustainability and ESG

reporting

The Committee received regular reports from Jelena Bjelanovic as Chair of the management ESG Committee

regarding the current and developing ESG regulatory landscape as well as the Group’s progress in these areas.

The Committee has continued to monitor developments in the area of the Group’s ESG responsibilities,

including the climate change risk management, data collection and reporting within the business

throughout its work in 2023. The Committee received feedback on the work of the Group’s newly

appointed sustainability manager, the activities of the Lancashire Employee Network and the Group’s

DE&I working group. The Committee noted the FCA consultation regarding the adoption of sustainability

disclosures reporting standards.

Committee reports continued

92 Lancashire Holdings Limited | Annual Report & Accounts 2023

Priorities for 2024

• To continue to ensure that the Company is able to effectively

discharge its governance responsibilities and to monitor and

report its compliance with the UK Corporate Governance Code;

• To support management in the development of the talent pipeline

and training and retention tools within the business;

• To review developments with regards to the Company’s

sustainability and ESG activities including management of

climate change risk and opportunity; and

• To monitor the Company’s progress on diversity and to consider

the Board’s objectives for female and ethnic minority membership

of the Board as part of its succession planning.

How the Committee discharged its responsibilities continued

Environment

Committee

responsibility Committee activities

Climate change risk and

opportunity and nature-

related risk

The Committee also periodically reviews developments in the areas of environmental sustainability and

climate change, and the management of related risks and opportunities. The Committee and Board reviewed

and ratified the Group’s 2023 CDP response and the Group’s ClimateWise submission. For more information

on these matters, please see the 2023 TCFD report starting on page 49. The Committee noted

recommendations with regard to a reporting framework produced by the Taskforce on Nature-related

Financial Disclosures (TNFD).

Social responsibility

Diversity, equity and

inclusion

For data regarding the gender and ethnicity of the Board and executive management please refer to page 38.

The Chair’s introduction on page 41 covers the Board’s disclosures under the UK listing rules with regard to the

Company’s diversity targets. The Committee recommended approval of an updated Board diversity policy,

which is posted on the Company’s website, and covers the Board and each of its committees. The gender

makeup of each committee is included in the relevant committee reports. The Committee was pleased

that during 2023 the Board was able to meet its Board level Parker review objective for minority ethnic

representation. The Committee also discussed the option of the adoption of a Parker Review target for

the executive management group and its reports, which is an option which the Committee and Board will

keep under review pending enhancements to the Group’s data collation and management capabilities. The

Committee noted the drop in gender diversity on the Board and intends to address this as part of Board

succession planning. The Committee received a report from management on the Group’s gender pay gap

data and discussed areas for focus and action, including workforce communication.

The Lancashire Foundation The Committee is responsible for monitoring and making recommendations to the Board in relation to the

Company’s charitable giving policy and the operation of, and reporting requirements for, the Lancashire

Foundation. During 2023, the Committee received a report from the Foundation, including its objectives,

governance, approach to funding for 2024 and beyond, alongside its investment strategy, donations policy

and charitable activities, as well as the ways in which the Foundation engages employees throughout the

Group with its work and initiatives. The Committee made a recommendation to the Board that the Company

donate to the Foundation 0.75% of full-year Group profits (subject to a cap of $750,000 and a $250,000

collar), conditional on the determination of financial performance for the full year. For more information

regarding the work of the Lancashire Foundation, please see pages 45 to 48.

UK Modern Slavery Act

2015 and human rights

During 2023, the Committee recommended the approval by the Board of an updated anti-slavery and human

trafficking statement, a copy of which is posted on the Company’s website. The Committee discussed ongoing

work on the development of a Group human rights statement which was approved by the Board at its meeting

in March 2024.

93Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

Committee membership

The Terms of Reference of the Investment Committee provide that the

Committee shall comprise at least two Non-Executive Directors (one

of whom may be the Chair of the Board) and the Group CFO and/or the

Group CIO. Any Executive Director may also serve on the Committee.

The Investment Committee comprises one independent Non-Executive

Director, the Chair of the Board, one Executive Director (the Group CFO)

and the Group CIO (who is not a Director).

Committee members Meetings attended

Robert Lusardi (Chair) 4/4

Peter Clarke* 3/4

Natalie Kershaw 4/4

Denise O’Donoghue 4/4

*Peter Clarke was unable to attend the November 2023 meeting due to illness.

Investment Committee

“ In 2023, the Group’s investment portfolio has contributed

materially to the Group’s overall returns, which accorded

with my expectations at the time of last year’s Annual Report.

In 2023, the relatively more stable and higher yield interest

rate environment, in conjunction with the relatively short

duration profile of the Lancashire portfolio tended to

reverse last year’s losses andto generate higher returns. The

investment portfolio is managed to support underwriting

opportunities and to provide adequate liquidity to match

the Group’s risk exposures. The growth of the business over

recent years, including the Group’s longer tail casualty

portfolio, has led to an increase in the size of the overall

investment portfolio. This increased portfolio size, together

with a higher interest rate environment is expected to

deliver enhanced net investment income in future years.”

Robert Lusardi

Chair of the Investment Committee

Principal responsibilities of the Committee

• Recommends investment strategies, guidelines and policies

to the Board and other Group entities to approve;

• Recommends and sets risk asset definitions and investment

risk tolerance levels;

• Recommends to the relevant subsidiary Boards the appointment of

investment managers to manage the Group’s investments;

• Monitors the performance of investment strategies within the risk

framework; and

• Establishes and monitors compliance with investment

operating guidelines.

Committee reports continued

94 Lancashire Holdings Limited | Annual Report & Accounts 2023

How the Committee discharged

its responsibilities

During 2023, the Group’s investment portfolio generated $160.5 million,

representing a positive return of 5.7%. This strong return was driven by

the higher interest yield environment and the relatively short duration

of the portfolio. The Committee received regular comprehensive reports

from management regarding investment performance, strategy and risk

monitoring. The Committee continued to work constructively with

management to articulate, support and implement the Board’s

investment philosophy and discussed and agreed the resourcing

requirements for the Group’s investment department.

The Committee received regular reports from the professional

investment portfolio managers concerning their forward-looking view

of the macro-economic environment and implications for investment

asset classes and strategy. The Committee received presentations

from managers regarding potential new asset classes including senior

tranches of collateralised loan obligations.

The Committee considered regular reports on the performance of the

Group’s investment portfolios, including asset allocation and compliance

with pre-defined guidelines and tolerances; and recommended

amendments to portfolio investment guidelines to the Board. During

the year, the Committee approved an increased portfolio allocation to

CLOs and decided to progressively liquidate the Group’s hedge fund

portfolio, which, though positive, had not delivered the expected

risk-adjusted returns over the long term.

The Committee monitored a suite of investment portfolio risk analytics

throughout the year, including a 1 in 100 Value at Risk measure, realistic

disaster scenarios and realistic loss scenarios, credit risk and credit

quality, liquidity risk and other market risks. The Committee also

tracked FX exposure and its management.

The Committee monitors a number of tools to measure the ESG profile,

climate change risk exposure and carbon intensity of the Group’s

investment portfolio, including the MSCI ESG and carbon intensity rating

tools, with due regard to stakeholder expectations in these areas. The

Committee considers that most of the available tools and methodologies

for the ESG, carbon and climate factors are imperfect. Accordingly, the

Committee expects to further develop and refine its ability to analyse

these factors in future years, in consultation with the Group’s external

advisors and portfolio managers and aligned with the evolving market

and regulatory standards and expectations for the measuring and

reporting in these areas.

Notwithstanding these current perceived imperfections, the Committee

has tracked the carbon intensity of portfolio assets covered by the MSCI

carbon intensity rating (representing approximately 49% of portfolio

assets, since U.S. treasuries and structural assets, among others, are

not included).

In 2022, the Committee had directed its external managers to begin

repositioning its portfolio to reduce the carbon intensity score, which

continued in 2023.

The Committee noted that 96.7% of the Group’s externally managed

investment portfolio is assigned to mangers which are signatories to

the UNPRI.

The Committee continues to operate a framework for the measurement

of climate sensitivity for corporate bonds within the fixed maturity

portfolio through the use of a Climate VaR, which is aligned with the

Paris Accord goal of limiting global temperature increases to a maximum

of 1.5°C, for the Group’s investment risk tolerance statements. The

Committee and Board have a preference for the financial impact of this

scenario on the Group’s fixed maturity portfolio, covered by MSCI, to

have a less detrimental impact than the MSCI benchmark model.

The Committee noted that the fixed maturity portfolio continues to

outperform the benchmark portfolio on the Climate VaR measure.

Priorities for 2024

• To build a diversified portfolio which supports Group

underwriting activities, contributes to growth in DBVS and is

balanced with the preservation of capital and the maintenance

of liquidity to pay claims;

• To increase portfolio duration to align with the longer overall

reserve duration as a result of the growth of the Group’s

casualty portfolio;

• To focus on the implications of macro-economic trends and

the measurement and monitoring of associated investment

risk within a framework of prudent investment risk

management; and

• To monitor the climate change risk sensitivity, ESG profile

and carbon intensity profile of the Group’s investment

portfolio with due regard to developing expectations

and methodologies.

95Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

Committee membership

During 2023, the Underwriting and Underwriting Risk Committee

comprised one Executive Director (the Group CEO) and three Non-

Executive Directors (Bryan Joseph joined the Committee during the

second quarter), together with other senior members of the Group’s

underwriting and actuarial management teams (who are not Directors).

Committee members Meetings attended

Alex Maloney (Chair) 4/4

Jon Barnes 4/4

Michael Dawson 4/4

James Flude 4/4

Paul Gregory 4/4

Jack Gressier 4/4

James Irvine 4/4

Hayley Johnston 4/4

Bryan Joseph 2/2

Ben Readdy 4/4

Underwriting Committee

“ We had another record-breaking year in 2023 for our highest ever

annual premium income, which was achieved through a combination

of a strong premium rating environment and organic growth in our

client base, particularly in our newer lines of business. The Committee

had actively monitored underwriting performance during the year and

also continues to approve and monitor the Group’s underwriting risk

tolerances and preferences and related performance. One of the

Committee’s roles is to monitor the Group’s reinsurance planning,

which is an important tool in managing our exposures across the

portfolio. Through a combination of disciplined underwriting in

well-priced markets and growth in non-catastrophe exposed lines,

the Group has built a more diversified book which has improved

our portfolio’s overall resilience to the impact of catastrophe losses.

The Committee has also monitored progress in implementing our

new U.S. underwriting platform.”

Alex Maloney

Group CEO and Chair of the Underwriting and Underwriting Risk Committee

Principal responsibilities of the Committee

• Reviews Group underwriting strategy, including consideration of

new lines of business;

• Oversees the development of, and adherence to, underwriting criteria,

limits, guidelines and authorities by operating company CUOs;

• Reviews underwriting performance;

• Reviews significant changes in underwriting rules and policies; and

• Monitors underwriting risk and its consistency with the Group’s risk

profile and risk appetite.

Committee reports continued

96 Lancashire Holdings Limited | Annual Report & Accounts 2023

How the Committee discharged

its responsibilities

Strategic oversight

During 2023, the Committee continued to monitor the overarching

strategic priority for the business to maximise the underwriting

opportunity during the improved pricing environment of the current

insurance market cycle.

Management reporting to the Committee was developed for richer

underwriting information, which was re-configured to align with the

Group’s streamlined insurance and reinsurance reporting segments.

Reporting enhancements included dashboard presentation of data,

which is a product of the Group’s improved data warehouse and

data management capabilities as a key part of the Group’s IT

development strategy.

The Committee received regular updates on the Group’s strategic

underwriting plans and the Lloyd’s business plans, including related

capital requirements.

The Committee regularly reviewed progress in the development of the

Group’s U.S. underwriting initiative, and worked in conjunction with a

dedicated project committee, with Board and management participation,

which also monitored progress. The Committee also received reports on

a number of new business initiatives, including several which were

explored but not pursued.

The LCM platform did not deploy third party capital during 2023 and the

Committee monitored reserve movements on open Kinesis contracts.

Underwriting Performance

The Committee received regular reports on the Group’s underwriting

activities, including quarterly updates on gross premium written,

insurance and reinsurance pricing trends, and combined ratio

developments. In particular, the Committee considered the work

performed by management in repositioning some of the Group’s inwards

reinsurance lines.

The Committee received a management progress report on those classes

of business established during 2018. These included aviation deductible

reinsurance, and the energy power and energy downstream insurance

classes. All these lines are now contributing meaningfully to the Group’s

gross written premium.

The Committee received a presentation on the Group’s US mortgage

reinsurance protection portfolio and discussed an appropriate tolerance

for a mortgage risk PML scenario.

In April 2023, the Committee received a presentation from Syndicate

2010 property reinsurance underwriters relating to underwriting

optimisation work, which has been informed by improved data analysis.

Across the year the Committee monitored the progress made in building

a more diversified underwriting portfolio, within which catastrophe risk is

more broadly balanced against other non-correlating risks.

In April 2023, the Committee received a presentation on the Group’s

property insurance D&F lines of business, including a report on the

allocation of D&F risks between the Group’s LUK and Syndicate

platforms.

In April 2023, the Committee received a report on progress made by the

property construction underwriting team, first established during 2021.

The focus in this class is within the North American and Australian

markets.

The Committee received reports on underwriting conditions across a

number of business classes including changes in underwriting appetites

and client base.

The Committee discussed the Group’s Japan property reinsurance treaty

renewal season during April 2023.

The Committee also discussed data relating to insurance and reinsurance

pricing trends. There has been a strong improvement in the pricing

environment over recent years which has contributed to the Group’s

ability to grow its premium income materially.

At the half-year meeting, the Committee received its first report

summarising the (re)insurance service result performance calculated

under the new IFRS 17 accounting standard.

In August 2023, the Committee received an update of the Group’s

mid-year Florida property reinsurance renewals including pricing,

underwriting appetite, and positioning.

Underwriting Controls

In April 2023, the Committee recommended to the Board approval

of the Group’s underwriting controls policy and procedure.

The Committee reviewed and recommended to the Board the summary

of underwriting authorities and normal maximum lines by class of

business and the statements for the aggregate political risk exposures

by country.

Risk appetites and monitoring

The Committee reviewed and recommended to the Board the

Group’s underwriting PML and RDS risk tolerances and preferences.

The Committee reviewed at each of its meetings a summary of the

Group’s top PML and RDS exposures, including quarterly movements.

Through the review and monitoring of underwriting PMLs, the

Committee continued to monitor exposures to a range of natural

catastrophe risks, including regional windstorm and hurricane exposures,

and the articulation of an appropriate underwriting and risk management

strategy and management preference for these and other risk exposures

linked to climate change factors. The Committee is satisfied that the

Group’s underwriting strategy and reinsurance and risk management

programmes are appropriate for the management of underwriting risk

and natural catastrophe and climate linked exposures relating to these

factors. For more detail, please see the ERM report starting on page 23

and the Group’s TCFD report starting on page 49.

97Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

The Committee also monitors the potential for conflicts and their

management within the business.

Oversight of reinsurance structures

The Group’s programme of outwards reinsurance protections is a core

risk and exposure management tool. The Committee reviewed the

structure, pricing and operation of the outwards reinsurance programme

and regularly discussed management reports covering outwards

reinsurance developments. The Committee’s work included a forward-

looking presentation by management regarding opportunities for the

Group’s reinsurance structure for 2024. The Committee also approved

the Group’s intra-group reinsurance approval controls.

Claims reporting

The Committee monitored the status of key claims, including reserve

developments during the course of the year. Topics discussed included

market loss developments on winter storm Elliott, COVID-related

market litigation developments and developments in aviation claims

relating to the conflict in Ukraine. The Committee also discussed

reserving, including within the context of the Group’s business plan

assumptions. At its November 2023 meeting, the Committee discussed

with management the Group’s potential policy exposures within Israel

and the Middle East.

Board engagement

During 2023, the Committee meetings were ordinarily attended

by all Board members. The Committee and Board seek to match the

Company’s capital to the underwriting requirements of the business

in all parts of the underwriting cycle. A more detailed analysis of the

Group’s underwriting performance appears in the underwriting and

business review starting on page 14.

Priorities for 2024

• To continue to monitor the development and implementation

of a forward-looking and disciplined underwriting strategy

with a focus on disciplined growth appropriate to the current

market opportunities and nimble use of the Group’s

underwriting platforms, within a framework of appropriate

risk tolerances;

• To work actively with management in the identification,

analysis and consideration of new underwriting opportunities,

including potential new lines of business, opportunities in new

markets, opportunities for the Group’s newly established U.S.

underwriting platform and opportunities for the managed

‘organic’ growth in the Group’s existing business lines;

• To consider opportunities for development of the Group’s

reinsurance structures; and

• To continue to foster a nimble, sustainable and responsive

underwriting culture, capable of responding to the needs of

clients, investors, employees and other stakeholders.

Committee reports continued

98 Lancashire Holdings Limited | Annual Report & Accounts 2023

Remuneration Committee

Committee membership

The Remuneration Committee comprises four independent

Non-Executive Directors and the Chair of the Board. Simon Fraser

stepped down from the Committee and the Board, having completed

nine years’ service, at the 2023 AGM.

Committee members Meetings attended

Irene McDermott Brown (Chair) 4/4

Peter Clarke 4/4

Michael Dawson 4/4

Jack Gressier 4/4

Robert Lusardi 4/4

Simon Fraser 2/2

“ The 2023 year has been one of strong performance for the business, on

both the underwriting and investment side. This represents significant

delivery on our long term strategic objective of balancing risk and return

to generate attractive returns for our investors across the insurance cycle.

The Committee recognises the importance of management contribution

in leading the Lancashire team to achieve these outcomes.

The year has also been one of transition in a number of important respects.

Firstly, I would like to thank our shareholders for their strong support of

our Remuneration Policy at the 2023 AGM, which included a number of

minor changes. The Committee and Board have also tracked the

implementation of the new IFRS 17 insurance accounting standard and

performance outcomes during the year. The Committee also conducted a

tender for remuneration advisory services, which has resulted in the

appointment of PwC as our new advisor.

The Committee is satisfied that Lancashire’s remuneration structures

continue to ensure appropriate reward for our management and our

people, who are the Group’s key asset, and are strongly aligned with

the Group’s strategic priorities.”

Irene McDermott Brown

Chair of the Remuneration Committee

Principal responsibilities of the Committee

• Sets the Remuneration Policy for all Directors and determines the

total individual remuneration packages of the Company’s Chair,

the Executive Directors, Company Secretary and other designated

senior executives, to deliver long-term benefits to the Group;

• Recommends to the Board the financial and personal objectives for

each Executive Director and monitors the performance against these

objectives for the annual bonus;

• Determines each year whether awards will be made under the

Group’s RSS and, if so, the overall amount of such awards, the

individual awards to Executive Directors and other designated

senior executives, and the performance targets to be used;

• Ensures that contractual terms on termination or retirement,

and any payments subsequently made, are fair to the individual

and the Company; and

• Oversees any major changes in employee reward and benefit

structures throughout the Group.

99Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

How the Committee discharged

its responsibilities

Throughout the year, the Committee kept under review the Group’s

performance and remuneration structures, in the light of due

consideration of investor and stakeholder input and interests.

At the 2023 AGM, the Board put to our shareholders a revised Directors’

Remuneration Policy, following a period of shareholder consultation led

by Irene McDermott Brown as the Committee Chair. The Policy has a

three-year term and was approved by shareholders with a majority of

92.9% of votes cast. The Remuneration Policy is summarised on page

105 of the Directors’ Remuneration Report. The vote on the 2022 Annual

Report on Remuneration received 92.2% of votes cast. The Committee

noted the strong level of shareholder support for the Directors’

Remuneration Policy and its implementation for the 2022 year.

Following shareholder feedback the Committee and Board agreed to

utilise a profit-related RoE measure for the annual bonus for Executive

Directors. The Committee and Board retained change in DBVS and TSR

as the metrics used in the longer term RSS equity-linked awards for

Executive Directors. The Committee monitored throughout the year the

financial performance of the business, which was reported for the first

time on the basis of the IFRS 17 and IFRS 9 accounting standards.

Under the leadership of Irene McDermott Brown the Committee

conducted a tender process for remuneration advisory services.

Following consideration of three shortlisted candidates (including Alvarez

& Marsal, the Group’s adviser in recent years) the Committee decided

to appoint PwC as the Group’s independent remuneration advisers. The

Committee felt that PwC had access to excellent comparative data for

UK and internationally listed businesses, and with regard to the insurance

and financial services sectors, and has informed experts capable of giving

practical remuneration advice.

During 2023, the Committee reviewed the Group’s incentive packages

for Executive Directors, for other designated senior executives within

the agreed remuneration framework and more generally for the staff

population, to ensure that remuneration is structured appropriately

in order to promote the long-term success of the Company. The

Committee reviewed industry benchmarking data for the Group’s

senior executive roles. In considering the salary and bonus awards for

the Executive Directors, as well as other designated senior executives,

the Committee also had regard to remuneration levels and practices

across the workforce. The Committee and the Board noted and discussed

the outcomes of the employee surveys conducted during the year and

the results of the Group’s gender pay gap data analysis.

The Committee also approved the grant of long-term incentive awards

under the Company’s RSS, considering a range of factors including the

Company’s share price movement. The Committee reviewed Executive

Directors’ shareholdings in the context of the Company’s share

ownership guidelines for senior/key executives. Share ownership targets

have either been met, or acceptable progress made in accordance with

guideline requirements. The Committee also discussed and agreed

proposals for the treatment of unvested RSS equity awards of

departing employees, including retirees.

In considering remuneration outcomes, the Committee gave formal

consideration to the questions of malus and clawback and made

enquiries with respect to the effective operation of the Group’s risk

and control framework.

The Committee reviewed and recommended to the Board two

supplementary schedules to the Group RSS rules, relating to RSS

awards made to U.S. and Canadian employees. These were duly

approved by the Board.

At the November 2023 meeting, the Committee and all Directors

received a presentation from PwC on developments in remuneration

practice. Discussion covered developments in law, regulation, best

practice and reporting obligations as well as the remuneration guidance

from leading shareholder advisory groups.

The Committee reviewed and recommended to the Board for approval

the Group’s Solvency II remuneration policy relevant to the management

population of staff within the Group’s UK regulated entities.

The Committee received market benchmarking data on fees for directors

of listed entities and operating insurance companies.

For discussion of the linkage between performance and remuneration

outcomes, please see Irene McDermott Brown’s introduction to the

Directors’ Remuneration Report on page 101. The Report also sets out

in greater detail 2023 remuneration for Executive Directors and the

Committee’s work in reviewing performance and outcomes and in

determining appropriate implementation of the Policy for 2024 (see

pages 108 to 117 for the full report).

Priorities for 2024

• To ensure the appropriateness and relevance of the Group’s

remuneration structures and alignment with the Board’s

business strategy and objectives, effective risk management

and the interests of stakeholders;

• To ensure that remuneration across the wider Group is

appropriate to retain and reward employees and remains

competitive and appropriate to meet the skills and resourcing

needs of the business; and

• To work with the Group’s independent remuneration adviser

to keep abreast of compensation levels amongst the Group’s

London, Bermudian and other international peers, and

appropriately reflect good market practices.

Committee reports continued

100 Lancashire Holdings Limited | Annual Report & Accounts 2023

Annual Statement

Directors’ Remuneration Report

Dear Shareholder,

I am pleased to present the 2023 Directors’ Remuneration Report

to shareholders.

2023 has been a year of strong operational and financial performance.

For the third year in succession the business has achieved strong

premium growth in excess of the rates of growth in premium pricing

generating comprehensive income of $321.5 million, the highest since

2010. We have seen robust organic growth in our underwriting portfolio

and the addition of new underwriting lines, including the Group’s

casualty reinsurance portfolio over recent years, has diversified the

premium income streams and related policy exposures thereby creating

greater portfolio resilience to the Group’s catastrophe loss exposures.

Whilst there have been several smaller to medium-sized industry losses

during 2023, we have not witnessed any major catastrophe loss, which

has further enhanced the Group’s underwriting performance. Our

investment portfolio has also delivered strong returns and investment

performance has contributed meaningfully to Group returns.

In light of the strong financial performance, the Board has been very

pleased with the strong growth in DBVS of 24.7%, with an undiscounted

combined ratio of 82.6%. The Group’s simple RoE, being adjusted profit

over average shareholders’ equity, has been similarly strong at 20.0%.

Further detail on the RoE outturn is provided on page 109.

Expectations are that the current pricing environment and growth

opportunity will continue into 2024. Overall, as we enter 2024,

the Group is in a strong position to continue to maximise attractive

underwriting opportunities in what we expect will be a positive pricing

environment. The business has also reinforced its long-standing

commitment to active capital management and, in light of the

strong returns generated in 2023, the Board was able to declare in

November 2023 a special dividend of $0.50 per share which was paid

to shareholders during December 2023. The Board is confident that

the business has the required capital and resilience to support its

underwriting and growth plan for 2024 and the foreseeable future.

Against this background, total remuneration for our Group CEO and

Group CFO has increased in comparison to 2022. The principal driver

for this change is the strong performance delivery on the financial metric

of the annual bonus, which accounts for 75% of bonus outturn. The

financial element of annual bonus did not meet threshold in 2022

(see the comparison table for single figure remuneration on page 108). In

2023, the Directors’ Remuneration Policy operated in line with the

intentions set out in the 2022 Annual Report on Remuneration.

2023 AGM voting outcomes

Shareholders will recall that in the autumn of 2022, I led a consultation

exercise in which shareholder feedback was sought, with a particular

focus on proposals for the updated Directors’ Remuneration Policy,

which was included in last year’s report and is summarised in this report

(see page 105), and a proposal to modify the financial metrics used for

annual bonus purposes to include a new simple RoE measure – which

the Board adopted for the first time in 2023.

As is noted in the Remuneration Committee Report (see page 100) the

Committee was very pleased with the levels of shareholder support at

the 2023 AGM for the three year Directors’ Remuneration Policy and

report on remuneration both of which received over 92% of votes cast.

The Board and management continue to believe that there is a strong

link between the Remuneration Policy and business strategy. The

Committee and Board keep remuneration policy and performance

metrics under regular review to ensure appropriate focus and alignment

of our management team with the interests of our stakeholders. The

Committee and Board consider that the three-year Directors’

Remuneration Policy, which was set out in full in the 2022 Annual Report

and approved at the 2023 AGM, remains fit for purpose and no policy

changes are proposed at the 2024 AGM.

Performance outcomes for 2023

The Executive Directors’ 2023 annual bonus performance targets for

both financial and personal performance were stretching. The financial

element made up 75% of the annual bonus opportunity and was linked

to the Company’s simple RoE metric. 2023 RoE performance of 20.0%

exceeded the maximum level set by the Committee at the start of the

year (19.2% being the risk free rate, confirmed as 5.2%, plus 14%),

resulting in a 2023 annual bonus pay out for the financial performance

element at the maximum level. This was considered by the Committee

and Board to be an appropriate outcome for 2023 and therefore no

discretion was exercised by the Committee.

The Board considered that the Executive Directors performed extremely

well in achieving the agreed strategic aims for the business aligned with

their personal performance targets. The outcomes achieved included

strong organic growth in underwriting premium income, establishing and

embedding new lines of underwriting, the establishment of the Group’s

new U.S. underwriting presence, successfully implementing the new IFRS

17 and 9 accounting standards, managing risk within the business and

structuring a more diversified and resilient underwriting portfolio.

The business has continued to demonstrate high levels of operational

effectiveness, which has in turn driven the strong financial outcome for

the 2023 year. The Board also noted the dynamic action of management

in managing the Group’s capital and in managing and monitoring risk.

101Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

The business was able not only to match its capital resources to the

Group’s underwriting activities but also to facilitate the payment to

our shareholders of a special dividend. The Board considers that our

Executive Directors have continued to provide the effective leadership

which has contributed to the Group’s strong financial performance

during the year and has placed Lancashire in a robust position to grow,

to return capital as appropriate and to withstand any future, more

challenging, parts of the cycle. Performance versus personal and

strategic objectives was assessed at 93% of maximum for the Group

CEO and 94% of maximum for the Group CFO, resulting in 2023 bonus

outcomes at 98% of maximum level for the Group CEO and 99% of

maximum level for the Group CFO (see page 110 for further details of

personal performance).

In relation to long-term incentives for Executive Directors, the 2021

Performance RSS awards were 85% based on the annual change in

DBVS targets and 15% on compound annual growth TSR targets over

the three-year period to 31 December 2023. The Company’s TSR

(calculated in U.S. dollars) for the performance period resulted in a

compound annual rate of negative 3.5%, resulting in 0% vesting for the

TSR component. The Change in DBVS performance over the three-year

performance period was assessed based on the change for each of the

three separate financial years as disclosed on page 111, resulting in nil

vesting in respect of the 2021 and 2022 years for this element and

33.3% vesting in respect of the 2023 year for this element of the 2021

Performance RSS awards. Therefore overall, the 2021 Performance RSS

awards will vest at 28.3%.

The Committee believes in setting challenging performance criteria and

having a significant proportion of the overall package linked to Company

performance. Furthermore, the Committee also continues to recognise

the need to ensure that Executive Directors are appropriately

remunerated and incentivised throughout every phase of the insurance

cycle. The Board seeks to ensure that Executive Director compensation

is structured in such a way as to discourage excessive risk to the business.

The Committee noted the 28.3% vesting of the 2021 RSS awards, which

was a result of the three-year performance delivered. This outcome is

relatively low and was a reflection of the challenging loss environment

faced by insurance markets in 2021 and 2022 and the Group’s strong

performance in 2023. The Committee is satisfied that there has been

sufficient linkage between longer-term performance and reward for

Executive Directors. The Committee also considers that the Executive

Directors will not benefit from any windfall gains; and as a result, no

discretion was applied to the formulaic outcome. The Committee

will continue to ensure that there is appropriate alignment between

executive remuneration and Company performance in line with the

Group’s cross-cycle return expectations and is satisfied that the Policy

operated as intended for 2023.

During the year, the Committee also engaged with management on

matters of broader employee engagement and remuneration. As a

committee, we value the opportunity to hear the views of employees

and to support management in gathering and considering feedback and

implementing changes. The Board and Committee received feedback

during the year on a Group-wide employee survey monitoring issues of

engagement, purpose and perception of management effectiveness and

structures. As in previous years, one of our Non-Executive Directors

routinely joins Alex in the Group CEO’s quarterly staff town hall

meetings. These are a forum for the presentation and discussion with

staff of the performance and operation of the business and the activities

and operation of the Board. They also afford Alex and the Board the

opportunity to address employee questions and receive feedback.

Application of Remuneration Policy for 2024

The Committee has reviewed and discussed the remuneration structures

to be used in 2024 in some detail and, following engagement with major

shareholders and agencies, is putting forward an adjustment to RSS

award level and increase to salary for the CEO. Both adjustments are

within Policy and address concerns related to international competitive

pressure for talent across the industry, highlighted in a remuneration

benchmarking study commissioned from our independent remuneration

adviser. The exercise considered the CEO remuneration levels of a

bespoke peer group of comparable UK and US-listed insurers and

reinsurers, primarily headquartered in the UK and Bermuda (taking note

of the size and complexity in each case, and paying particular attention

to the market capitalisation), to reflect the relevant talent market for

Lancashire. The Committee proposes a salary uplift equal to 10% for

Alex Maloney, comprised of an inflationary uplift of 5% plus an

additional 5% (the average uplift across the workforce for 2024 is 6.2%)

and an adjustment to RSS from the current level of 300% of salary to

350% of salary. The decision to adjust RSS in addition to salary is to

ensure the link between CEO remuneration and shareholder value is

maintained. No additional adjustment beyond an inflationary salary

uplift of 5% is proposed for the CFO.

The Annual Report on Remuneration provides detailed disclosure on

how the Policy will be implemented for 2024 and how Directors have

been paid in relation to 2023.

The disclosures provide our shareholders with the information necessary

to form a judgement as to the link between Company performance and

how the Executive Directors are paid. This Annual Statement, together

with the Annual Report on Remuneration, will be subject to an advisory

vote, and I hope that you will be able to support this resolution at the

forthcoming 2024 AGM. The Committee is committed to maintaining

an open and constructive dialogue with our shareholders on

remuneration matters and I welcome any feedback you may have.

Irene McDermott Brown

Chair of the Remuneration Committee

Directors’ Remuneration Report continued

102 Lancashire Holdings Limited | Annual Report & Accounts 2023

Directors’ Remuneration Policy

As a Company incorporated in Bermuda, LHL is not bound by UK law

or regulation in the area of Directors’ remuneration to the same extent

that it applies to UK incorporated companies. However, by virtue

of the Company’s premium listing on the LSE, and for the purposes

of explaining its compliance against the requirements of the Code,

the Board is committed to providing full information on Directors’

remuneration to shareholders.

The Remuneration Policy addresses the following principles as set out in the Code:

• Clarity – the Committee regularly engages with shareholders to

take into account shareholder feedback (as it did in developing the

current Policy and proposals for 2024 implementation) and with

the workforce, as described in the Annual Statement on page 101,

to ensure there is transparency on the Remuneration Policy and

its implementation. The Remuneration Policy has a clear objective:

to enable the Group to attract, retain and motivate Executive

Directors of the highest calibre to further the Company’s interests

and to optimise long-term shareholder value creation, within

appropriate risk parameters.

• Simplicity – the Remuneration Policy is designed such that

the arrangements are considered easy to communicate

to all stakeholders. This includes variable pay which operates

as an annual bonus plan and a single LTIP. The objective

and rationale for each element of the Remuneration Policy

is clearly explained in the Policy table.

• Risk – the Committee considers that the structure of remuneration

does not encourage inappropriate risk-taking. The performance

metrics used ensure remuneration aligns to the Board’s strategic

objective which is to achieve attractive returns appropriate to

overall risk levels across the (re)insurance market cycle. There

is a mixture of short-term and long-term performance metrics

with an appropriate mix of performance conditions. Malus and

clawback provisions are in place across all incentive plans and

the Committee has the ability to use its discretion to override

formulaic outcomes. The Committee receives a report from the

Group CRO with regard to risk management developments which

may be relevant to remuneration outcomes, and also makes

inquiry with the Group Head of Internal Audit.

• Predictability – the range of possible reward outcomes is shown

in the ‘Illustrations of annual application of Remuneration Policy’

(see page 114 for full details), which demonstrates the potential

threshold, on-target and maximum scenarios of performance

and the resulting pay outcomes which could be expected.

• Proportionality – a significant proportion of pay is delivered

through variable remuneration. No variable remuneration will

be delivered for below threshold performance with incentives

only paying out if strong performance has been delivered by the

Executive Directors. The Committee has the discretion to override

outcomes if they are deemed inappropriate to ensure a robust link

between reward and performance.

• Alignment to culture – the Policy has been designed to support

the delivery of the Group’s long-term strategy, and the interests

of its shareholders and employees. Annual bonus performance

metrics include an assessment of whether each Executive

Director’s contribution aligns to the Group values. The Policy seeks

to appropriately motivate Executive Directors to deliver long-

term, sustainable performance which benefits all stakeholders.

The Company’s current Remuneration Policy was approved

by shareholders at the 2023 AGM, which is effective for

a period of three years.

The Committee considers the Policy to be in line with best

practice and shareholder expectations.

103Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

Governance and approach

The Company’s Remuneration Policy is geared towards providing

a level of remuneration which attracts, retains and motivates Executive

Directors of the highest calibre to further the Company’s interests and

to optimise long-term shareholder value creation, within appropriate risk

parameters. The Remuneration Policy also seeks to ensure that Executive

Directors are provided with appropriate incentives to drive Company and

individual performance and to reward them fairly for their contribution

to the successful performance of the Company.

The Remuneration Committee and the Board have again considered

whether any element of the Remuneration Policy could conceivably

encourage Executive Directors to take inappropriate risks and have

concluded that this is not the case, given the following:

• there is an appropriate balance between fixed and variable pay,

and therefore Executive Directors are not required to earn

performance-related pay to meet their day-to-day living expenses;

• there is a blend of short-term and long-term performance metrics

with an appropriate mix of performance conditions, meaning that

there is no undue focus on any one particular metric;

• in the case of Alex Maloney, the Group CEO, there is a high level of

share ownership, and in the case of Natalie Kershaw, who assumed

the role of Group CFO and Executive Director during 2020, there is

an appropriate opportunity to acquire a longer-term equity holding

on a measured basis, meaning that there is a strong focus on

sustainable long-term shareholder value; and

• the Company has the power to claw back bonuses (including the

deferred element of the annual bonus) and long-term incentive

payments made to Executive Directors in the event of material

misstatements in the Group’s consolidated financial statements,

errors in the calculation of any performance condition, corporate

failure and material damage to the Group’s business or reputation

or the Executive Director ceasing to be a Director and/or employee

due to gross misconduct (see page 105 for a summary of the Policy).

The full Policy details are included in the 2022 Lancashire Holdings

Limited Annual Report.

How the views of shareholders are taken

into account

The Committee Chair and, where appropriate, the Company Chair

consult with major investors and representative bodies on any significant

remuneration proposal relating to Executive Directors. Views of

shareholders at the AGM, and feedback received at other times,

will be considered by the Committee. The Committee also takes into

account published guidance from shareholders and proxy agencies.

During 2023, management engaged regularly with investors touching

on matters including remuneration and wider workforce pay principles.

The Committee engaged specifically with the Group’s major

shareholders on the matter of CEO pay structure for 2024 which,

within the Policy parameters approved at the 2023 AGM, addresses

the challenges of an international competitive market in a proportionate

manner. A number of investors sought additional clarity on the

comparator group used, and we confirmed that this was based on listed

companies, taking into account the business mix, geographic market,

size and complexity compared to Lancashire and that, where

comparators were larger or smaller than Lancashire, this was

taken into account in the remuneration comparison.

How the views of employees are taken

into account

The Remuneration Committee takes into account levels of pay elsewhere

in the Group when determining the pay levels for Executive Directors.

The Remuneration Policy for all staff is, in principle, broadly the same as

that for Executive Directors in that any of the Group’s employees may be

offered similarly structured packages, with participation in annual bonus

and long-term incentive plans, although award types (restricted cash,

restricted stock or performance shares) and size may vary between

different categories of staff. For Executive Directors, with higher

remuneration levels, a higher proportion of the compensation package

is subject to performance pay, share-based remuneration and deferral.

This ensures that there is a strong link between remuneration,

Company performance and the interests of shareholders.

Reflecting good practice in this area, Executive Directors’ pension

provision is the same as the standard pension contributions made

to employees in the Group (in percentage of salary terms).

Whilst the Company does not expressly consult with employees on

Executive Directors’ remuneration, the Board and Committee, through

the structured arrangements for regular workforce engagement, do

receive employee feedback, including where relevant to matters of

remuneration. As noted above, the Committee is made aware of pay

structures across the wider Group when setting the Remuneration Policy

for Executive Directors. The Committee also reviews and approves the

size of any annual bonus pot to be distributed to employees and the

allocation of RSS awards or other LTI structures, and its practice in this

regard is well aligned with the expectations introduced within the Code.

There is a broad understanding across the business of the influence of the

financial performance of the Group on year-end remuneration outcomes

via town hall meetings and internal communication of quarter end

results with managers engaging directly with employees on their

contribution. The percentage change in remuneration table on page 116

shows that wider employee pay outcomes are broadly aligned to those

of senior executives, albeit with a less dramatic impact from financial

performance due to active management decisions in previous years to

soften the effect of more challenging years and the larger proportion

of variable components in senior executive pay.

Directors’ Remuneration Report continued

104 Lancashire Holdings Limited | Annual Report & Accounts 2023

Component Operation/Key Features Maximum Potential Opportunity Applicable Performance Measures

Salary

• Typically reviewed annually with

regard to market conditions, role,

experience and peer group

• Percentage increases aligned

with workforce other than in

exceptional circumstances

• No maximum • None

Pension and

other benefits

• Money purchase pension

arrangement or cash alternative

• Benefits offered in line with

wider workforce

• Additional benefits can be

offered to support relocation

or local practice

• Reasonable business-related

expenses

• Maximum employer pension

contribution of 10% in line with

wider workforce

• None

Annual Bonus

• One third of annual bonus

deferred into Lancashire shares

vesting in three equal tranches

over three years

• Dividend equivalent is earned

on deferred portion

• Cash and deferred elements are

subject to malus and clawback

• 400% of salary (2x target) • At least 75% based on Financial

Performance, e.g., growth in DBVS,

profit, comprehensive income,

combined ratio, investment return,

simple RoE or any other financial KPI

• No more than 25% based on

strategic/personal objectives

Long Term

Incentives (LTI)

• Normally awarded annually

as nil-cost options or

conditional awards

• Vesting after three years with

a two-year holding period

• Dividend equivalent accrues

in cash or shares

• All awards are subject to

malus and clawback

• Maximum 350% of salary • Performance measures that reflect

the long-term strategy of the

business at the time of grant

• May include TSR, growth in DBVS,

Company profitability or any other

relevant financial or strategic

measure

Remuneration Policy Summary

The following table summarises Lancashire’s Remuneration Policy which became binding on 26 April 2023 with 92.9% of votes cast in favour.

The full Policy can be reviewed in the 2022 Annual Report which can be found in the Results, Reports & Presentations section on the Group’s website,

www.lancashiregroup.com.

105Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

Component Operation/Key Features

Shareholding

requirements

• Executive Directors are expected to maintain an interest equivalent in value to no less than two times salary

• To be achieved within five years of appointment, with 50% of the shares (net of tax) from vesting RSS to be retained

until the required level is achieved

• Requirement to retain minimum shareholding level for two years post termination

Chair and

Non-Executive

Director fees

• Chair receives a single fee for all responsibilities which is reviewed periodically by the Committee and Group CEO

• Non-Executive Directors receive a single fee for all responsibilities with the option to pay supplemental fees where

additional responsibilities are undertaken

• Any reasonable business expenses can be reimbursed

Committee

discretion

• The Committee has discretion within the Policy over a number of areas of bonus and LTI operation including, but

not limited to, participants, award timing, award size and vesting proportion, change of control arrangements, leaver

treatment, special circumstances including rights issues, corporate restructuring, special dividends and adjustments

to performance metrics, outcomes and deferral

• Any use of exceptional discretion to override formulaic outcomes would, where relevant, be explained in the Annual

Report on Remuneration, as appropriate

Approach to

recruitment

• Remuneration packages for new Executive Directors would be set in accordance with the terms of the Company’s

prevailing approved Remuneration Policy at the time of appointment, taking into account the skills and experience

of the individual

• The Committee may offer to compensate a new Executive Director for deferred or incentive pay deemed forfeit on

leaving a previous employer ensuring, where possible, that value, timing and performance requirements are consistent

with the forfeit awards

• The Committee may also agree that the Company should meet appropriate relocation and expatriate expenses

Service contracts

and loss of office

payments

• Notice periods for Executive Directors will normally be limited to six months and will not exceed 12 months

• Base salary and benefits will continue for the notice period, in the event that a proportion of the notice period

is not worked, the Executive Director would have no contractual right to bonus for this proportion

• Depending on the leaver classification, an Executive Director may be eligible for certain payments or benefits to

continue after cessation of employment

Leaver

arrangements

• If an Executive Director leaves on agreed terms, there may be payments after cessation of employment and, subject

to performance, the Committee has discretion to approve a bonus payment for the portion of the year worked with

or without a deferral requirement. The Committee also has discretion to treat unvested RSS awards in line with the

Good Leaver provisions contained within the plan rules

• If an Executive Director resigns or is summarily dismissed, all payments will cease on the last day of employment

Non-Executive

Director terms

of appointment

• Non-Executive Directors are appointed subject to re-election at the AGM and are terminable by either party on

six months’ notice

• Non-Executive Directors typically serve for up to six years, but can be invited to serve for an additional period

Legacy

arrangements

• Authority is given to the Company to honour commitments paid, promised to be paid or awarded prior to

commencement of this Policy, either under a previous Policy or made prior to appointment as a Director

Unexpired terms

• The Executive Directors are employed under service contracts with no fixed duration

• Non-Executive Directors have letters of appointment rather than service contracts

Remuneration Policy Summary continued

Directors’ Remuneration Report continued

106 Lancashire Holdings Limited | Annual Report & Accounts 2023

Remuneration at a glance

Remuneration in the Group

2023 Total single figure remuneration

2023 RSS awards granted

On 20 February 2023, RSS nil cost option awards were granted to the Group CEO and Group CFO. Details are set out below.

Director

Basis of award

% Salary Date of grant

Number of

options granted

Alex Maloney 300% 20-Feb-23 373,899

Natalie Kershaw 275% 20-Feb-23 235,523

:

2022 15:1

.m

2022 $82.6m

Group CEO pay ratio to

the median colleagues

Total spend

on pay

2023 (£’000) 2022 (£’000) 2023 (£’000) 2022 (£’000)

Salary 764 728 525 453

Benefits 9 8 8 7

Pension 76 73 53 45

Bonus paid in cash 1,503 363 1,034 229

Bonus deferred in shares 751 121 517 77

Long-term Incentive Plan (LTIP) 606 335 310 171

Total 3,709 1,628 2,447 983

Alex Maloney

CEO

Natalie Kershaw

CFO

809

819

2,860

849

505

477

586

1,861

107Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

Single figure of remuneration

The following table presents the Executive Directors’ emoluments in GBP in respect of the years ended 31 December 2023 and 31 December 2022

for time served as an Executive Director.

Executive Director

Salary

£’000

Pension

£’000

Taxable

benefits

£’000

Total Fixed

pay

£’000

Annual

bonus

£’000

Long-term

incentives

(RSS)

2,3

£’000

Total

Variable

pay £’000

Total

‘000

Alex Maloney, Group CEO 2023 764 76 9 849 2,254 606 2,860 3,709

2022 728 73 8 809 484 335 819 1,628

Natalie Kershaw, Group CFO 2023 525 53 8 586 1,551 310 1,861 2,447

2022 453 45 7 505 306 171 477 983

1. The final bonus earned by Executive Directors will be 98.4% of the maximum for the Group CEO, 98.5% of the maximum for the Group CFO. For full details of Executive Directors’

bonuses and the associated performance delivered, see pages 110 and 111. One third of the serving Executive Directors’ annual bonus is deferred into RSS awards without

performance conditions, vesting at 33.3% per year over a three-year period.

2. For 2023, the long-term incentive values are based on the 2021 Performance RSS awards which vested at 28.3% and are based on a three-year performance period that ended

on 31 December 2023. The values above are based on the average share price for the final quarter of 2023, being £6.0637, and includes the value of dividend equivalents accrued

up to 31 December 2023.

3. For 2022, the long-term incentive values are based on the 2020 RSS awards which vested at 19.8%, and have been restated using the share price as at the date of vesting

(10 February 2023) which was £6.145. The figures reflect the final number of shares that vested on 10 February 2023.

4. The benefits value shown reflects taxable benefits provided (Private Medical, Critical Illness, Dental and Gym reimbursement).

The following charts set out the above disclosed 2023 total remuneration received by serving Executive Directors as a percentage of their total

2023 remuneration.

Alex Maloney Natalie Kershaw

Fixed Pay:

22.9%

Annual Bonus:

60.8%

LTI awards (RSS):

16.3%

Fixed Pay:

23.9%

Annual Bonus:

63.4%

LTI awards (RSS):

12.7%

Annual Report on Remuneration

This Annual Report on Remuneration together with the Chair’s statement, as detailed on pages 101 to 104 and 108 to 117, will be subject

to an advisory vote at the 2024 AGM. The following sections in respect of Directors’ emoluments have been audited by KPMG LLP:

• Single figure of remuneration

• Non-Executive Director fees

• Annual bonus payments in respect of 2023 performance

• Long-term share awards with performance periods ending in the year – 2021 RSS awards

• Scheme interests awarded during the year

• Directors’ shareholdings and share interests.

Directors’ Remuneration Report continued

108 Lancashire Holdings Limited | Annual Report & Accounts 2023

Non-Executive Director fees

The following table presents the Non-Executive Directors’ fees in respect of the years ended 31 December 2023 and 31 December 2022 for time

served as a Non-Executive Director.

Current Non-Executive Directors Fee $’000

Other $’000 Total $’000

Peter Clarke 2023 350 – 350

2022 350 – 350

Michael Dawson 2023 175 – 175

2022 175 – 175

Simon Fraser

2023 56 50 106

2022 175 95 270

Jack Gressier

2023 175 – 175

2022 75 – 75

Robert Lusardi 2023 175 – 175

2022 175 – 175

Irene McDermott Brown 2023 175 – 175

2022 175 – 175

Sally Williams

2023 175 67 242

2022 175 39 214

Bryan Joseph

2023 119 41 161

2022 – – –

Philip Broadley

2023 26 – 26

2022 – – –

1. Simon Fraser stepped down from the Board on 26 April 2023 and from his role on the LSL Board on 18 May 2023, his fees represent his 2023 tenure.

2. Jack Gressier was appointed to the Board on 26 July 2022 and his fees represent his time as a Director.

3. Sally Williams was appointed to the LUK Board on 10 May 2022 and fees for LUK in 2022 represent her time as a Director in 2022.

4. Bryan Joseph was appointed to the Board on 26 April 2023 and the LSL Board on 1 August 2023. His 2023 fees represent his time as a Director.

5. Philip Broadley was appointed to the Board on 8 November 2023 and his fees represent his time as a Director.

6. LSL and LUK fees are paid in GBP at the average exchange rate for the month of payment.

Annual bonus payments in respect of 2023 performance

As detailed in the Remuneration Policy, each Executive Director participates in the annual bonus plan, under which performance is measured over

a single financial year.

Bonus targets were set at the beginning of 2023 and based on a clear split between Company financial performance and personal performance

on a 75:25 basis. The target value of bonus was 150% of salary for the Group CEO and Group CFO respectively, and the maximum payable was

two times the target value.

Financial performance

75% of the 2023 bonus was based on Company performance conditions and the extent to which these were achieved is as follows:

Performance measure

Financial performance

weighting (of total bonus) % Threshold % Target % Max %

Actual

performance %

RoE 75 RFR +5%

(10.2%)

RFR +8%

(13.2%)

RFR +14%

(19.2%)

RFR +14.8%

(20.0%)

Payout % of Target 25% 100% 200% 200%

2023 is the first year in which financial performance has been measured using simple RoE, it is also the year in which the IFRS 17 and IFRS 9 accounting

standards were implemented. The RoE outturn was calculated using adjusted profit after tax divided by average shareholders’ equity. Profit in the RoE

calculation was adjusted for elements considered to be outside management’s control, most significantly the change in unrealised investment gains

and losses, and on the impact of interest rate movements on the discounting of IFRS 17 loss reserves. Average equity was calculated as the average

of the opening and closing shareholders’ equity position, excluding the unrealised investment gains and losses and discounting impacts noted above.

The RFR was calculated with reference to the average 13 week UST rates for the year.

109Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

Personal performance

25% of the 2023 bonus was based on performance against clearly defined personal objectives set at the start of the year.

The table below sets out a summary of the 2023 personal objectives for each Executive Director and some of the factors the Board has considered

to determine whether the objectives have been met.

Executive

Director Personal strategic objectives Factors relevant to the Board’s determination for the 2023 performance year

Alex Maloney

Business management and

leadership, including

transformation and values

Strategy of diversification executed and delivering strong financial returns.

Significant and tangible progress delivered on business transformation. Group COO

appointed to directly oversee the delivery of further efficiencies.

The Lloyd’s relationship continues to develop positively and efficiently.

Alex is highly regarded across all stakeholders as demonstrated in shareholder feedback,

counterparty interactions, and the strongly positive Employee Opinion Survey (EOS) results.

Leads by example in supporting and promoting the company values.

Implementation of the

long-term business growth

and development strategy

Ongoing execution of the diversification strategy is evident in the financial results.

Lancashire continues to attract leading talent to support the strategy and has built

the framework for a successful and measured expansion into the U.S. market.

Effective diversification and thoughtful capital allocation now enable capital returns

to shareholders while maintaining headroom and facilitating growth.

Significant focus and progress achieved on climate-related considerations in underwriting

and investments, and in risk and reporting.

ESG, with a focus on People

and Culture and continued

embedding and management

of environmental considerations

Diversity continues to develop in terms of gender and ethnicity data tracking, and the

EOS results demonstrate strong support and inclusion levels across Lancashire. Talent

and succession planning is developing, positively supported by the new Group CHRO.

Governance continues to be strong at Lancashire, and the appointment of a new Chair

to work with management and the Board has been a successful demonstration of this.

Natalie Kershaw

Business Management

and Leadership, including

transformation and values

Strong performance delivered across all aspects of business management and leadership.

IFRS 17 was implemented effectively and efficiently on time and below budget.

Strong cost management demonstrated and delivery on major aspects of transformation.

Effective team leadership with strong inter and intra departmental relationships

demonstrated by strong EOS scores.

Natalie is one of the strongest role models for Lancashire values with a commercial

focus and ability to challenge and cut through complexity within the business.

Strategic Financial

Management supporting

growth and transformation

Robust and prudent capital management has facilitated business growth and has

directly contributed to the ability to deliver shareholder returns via special dividend.

Significantly more streamlined business planning that will continue to evolve and deliver.

Strong hiring decisions have added to the resilience and skills base of the finance function,

creating a platform that will continue to support business growth.

ESG, focusing on maintaining

environmental considerations

in investment portfolio

management, and continued

strong financial governance

Investment performance continues to generate strong returns despite challenging market

conditions, making a material contribution to overall business performance in 2023.

The investment portfolio continues to perform strongly, while maintaining a responsible

approach to carbon intensity, via prudent management and oversight.

Natalie assumed the leadership role over the reward function during the transition to the

new Group CHRO. The approach to Group reward is now more structured and planned.

Natalie’s approach to financial governance and oversight is exemplary, resulting in high

quality reporting, facilitating strong business performance.

The personal targets were tailored to each of the Executive Directors, according to their respective roles and areas of personal development.

During the 2023 annual performance reviews of each Executive Director, a performance rating, determined following an evaluation process and

discussion and agreement of the outcomes with the Chair and members of the Board, was assigned to determine the level of bonus earned for delivery

versus personal strategic objectives. The bonus earned by the Executive Directors in relation to 2023 personal strategic objectives assessment is, for

the Group CEO, 70% of salary (being 93% of the maximum available for this element) and, for the Group CFO, 71% of salary (being 94% of the

maximum available for this element).

Directors’ Remuneration Report continued

110 Lancashire Holdings Limited | Annual Report & Accounts 2023

A table of performance measures and total 2023 bonus achievement is set out below:

Executive Director

Financial performance

(max % of total bonus)

Personal performance

(max % of total bonus)

Bonus % of maximum

awarded

Total bonus value

£’000

Value of bonus paid in

cash (2/3 of total

bonus) £’000

Value of bonus

deferred into RSS

awards (1/3 of total

bonus)

£’000

Alex Maloney

75% (of 75%) 23% (of 25%) 98% 2,254 1,503 751

Natalie Kershaw

75% (of 75%) 24% (of 25%) 99% 1,551 1,034 517

1. In line with the 2023 Remuneration Policy, one-third of total bonus award will be deferred into RSS awards with one-third of the award vesting annually over a three-year

period with the first third becoming exercisable in February or March 2025, subject to the Company not being in a closed period. Vesting is subject to continued employment.

Long-term share awards with performance periods ending in the year – 2021 RSS awards

The 2021 RSS awards were based on a three-year performance period ending on 31 December 2023 and vest following the determination of financial

results by the Board. The tables below set out the achievement against the performance conditions attached to the award and the resulting vesting.

Absolute compound annual growth in TSR

(relevant to 15% of the 2021 RSS awards)

Annual Change in DBVS (within the three year performance period)

(relevant to 85% of the 2021 RSS awards)

Performance level Performance required (%) % vesting Performance required (%) % vesting

Below threshold Below 8 – Below 6 0

Threshold 8 25 6 25

Stretch or above 12 or above 100 13 or above 100

Actual achieved (3.5) – see note

33.3

Note 1. 2023 2022 2021

Change in DBVS 24.7% (6.7%) (5.8)%

Vesting % of one third by performance year 100% 0.0% 0.0%

2021 RSS Awards 33.3% 0.0% 0.0%

The table above shows the growth in DBVS for the performance period. The detailed vesting for each Executive Director is shown below.

Executive Director Number of shares at grant Number of shares to lapse Number of shares to vest

Dividend accrual on vested

shares value

Value of shares including

dividend accrual

Alex Maloney 313,321 224,555 88,766 67,464 605,715

Natalie Kershaw 160,356 114,926 45,430 34,528 310,002

1. Dividend equivalents accrue on awards at the record date of a dividend payment and upon exercise the cash value of the accrued dividend equivalent is paid to the employee

on the number of vested awards net of tax required.

2. The value of vested shares is based on the 2021 RSS awards which vest at 28.3% and are based on a three-year performance period that ended on 31 December 2023.

The average share price rate for the final quarter of 2023 (£6.0637) is used for this calculation. No value is attributable to share price appreciation.

There is a two-year post-vesting holding requirement for the 2021 RSS awards for Executive Directors.

Scheme interests awarded during the year

The table below sets out the performance RSS awards that were granted to the serving Executive Directors as nil-cost options on 20 February 2023.

Executive Director % Salary Grant date

Number of

awards granted

during the year

Face value of awards granted

during the year

% vesting

at threshold

performance

Alex Maloney 300 20-Feb-23 373,899 2,292,001 25

Natalie Kershaw 275 20-Feb-23 235,523 1,443,756 25

1. The awards were based on the five-day average closing share price following announcement of the 2022 results, being £6.13 and the awards were granted as nil-cost options.

2. These awards are due to vest subject to performance conditions being met at the end of the performance period ending 31 December 2025 and becoming exercisable in the

first open period following the release of the Company’s 2025 year-end results.

Absolute compound annual growth in

TSR targets for RSS (15% weighting)

As at 2020 2021 2022 2023

100% 12% 12% 12% 12%

25% 8% 8% 8% 8%

Nil < 8% <8% <8% <8%

See above for the vesting methodology to be applied for the RSS awards.

Annual internal rate of return of the Change in DBVS

targets for RSS (85% weighting)

As at 2020 2021 2022 2023

100% 13% 13% 13% 13%

25% 6% 6% 6% 6%

Nil < 6% <6% <6% <6%

Performance conditions attached to 2023 RSS Awards

The table below sets out the deferred bonus RSS awards that were granted to the serving Executive Directors as nil-cost options on 20 February 2023.

Executive Director Award Type Grant date

Number of

awards granted

during the year

Face value of awards granted

during the year

% vesting annually

(without specific

performance conditions)

Alex Maloney Deferred Bonus 20-Feb-23 19,753 121,086 33.3

Natalie Kershaw Deferred Bonus 20-Feb-23 12,474 76,466 33.3

111Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

Implementation of Remuneration

Policy for 2024

Base salary and fees

Executive Directors

Salaries effective from 1 January 2024 are set out below:

Group CEO – £840,000, a 10% increase

Group CFO – £551,250, a 5% increase

Salary uplifts for Group employees varied across the workforce skewed

towards the lowest paid cohort with an average of 7.2%, and an overall

average uplift for Group employees of 6.2% for 2024.

Non-Executive Directors

The Chairman’s and Non-Executive Directors’ fees are as follows

for 2024:

• The fee for the Board Chair will remain at $350,000 per annum.

• The Non-Executive Director fee will remain at $175,000 per annum.

Other fees

Sally Williams is a Non-Executive Director of LUK in which capacity

she will receive a fee of $70,000 per annum.

Bryan Joseph is a Non-Executive Director of LSL in which capacity

he will receive a fee of $100,000 per annum.

Annual bonus

For 2024, the Group CEO and the Group CFO will have a target bonus

of 150% of salary and, therefore, a maximum opportunity of 300% of

salary. This is within the approved policy limit and is in line with last

year’s opportunity and represents a maximum bonus opportunity

which is 100% of salary less than the set policy limit.

The financial and personal portions of the annual bonus will

remain unchanged with 75% on financial performance and 25%

on personal performance.

Financial performance (75%)

Financial performance for bonus purposes will be measured on the

basis of RoE (being profit divided by average equity).

Specific targets and ranges will be disclosed in full with the assessment

of financial performance in the 2024 Annual Report on Remuneration.

The Committee appreciates that this is a break from the historic practice

of disclosing targets prospectively but is of the view that, in the current

growth phase of the business, specific financial targets are commercially

sensitive and should be disclosed retrospectively.

Executive Director Personal performance

Alex Maloney

Business Management and Leadership; including oversight of change, talent and succession, relationship management,

and values

Growth Strategy; including opportunity identification, capital management oversight and engagement

ESG; with specific objectives related to environment, people and culture and governance

Natalie Kershaw

Business Management and Leadership, including values

Strategic Financial Management supporting growth

ESG, with a focus on maintaining environmental considerations in portfolio management, identifying and developing

talent and continued strong financial governance

Due to their close link to Business Strategy detail, personal objectives for both CEO and CFO are considered commercially sensitive at the present

time. Detailed objectives have been presented to and approved by the Committee and will be described in the 2024 Annual Report.

Personal performance (25%)

This element of the bonus plan is based upon the individual achievement of clearly articulated objectives created at the beginning of each year.

The table below sets out a broad summary of the 2024 personal objectives for each Executive Director.

Directors’ Remuneration Report continued

112 Lancashire Holdings Limited | Annual Report & Accounts 2023

Restricted Share Scheme

Award levels

2024 RSS award levels are as follows:

• Group CEO – RSS awards in respect of shares to the value of

£2,940,000 (being 350% of salary)

• Group CFO – RSS awards in respect of shares to the value of

£1,515,938 (being 275% of salary)

The number of shares subject to the awards shall be determined based

on the closing average share price for a period of five trading days

immediately prior to the date of the award.

Weighting

For 2024, the weighting is 85% on annual Change in DBVS and 15%

on absolute compound annual growth in TSR.

Target ranges

The annual Change in DBVS target range for 2024 awards is:

• threshold – 6%; and

• maximum – 13%.

Within the three-year performance period each of the separate financial

years will be treated as a separate element, each one contributing

one-third to the overall outcome of the vesting of this element of the

RSS award. In each year, performance will be measured against the

target range to determine the ultimate level of vesting in respect of

one-third of the RSS award. Vesting will only occur after completion

of the full three-year performance period, and continued employment

of the Executive Director at the time of vesting.

The relevant elements of the RSS award will not vest if annual Change in

DBVS is below threshold, 25% of the relevant element of the RSS award

will vest at threshold, and 100% of the relevant element of the RSS

award will vest at maximum. Performance between threshold and

maximum is determined on a straight-line basis.

The TSR target range for 2024 awards is:

• threshold – 8% compound annual growth; and

• maximum – 12% compound annual growth.

Absolute TSR will be measured for compound annual growth over

the full three-year performance period rather than looking at each

year separately.

None of the relevant elements of the award will vest if compound

annual growth in TSR is below threshold, 25% of the award will vest at

threshold, and 100% of the award will vest at maximum. Performance

between threshold and maximum is determined on a straight-line basis.

Overriding downwards discretion

If any year produces a return that the Committee believes is significantly

worse than competitors and reflects poor management decisions, the

Remuneration Committee will use its discretion to determine the extent

to which any relevant element of the RSS award shall vest fully (or to a

lesser extent) based on the performance over the full three-year period.

Post-vesting holding period

It is a requirement of RSS awards granted to Executive Directors that

they are expected to hold vested RSS awards (or the resultant net of

tax shares), which had a performance period of at least three years,

for a further period of not less than two years following vesting.

Post-employment holding requirements

In respect of RSS awards made after 1 January 2020, there is a

requirement on each Executive Director to retain 50% of the net of tax

shares resulting on exercise in order to hold an interest equivalent in value

of up to two times salary for a period of two years (or such other period

or amount as the Committee may in future determine) following the

date of termination of employment of the relevant Executive Director.

113Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

Directors’ shareholdings and share interests

Formal shareholding guidelines were first introduced in 2012 and have subsequently been modified. The guidelines require the Group CEO and Group

CFO to build and maintain a shareholding in the Company worth two times annual salary as set out in the Policy Report.

Details of the Directors’ interests in shares are shown in the table below.

Number of common shares and nil cost option share interests

Total as at

1 January 2023 As at 31 December 2023

As at Legally owned

Subject to

deferral under

the RSS

Subject to

performance

conditions under

the RSS

Unvested and not

subject to

performance

conditions under

the RSS

Vested but

unexercised

awards under

other

share-based

plans Total

Shareholding

guideline

achieved

Alex Maloney 1,964,157 810,899 46,766 1,102,298 N/A N/A 1,959,963 Yes

Natalie Kershaw 614,379 52,840 42,925 608,313 N/A 26,384 530,543 No

Peter Clarke 82,500 82,500 N/A N/A N/A N/A 82,500 N/A

Michael Dawson 20,000 20,000 N/A N/A N/A N/A 20,000 N/A

Jack Gressier – – N/A N/A N/A N/A – N/A

Robert Lusardi 48,000 48,000 N/A N/A N/A N/A 48,000 N/A

Irene McDermott Brown – 8,663 N/A N/A N/A N/A 8,663 N/A

Sally Williams 11,082 11,082 N/A N/A N/A N/A 11,082 N/A

Bryan Joseph – 4,076 N/A N/A N/A N/A 4,076 N/A

Philip Broadley – – N/A N/A N/A N/A – N/A

Share ownership interest equivalent is defined as wholly owned shares or the net of taxes value of RSS awards which have vested but are unexercised and the net of tax value

of deferred bonus and/or non-performance RSS awards. Shares include those owned by persons closely associated with the relevant Executive Director.

On 24 February 2023 Alex Maloney, Group CEO, exercised 89,105 RSS nil cost options with an exercise price of £5.99602. The total gain on exercise

of the awards was £534,275, of which shares to the value of £252,980 were sold to cover applicable taxes and fees, resulting in a net gain of £281,295.

Directors’ Remuneration Report continued

Fixed pay = 2024 Salary + Actual Value of 2023 Benefits + 2024 Pension Contribution.

On-target = Fixed Pay + Target Bonus (being half the Maximum Bonus Opportunity) + Target Value of 2024 RSS grant (assuming 50% vesting with

the face values of grant).

Maximum = Fixed Pay + Maximum Bonus Opportunity + Maximum Value of 2024 RSS grant (assuming 100% vesting with the face values of grant).

Maximum + 50% growth over performance period = Fixed Pay + Maximum Bonus Opportunity + Maximum Value of 2024 RSS grant + 50% share

price appreciation (assuming 100% vesting with the face values of grant).

The charts below show the potential total remuneration opportunities for the Executive Directors in 2024 at different levels of performance under

the Directors’ Remuneration Policy.

Maximum

On-target

Group CFO

Group CEO

Fixed payMaximum Maximum +50%

growth in shares

Maximum +50%

growth in shares

On-targetFixed pay

Total compensation (£m)

Fixed pay Annual bonus LTI awards (RSS) LTI awards (RSS) + 50% share price growth

100%

0.93

26%

34%

39% 32%

38%

44%

36%

33%

17%

4.54

40%

3.78

34%

2.20

37%

19%

7.86

46%

6.39

40%

3.66

15%

12%

100%

0.61

28% 16% 14%

114 Lancashire Holdings Limited | Annual Report & Accounts 2023

Performance graph and total remuneration history for Group CEO

The following graph shows the Company’s performance, measured by TSR, compared with the performance of the FTSE 250 Index. The Company’s

common shares commenced trading on the main market of the LSE on 16 March 2009 and the Company joined the FTSE 250 Index on 22 June 2009

and is currently a constituent of this.

This graph shows the value, by 31 December 2023, of £100 invested in LHL on 31 December 2013 compared with the value of £100 invested in the

FTSE 250 Index. The other points plotted are the values at intervening financial year ends.

The table below sets out the total single figure of remuneration for the Group CEOs over the last 10 years with the annual bonus paid as a percentage

of the maximum and the percentage of long-term share awards vesting in each year.

2014

2015 2016 2017 2018 2019 2020 2021 2022 2023

Total remuneration (£000s

) 6,088 1,453 2,511 2,758 1,517 1,067 2,398 3,193 2,033 1,628 3,709

Annual bonus (% of maximum) 80 73 72 76 17 19 80 60 19 22 98

LTI vesting (% of maximum) 61

50 75 67 22.5 – – 48.2 48.2 19.8 28.3

1. Richard Brindle was the Group CEO from 2005 until he retired from the Group and as a Director on 30 April 2014. Mr Brindle was afforded good leaver status and all RSS award

interests were vested upon his departure, using estimated TSR and RoE values (as then defined) at the time of his retirement. The amounts in the table above reflect all awards

which vested in 2014. Further particulars of the vesting were reported in the Group’s 2014 Annual Report and Accounts.

2. Alex Maloney was appointed Group CEO effective 1 May 2014, after the retirement of Mr Brindle. For the purposes of this table his numbers have been pro-rated to account

for only his time in office as CEO for 2014.

3. For the years 2014 – 2020 these figures were converted to GBP using the average exchange rate for the relevant year.

100

150

200

250

300

LRE LN Equity FTSE 250 Index

Source: Datastream (Thomson Reuters)

20232022202120202019201820172016201520142013

115Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

Group Chief Executive Pay Ratio

Method 25

percentile Total Pay Ratio Median Total Pay Ratio 75

percentile Total Pay Ratio

2023 A 54:1 31:1 18:1

2022 A 24:1 15:1 8:1

In 2022 the number of UK based employees of Group exceeded 250 for the first time and CEO pay ratio was reported. Financial performance in 2023

is significantly stronger than 2022 and a much greater proportion of CEO pay is directly linked to business financial performance versus the broader

workforce. This is the driver for the change to CEO pay ratio from 2022 to 2023. The table above sets out how the single total figure of remuneration

(STFR) for the Group Chief Executive compares to the STFR of the UK employees at the 25

percentile, median and 75

percentile in both 2023 and

2022. The UK employees included are those employed on 31 December and remuneration figures are determined with reference to the financial year

ending on 31 December for the relevant year. The value of each employee’s total pay and benefits was calculated using the single figure methodology

consistent with the CEO. No elements of pay have been omitted. Where required, remuneration was approximately adjusted to be full-time and

full-year equivalent basis based on the employee’s average full-time equivalent hours for the year and the proportion of the year they were employed.

The table below sets out the split between total remuneration (fixed and variable pay and benefits) and the salary component of that total for the

relevant 2023 employees. Lancashire has chosen to use methodology A (as defined in the applicable regulations) to calculate the figures in the tables

above and below because it is the most statistically robust methodology.

percentile pay ratio Median pay ratio 75

percentile pay ratio

Total Remuneration (£) Base Salary (£) Total Remuneration (£) Base Salary (£) Total Remuneration (£) Base Salary (£)

2023 69,047 45,000 118,991 85,900 210,776 127,100

54:1 17:1 31:1 9:1 18:1 6:1

Percentage change in Directors’ remuneration

The following table sets out the percentage change in the aggregate value of salary, benefits and bonus for the Directors from the preceding year

and the average percentage change in respect of the employees of the Group taken as a whole.

2023 2022 2021 2020

As at

Base salary/

Fees Benefits

Bonus

Base salary/

Fees Benefits

Bonus

Base salary/

Fees Benefits

Bonus

Base salary/

Fees Benefits

Bonus

Executive Directors

Alex Maloney 5.0 5.0 365.5 4.0 4.3 23.1 (0.2) (0.5) (223.1) 3.1 – (27.9)

Natalie Kershaw

15.9 16.0 407.2 16.0 13.4 16.0 16.2 11.1 (197.0) N/A N/A N/A

Non-Executive Directors

Peter Clarke – – N/A – – N/A – – N/A – – N/A

Philip Broadley N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Michael Dawson – – N/A – – N/A – – N/A – – N/A

Simon Fraser

(60.7) – N/A 5.9 – N/A – – N/A – – N/A

Jack Gressier

134.0 – N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Bryan Joseph N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Robert Lusardi – – N/A – – N/A – – N/A – – N/A

Irene McDermott Brown – – N/A – – N/A N/A N/A N/A – – N/A

Sally Williams 13.5 – N/A 34.1 – N/A – – N/A – – N/A

Employees of the parent

company

N/A N/A N/A N/A N/A N/A N/A N/A N/A – – N/A

Employees of the Group 10.4 14.1 168.5 7.5 7.9 105.0 15.2 27.5 (57.9) 8.7 17.5 4.3

1. The change in remuneration for employees of the Group reported in the 2020 and 2021 annual reports and shown in the table above include the effect of headcount changes.

The figures presented for 2022 and 2023 represent employees in post on 31 December of the reported and prior year to provide a like-for-like comparison to Directors.

2. Benefits include pension and all taxable benefits as reported on page 108 in the Single Figure on Remuneration table.

3. The change to Natalie Kershaw’s salary in 2022 reflects salary paid including the mid-year adjustment previously disclosed. The 2023 change further reflects the effect of amending

salary at the mid-year point in 2022 and resulting pro-rata to that salary. There was no change in her CFO salary from 2020 to 2021. The apparent increase has arisen due to her

2020 salary shown being pro-rata following her appointment as Group CFO on 1 March 2020.

4. Simon Fraser stepped down from the Board on 26 April 2023, and from his role on the LSL Board on 18 May 2023 and his fees represent his 2023 tenure.

5. Jack Gressier was appointed to the Board on 26 July 2022 and his 2022 fees represent his time as a Director.

6. As the parent company does not have any employees, it is not possible to provide a percentage change in their pay and therefore the comparison is to the Group as a whole.

Directors’ Remuneration Report continued

116 Lancashire Holdings Limited | Annual Report & Accounts 2023

Relative importance of the spend on pay

The following table sets out the percentage change in dividends and overall spend on pay in the year ended 31 December 2023 compared with the

year ended 31 December 2022.

2023

2022

Percentage change

Employee remuneration costs 135.1 82.6 63.6

Dividends 155.3 36.2 329.0

Committee members, attendees and advice

For Remuneration Committee membership and attendance at meetings through 2023, please refer to page 99 of this Annual Report and Accounts.

The Remuneration Committee’s responsibilities are contained in its Terms of Reference, a copy of which is available on the Company’s website.

These responsibilities include determining the framework for the remuneration, including pension arrangements, for all Executive Directors, the

Chair and senior executives. The Committee is also responsible for approving employment contracts for senior executives.

Remuneration Committee adviser

The Remuneration Committee is advised by the Executive Compensation practice at PwC since their appointment in July 2023. PwC replaced Alvarez

& Marsal (‘A&M’), who had been in place since 2020. Advisers hold discussions with the Remuneration Committee Chair regularly on Committee

processes and topics which are of particular relevance to the Company.

The primary role of the Committee adviser is to provide independent and objective advice and support to the Committee’s Chair and members.

The Committee is satisfied that the advice that it receives is objective and independent, noting that both PwC and A&M are signatories to the

Remuneration Consultants Group (‘RCG’) Code of Conduct which sets out guidelines for managing conflicts of interest, and have confirmed

to the Committee their compliance with the RCG Code.

The total fees paid to PwC in respect of its services to the Committee for the year ended 31 December 2023 were $31,606. Additionally fees totalling

$52,898 were paid to A&M in respect of services provided to the Committee during 2023 prior to the appointment of PwC. Fees are predominantly

charged on both agreed and ‘time spent’ bases.

Engagement with shareholders

Details of votes cast for and against the resolution to approve last year’s Remuneration Report are shown below along with the votes to approve

the 2023 Remuneration Policy; any matters discussed with shareholders during the year, are provided in the Annual Statement for 2023 starting

on page 101. Details on the 2023 AGM vote are also outlined in the statement.

Vote to approve 2022 Annual Report

on Remuneration (at the 2023 AGM)

Vote to approve 2023-2025

Remuneration Policy (at the 2023 AGM)

Total number of votes % of votes cast Total number of votes % of votes cast

For 165,996,639 92.2 166,150,636 92.9

Against 14,137,270 7.8 12,769,776 7.1

Total 180,133,909 100.0 178,920,412 100.0

Abstentions 125 1,213,622

Please see page 101 for the Chair’s discussion of the 2023 AGM Remuneration vote outcomes.

Approved by the Board of Directors and signed on behalf of the Board.

Irene McDermott Brown

Chair of the Remuneration Committee

5 March 2024

117Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

Overview of the Group

LHL is a Bermuda incorporated company (Registered Company

No. 37415) with operating subsidiaries in Bermuda, London, the U.S.,

and Australia and two syndicates at Lloyd’s.

The Company’s common shares were admitted to trading on AIM

in December 2005 and were subsequently moved up to the Official

List and to trading on the main market of the LSE on 16 March 2009.

The shares have been included in the FTSE 250 Index since 22 June 2009

and have a premium listing on the LSE.

Principal activities

The Company’s principal activity, through its wholly-owned subsidiaries,

is the provision of global specialty, catastrophe and casualty insurance

and reinsurance products. An analysis of the Group’s business

performance can be found in the underwriting and business review

starting on page 14.

Dividends

During the year ended 31 December 2023, the following dividends

were declared:

• a final dividend of $0.10 per common share was declared on

9 February 2023 subject to shareholder approval, which was received

at the 2023 AGM. The final dividend was paid on 2 June 2023

in pounds sterling at the pound/U.S. dollar exchange rate

of 1.26135 or £0.0793 per common share;

• an interim dividend of $0.05 per common share was declared

on 9 August 2023 and paid on 15 September 2023 in pounds

sterling at the pound/U.S. dollar exchange rate of 1.2719

or £0.0393 per common share; and

• a special dividend of $0.50 per common share was declared

on 8 November 2023 and paid on 15 December 2023 in pounds

sterling at the pound/U.S. dollar exchange rate of 1.2429

or £0.4023 per common share.

Dividend policy

The Group intends to maintain a strong balance sheet at all times,

while generating an attractive risk-adjusted total return for shareholders.

We actively manage capital to achieve those aims. Capital management

is expected to include the payment of a sustainable annual (interim

and final) ordinary dividend, supplemented by special dividends

from time-to-time. Dividends will be linked to past performance

and future prospects.

Under most scenarios, the annual ordinary dividend is not expected

to reduce from one year to the next. Special dividends are expected

to vary substantially in size and in timing. The Board may cancel

the payment of any dividend between declaration and payment

for purposes of compliance with regulatory requirements or for

exceptional business reasons.

Current Directors

• Peter Clarke (Non-Executive Chair)

• Alex Maloney (Group Chief Executive Officer)

• Natalie Kershaw (Group Chief Financial Officer)

• Philip Broadley (Non-Executive Director and Chair designate)

• Michael Dawson (Non-Executive Director)

• Jack Gressier (Non-Executive Director)

• Bryan Joseph (Non-Executive Director)

• Robert Lusardi (Senior Independent Non-Executive Director)

• Irene McDermott Brown (Non-Executive Director)

• Sally Williams (Non-Executive Director)

Directors’ interests

The Directors’ beneficial interests in the Company’s common shares

as at 31 December 2023 and 2022, including interests held by family

members, were as follows:

Directors

Common shares held as

at 31 December 2023

Common shares held as

at 31 December 2022

Philip Broadley

– N/A

Peter Clarke 82,500 82,500

Michael Dawson 20,000 20,000

Simon Fraser

N/A 3,000

Jack Gressier – –

Bryan Joseph

4,076 N/A

Natalie Kershaw

52,840 77,922

Robert Lusardi 48,000 48,000

Alex Maloney

810,899 910,899

Irene McDermott Brown

8,663 –

Sally Williams 11,082 11,082

1. Philip Broadley was appointed to the Board with effect from 8 November 2023.

2. Simon Fraser ceased being a Director on 26 April 2023. Mr Fraser held 3,000

shares in the Company as at 26 April 2023.

3. Bryan Joseph was appointed to the Board with effect from 26 April 2023. Mr Joseph

conducted the following transactions in the Company’s shares during 2023:

• 2 June 2023 – purchase of 2,200 shares at a price of £6.24 per share costing

£13,725.80.

• 29 June 2023 – purchase of 1,850 shares at a price of £5.78 per share costing

£10,696.70.

• 22 September 2023 – purchase of 26 shares at a price of £6.01 per share costing

£159.26.

4. The 77,922 shares held at 31 December 2022 included 25,082 shares held by her

spouse, Adam Burton. Natalie Kershaw conducted the following transactions in the

Company’s shares during 2023:

• 17 May 2023 – sale of 25,082 shares at a price of £6.28 per share totalling

£157,434.08 by Adam Burton.

5. Includes 181,819 shares owned by his spouse, Amanda Maloney. Alex Maloney

conducted the following transactions in the Company’s shares during 2023:

• 24 February 2023 – exercise of 89,105 RSS awards and related sale of 89,105

shares at a price of £5.99 per share realising £534,275.36.

• 24 February 2023 – sale of 100,000 shares at a price of £6.02 per share realising

£601,842.20.

6. Irene McDermott Brown conducted the following transactions in the Company’s

shares during 2023:

• 6 March 2023 – purchase of 5,054 shares at a price of £5.93 per share costing

£29,983.87.

• 22 March 2023 – purchase of 3,609 shares at a price of £5.58 per share costing

£19,984.73.

Directors’ Report

118 Lancashire Holdings Limited | Annual Report & Accounts 2023

Transactions in own shares

Pursuant to the authority granted at the AGM held on 26 April 2023, the

Company announced on 22 November 2023 that it would commence a

share repurchase programme to expire on 29 February 2024. No shares

were repurchased under the programme.

Further details of the share repurchase authority and programme are set

out on page 188. The authority to repurchase shares is subject to renewal

at the 2024 AGM for an amount of up to 10% of the then issued

common share capital.

Directors’ remuneration

The Directors have decided to prepare voluntarily a Directors’

Remuneration Report in accordance with Schedule 8 to The Large

and Medium-sized Companies and Groups (Accounts and Reports)

Regulations 2008 made under the Companies Act 2006, as if those

requirements applied to the Company. Details of the Directors’

remuneration are set out in the Directors’ Remuneration Report

starting on page 101.

Substantial shareholders

As at 31 January 2024, the Company was aware of the following

interests of 5% or more in the Company’s issued share capital:

Shareholder No. of Shares % of issued ISC

Baillie Gifford 19,140,928 7.84

Setanta Asset Management 16,884,586 6.92

GLG Partners 14,983,203 6.14

Polar Capital 13,556,792 5.56

BlackRock 12,290,322 5.04

As at 5 March 2024, no further material changes have been notified to

the Company.

Corporate governance – compliance statement

The Company’s compliance with the Code is detailed in the

Sustainability and Governance reporting sections of this Annual Report

and Accounts on pages 40 to 121 and more particularly in Peter Clarke’s

introduction to those sections on page 41.

The Board considers, and the Company confirms, in accordance with

the principle of ‘comply or explain’, that the Company has applied

the principles and complied with the provisions and guidance set

out in the Code throughout the year ended 31 December 2023.

Health and safety

The Group considers the health and safety of its employees to be

a management responsibility equal to that of any other function.

The Group operates in compliance with health and safety legislative

requirements in Bermuda and the UK.

Greenhouse gas emissions and

TCFD reporting

The Group’s greenhouse gas emissions are detailed on page 69. The

Group’s TCFD Report is included in this Annual Report and Accounts

starting on page 49.

Employees

The Group is an equal opportunities employer and does not tolerate

discrimination of any kind in any area of employment or corporate life.

The Group believes that education and training for employees is a

continuous process and employees are encouraged to discuss training

needs with their managers. The Group’s health and safety, equal

opportunities, training and other employment policies are available

to all employees in the staff handbook which is located on the Group’s

Employee HR portal.

Creditor payment policy

The Group aims to pay all creditors promptly and in accordance with

contractual and legal obligations.

Financial instruments and risk exposures

Information regarding the Group’s risk exposures is included in the ERM

report starting on page 23 and in the risk disclosures section starting

on page 148 of the consolidated financial statements. The Group’s

use of derivative financial instruments can be found on page 158.

Accounting standards

The consolidated financial statements of the Group have been prepared

on a going concern basis in compliance with the IFRS accounting

standards, as adopted by the E.U.

Annual General Meeting

The Notice of the 2024 AGM, to be held on 1 May 2024 at the

Company’s head office, Power House, 7 Par-la-Ville Road, Hamilton

HM 11, Bermuda, is contained in a separate circular to shareholders

which is made available to shareholders at the same time as this

Annual Report and Accounts. The Notice of the AGM is also available

on the Company’s website.

Electronic and website communications

Provisions of the Bermuda Companies Act 1981 enable companies

to communicate with shareholders by electronic and/or website

communications. The Company will notify shareholders (either in

writing or by other permitted means) when a relevant document or

other information is placed on the website and a shareholder may

request a hard copy version of the document or information.

119Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

Going concern and viability statement

The performance review section starting on page 12 sets out details

of the Group’s financial performance, capital management, business

environment and outlook. In addition, further discussion of the principal

risks and material uncertainties affecting the Group can be found on

pages 23 to 31. Starting on page 148 the risk disclosures section of the

consolidated financial statements sets out the principal risks to which

the Group is exposed, including insurance, climate change, market,

liquidity, credit, operational and strategic, together with the Group’s

policies for monitoring, managing and mitigating its exposures to these

risks. Further details of the Group’s scenario testing and resilience to

climate change risk can be found in the TCFD Report starting on page 49.

The Board considers annually and on a rolling basis, a strategic plan for

the business which the Company progressively implements. The strategic

plan approved by the Board at its meeting on 9 August 2023 covered the

period to the year 2030. The Board also approved at its meeting on

8 November 2023 a management proposal for a more detailed

three-year business forecast covering 2024 to 2026, which (as in 2023

and prior years) will be revised and reviewed by the Board at each of its

quarterly meetings throughout 2024. The three year business plan period

aligns to the predominantly short-tail nature of the Group’s liabilities

and the agility in the business model, allowing the Group to adapt

capital and solvency quickly in response to market cycles, events and

opportunities. This is consistent with the outlook period in the Group’s

ORSA report. The Board receives quarterly reports from the Group CRO

and sets, approves and monitors risk tolerances for the business.

During 2023, the Board carried out a robust assessment of the principal

risks facing the Group, including those that would threaten its business

model, future performance, solvency or liquidity. As part of this

assessment the business plan was stressed for a number of severe but

plausible scenarios and the impact on capital evaluated. As we note in

the Audit Committee report on page 83 and throughout this Annual

Report and Accounts, the Board continues to monitor Group reserves

for a number of loss events including the conflict in Ukraine and various

natural catastrophe and specialty market loss events. The Board also

continued to monitor the conditions within the global investment

markets. The Audit Committee also considered a formal and thorough

‘going concern’ analysis from management at both its July 2023 and

March 2024 meetings (for further details see page 84 in the Audit

Committee report). The Directors believe that the Group is well placed

to manage its business risks successfully, having considered the current

economic outlook. Accordingly, the Board has a reasonable expectation

that, taking into account the Group’s current position, and subject to the

principal risks faced by the business, the Group will be able to continue in

operation and to meet its liabilities as they fall due for the period up to

31 December 2026, being the period considered under the Group’s

current three-year business plan.

Going Concern

Based on the going concern assessment performed as at 31 December

2023, the Directors consider there to be no material uncertainties that

may cast significant doubt over the Group’s ability to continue to

operate as a going concern and to adopt the going concern basis of

accounting. The Directors have formed a judgement that there is a

reasonable expectation that the Group has adequate resources to

continue in operational existence as a going concern in the foreseeable

future, a period of at least 12 months from the date of signing the

Group’s consolidated financial statements.

Auditors

Resolutions will be proposed at the Company’s 2024 AGM to re-appoint

KPMG LLP as the Company’s auditors and to authorise the Directors to

set the auditors’ remuneration.

Disclosure of information to the auditors

Each of the persons who is a Director at the date of approval of this

Annual Report and Accounts confirms that:

• so far as the Director is aware, there is no relevant audit information

of which the Company’s auditors are unaware; and

• the Director has taken all the steps that he or she ought to have

taken as a Director in order to make himself or herself aware of

any relevant audit information and to establish that the Company’s

auditors are aware of that information.

Approved by the Board of Directors and signed on behalf of the Board.

Christopher Head

Company Secretary

5 March 2024

Directors’ Report continued

120 Lancashire Holdings Limited | Annual Report & Accounts 2023

The Directors are responsible for preparing the Annual Report

and Accounts and the Group’s consolidated financial statements

in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements

for each financial year that give a true and fair view of the state of

affairs of the Group and of the profit or loss of the Group for that

year. The consolidated financial statements have been prepared

in accordance with the IFRS accounting standards, adopted by the

E.U. Further detail on the basis of preparation is described in the

consolidated financial statements.

In preparing the consolidated financial statements, the Directors

are required to:

• select suitable accounting policies and apply them consistently;

• make judgements and accounting estimates that are reasonable,

relevant and reliable;

• state whether they have been prepared in accordance with

the IFRS standards;

• state whether applicable accounting standards have been followed,

subject to any material departures disclosed and explained in the

Group’s consolidated financial statements;

• provide additional disclosures where compliance with the specific

requirements of IFRS standards are considered to be insufficient to

enable users to understand the impact of particular transactions,

events and conditions on the financial position and performance;

• assess the Group’s ability to continue as a going concern, disclosing,

as applicable, matters related to going concern; and

• use the going concern basis of accounting unless they either intend

to liquidate the Group or to cease operations or have no realistic

alternative but to do so.

The Directors are responsible for keeping adequate accounting records

that are sufficient to show and explain the Group’s transactions and

disclose with reasonable accuracy at any time the financial position of

the Group, and enable them to ensure that the consolidated financial

statements comply with applicable laws and regulations. They are also

responsible for such internal control as they determine is necessary to

enable the preparation of the consolidated financial statements that are

free from material misstatement, whether due to fraud or error, and also

have general responsibility for safeguarding the assets of the Group, and

hence for taking reasonable steps for prevention and detection of fraud

and other irregularities.

Directors’ responsibility statement

The Directors confirm that to the best of their knowledge:

• the consolidated financial statements, prepared in accordance

with the IFRS accounting standards as adopted by the E.U.

give a true and fair view of the assets, liabilities, financial

position and profit of the Group;

• the Board considers the Annual Report and Accounts, taken

as a whole, is fair, balanced and understandable and provides

the information necessary for shareholders to assess the Group’s

position and performance, business model and strategy; and

• the strategy report including the business review section of

this Annual Report and Accounts includes a fair review of the

development and performance of the business and the position

of the Group, together with a description of the principal risks

and uncertainties that the Group faces.

Legislation in Bermuda governing the preparation and dissemination

of the consolidated financial statements may differ from legislation in

other jurisdictions. In addition, the rights of shareholders under Bermuda

law may differ from those for shareholders of companies incorporated in

other jurisdictions.

By order of the Board

5 March 2024

Statement of Directors’ Responsibilities

121Lancashire Holdings Limited | Annual Report & Accounts 2023

ESG – Governance

Independent Auditor’s Report to the Members of Lancashire Holdings Limited

1. Our opinion is unmodified

We have audited the consolidated financial statements of Lancashire Holdings Limited (“the Company”) for the year ended 31 December 2023 which

comprise the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of

changes in shareholders’ equity, the consolidated statement of cash flows, and the related notes, including the accounting policies on pages 135 to

147 of this Annual Report and Accounts.

In our opinion:

• the consolidated financial statements give a true and fair view of the state of the Group’s affairs as at 31 December 2023 and of the Group’s profit

for the year then ended; and

• the consolidated financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by

the European Union.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are

described below. We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical

requirements including the FRC Ethical Standard as applied to other listed entities. We believe that the audit evidence we have obtained is a sufficient

and appropriate basis for our opinion.

2. Key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the consolidated financial

statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those

which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.

These matters were addressed, in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon and

we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matters, in decreasing order of audit

significance, were as follows:

122 Lancashire Holdings Limited | Annual Report & Accounts 2023

Estimation of incurred but not reported element of both liability for incurred claims and asset for incurred claims

(Claims incurred but not reported is an element of both the liability for incurred claims and the asset for incurred claims at 31 December 2023: $1,765.9 million

liability for incurred claims, $430.3 million asset for incurred claims; 31 December 2022: $1,644.5 million liability for incurred claims, $516.2m million asset for

incurred claims)

Refer to pages 83 to 88 (Audit Committee report), page 138 to 143 (accounting policy) and pages 178 to 183 (financial disclosures).

Risk vs 2022: <>

The risk Our response

The Group maintains liabilities (and related reinsurance

assets) for incurred claims to cover the estimated ultimate

cost of settling all losses and loss adjustment expenses

arising from events which have occurred up to the balance

sheet date, regardless of whether those losses have been

reported to the Group. Incurred but not reported (IBNR)

claims is the most subjective component of the liability for

incurred claims and the asset for incurred claims.

Whilst the adoption of IFRS 17 affects the measurement of

the incurred claims, for example by including a risk

adjustment and requiring discounting, the adoption of IFRS

17 in the period had no effect on the estimation of IBNR.

There is high level of uncertainty within the IBNR portion of

the liability (and asset) for incurred claims related to the

estimate of the fulfilment cash flows for IBNR

Subjective valuation:

The liability for incurred claims represents the single largest

liability for the Group and the estimation of the IBNR

element is the most subjective. Valuation of the fulfilment

cash flows related to incurred but not reported liabilities is

highly judgemental because it requires a number of

assumptions to be made with high estimation uncertainty

such as initial expected loss ratios, large loss assumptions

and claim development patterns. The determination and

application of the methodology and performance of the

calculations are also complex. These judgemental and

complex calculations for the cash flows for incurred claims

are also used along with net to gross ratio assumptions to

derive the valuation of the related reinsurance asset for

incurred claims.

The effect of these matters is that, as part of our risk

assessment, we determined that valuation of the liability and

asset for incurred claims has a high degree of estimation

uncertainty, with a potential range of reasonable outcomes

greater than our materiality for the consolidated financial

statements as a whole, and possibly many times that amount.

We have used our own actuarial specialists to assist us in performing our procedures in

this area:

Our procedures included:

Controls design and implementation

Evaluating and testing the design and implementation of key controls over the

appropriateness of the methodology and actuarial assumptions used in the valuation

process of the portion of the liability (and asset) for incurred claims related to

undiscounted IBNR fulfilment cash flows.

Assessment of assumptions and methodology

Assessing and challenging the reserving assumptions and methodology (on a gross

and net of outwards reinsurance basis) based on our understanding of the reserving

policy within the Group. This has also involved comparing the Group’s reserving

methodology for the calculation of the IBNR fulfilment cash flows with industry

practice and understanding the rationale for any key differences.

Historical experience

Evaluating the reliability of the Group’s reserving estimates by monitoring the

development of losses against initial estimates.

Independent re-projections

Applying our own assumptions, across all attritional classes of business, to perform

re-projections on the liability for incurred claims (fulfilment cash flows) and asset

for incurred claims and comparing these to the Group’s projected results. Where

there were significant variances in the results, we have challenged the Group’s

assumptions with respect to the selected initial expected loss ratios or

development patterns.

Data reconciliations

Assessing the completeness and accuracy of the data used within the reserving

process by reconciling the actuarial source data to the financial systems.

Sector experience and benchmarking of large losses

Assessing and challenging the reserving assumptions by comparing the Group’s loss

experience to peers in the market, on a gross and net of outwards reinsurance basis,

including on a contract by contract basis for selected large loss and catastrophe

events.

We performed the tests above over the valuation rather than seeking to rely on the

Group’s controls because the nature of the balance is such that we would expect to

obtain audit evidence primarily through the detailed procedures described.

Assessing transparency

Considering the adequacy of the Group’s disclosures in respect of the valuation of

the liability (and asset) for incurred claims.

123Lancashire Holdings Limited | Annual Report & Accounts 2023

Financial Statements

Eligibility for the Premium Allocation Approach (“PAA”)

Refer to pages 83 to 88 (Audit Committee report), page 136 (accounting policy)

Risk vs 2022: New risk in 2023

The risk Our response

IFRS 17 was adopted by the Group on 1 January 2023. This new and

complex standard requires the Group to measure its groups of insurance

(and reinsurance) contracts using the General Measurement Model

(“GMM”) unless the criteria for measuring contracts using a simplified

Premium Allocation Approach (“PAA”) is met.

The Group has applied the PAA to simplify the measurement of groups

of insurance (and reinsurance) contracts.

Insurance (and reinsurance) contracts are eligible for the PAA if the

coverage period is one year or less. If the coverage period for any

insurance (or reinsurance) contract in a group of contracts is more than

one year, the Group is only eligible to apply the PAA to the group of

contracts if it reasonably expects that the PAA and GMM would not

produce materially different measurements of the liability (and asset)

for remaining coverage.

The Group has to consider and apply judgement to assess whether

significant variability in the fulfilment cash flows is expected. If

significant variability is expected at the inception of the group of

insurance (and reinsurance) contracts, then the PAA is not allowed.

The calculation for liability (and asset) for remaining coverage using the

GMM is complex and requires the Group to perform a forecast based

assessment. As part of this assessment the Group has calculated the

liability (and asset) for remaining coverage at inception of each of the

groups of contracts using the GMM approach and compared this with

same output under the PAA over the coverage period of the group of

contracts. The Group has then modelled a series of plausible scenarios to

test the extent of variability and assess whether the eligibility test is met.

There are a number of subjective assumptions used in this assessment

with high estimation uncertainty such as budgeted loss and expense

ratios, cash flow patterns and estimates of ultimate premium. There is

also subjectivity and judgement involved in concluding whether the

difference between the liability (or asset) for remaining coverage

calculated using the GMM is materially different to the PAA under what

are considered reasonable scenarios.

We have used our own actuarial specialists to assist us in performing

our procedures in this area.

The below responses are in respect of groups of contracts existing at

the transition balance sheet as well as those commencing during 2022

and 2023.

Our procedures included:

Control Design and implementation

Evaluating and testing the design and implementation of key controls

over the assessment of PAA eligibility for groups of insurance and

reinsurance contracts.

Assessment of assumptions and methodology

Assessing the appropriateness of the methodology used, qualitative

factors and key assumptions such as forecast ultimate loss ratios, cash

flow patterns and expense ratios.

Independent Recalculation

Independently recalculating the liability for remaining coverage (“LRC”)

under the General Measurement Model (GMM) and the Premium

Allocation Approach (PAA) and assessing whether the difference

between the two measurement models differ materially considering

both qualitative and quantitative factors.

Stress testing

Assessing the appropriateness of stresses applied on key assumptions by

management, independently performing stress tests on key assumptions

and evaluating whether groups of insurance and reinsurance contracts

continue to be eligible for the PAA under various scenarios.

Data reconciliations

Assessing the completeness and accuracy of the data used within the PAA

eligibility assessment by reconciling to approved forecasts by the Board.

We performed the tests above over the eligibility for the PAA rather

than seeking to rely on the Group’s controls because the nature of the

balance is such that we would expect to obtain audit evidence primarily

through the detailed procedures described.

Assessing transparency

Considering the adequacy of the Group’s disclosures in respect of key

judgements within the PAA eligibility assessment performed by the Group.

We continue to perform procedures over the valuation of expected estimated premium receipts (before adoption of IFRS 17, valuation of premiums

receivable from insureds and cedants which are estimated) and the valuation of level 3 investments. However, based on our risk assessment we have

not assessed these as the most significant risks of material misstatement in our current year audit and, therefore, they are not separately identified in

our report this year.

Independent Auditor’s Report to the Members of Lancashire Holdings Limited continued

124 Lancashire Holdings Limited | Annual Report & Accounts 2023

3. Our application of materiality and an overview of the scope of our audit

Materiality for the consolidated financial statements as a whole was set at $14.0 million (2022: $12.0 million), determined with reference to a benchmark of

insurance revenue of which it represents 0.9% (2022: $12.0 million determined with reference to a benchmark of gross premiums written under IFRS 4, of

which it represented 0.7%). We consider insurance revenue to be the most appropriate benchmark given the size and complexity of the business as it provides

a stable measure year on year. We also compared our materiality against other relevant benchmarks (total assets, net assets and profit before tax) to ensure

the materiality selected was appropriate for our audit.

In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance

materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances aggregate to a material

amount across the consolidated financial statements as a whole.

Performance materiality was set at 75% (2022: 75%) of materiality for the consolidated financial statements as a whole, which equates to $10.5 million

(2022: $9.0 million). We applied this percentage in our determination of performance materiality because we did not identify any factors indicating an

elevated level of risk.

We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding $0.7 million (2022: $0.6 million), in addition to

other identified misstatements that warranted reporting on qualitative grounds.

We were able to rely upon the Group’s internal control over financial reporting in several areas of our audit, where our controls testing supported this

approach, which enabled us to reduce the scope of our substantive audit work; in the other areas the scope of the audit work performed was fully substantive.

Of the Group’s nine (2022: ten) reporting components, we subjected five (2022: five) to full scope audits for Group purposes which were the parent Company

(LHL), UK insurance company (LUK), Bermudan insurance company (LICL), UK service entity (LISL) and the Group’s participation in Lloyd’s Syndicate 2010 and

3010. Including the audit of the consolidation adjustments, the components within our scope of work covered 100% of insurance revenue, 99.8% of total

assets and total liabilities (2022: 100% of gross premiums written, total assets and total liabilities under IFRS 4).

For the residual components, we performed analysis at an aggregated group level to re-examine our assessment that there were no significant risks of material

misstatement within these.

The Group team instructed component auditors as to the significant areas to be included within audit scope, including the relevant risks detailed above and the

information to be reported back.

The Group team determined the component materialities, which ranged from $3.5 million to $10.7 million (2022: $3.0 million to $8.9 million), having regard

to the mix of size and risk profile of the Group across the components.

The work on four of the five full scope components (2022: four of the five components) was performed by component auditors and work on one (2022: one)

full scope component was performed by the Group team.

In working with component auditors, we:

• Held planning calls with component audit teams to discuss the significant areas of the audit relevant to the components.

• Held planning calls with the component audit teams to discuss the impact of the adoption of IFRS 17 and 9 by the Group and the scope and timing

of the relevant audit work to be performed by the component audit teams.

• Issued group audit instructions to component auditors on the scope of their work.

• Held risk assessment update discussions with the component audit teams before the commencement of the final phases of the audit led by the

Group engagement partner and engagement quality control partner.

• Visited Bermuda and UK (2022: Bermuda and UK) components in-person as the audit progressed to understand and challenge the audit approach

and organised video conferences with the partners and directors of the Group and component audit teams. At these visits and video conferences,

the findings reported to the Group team were discussed in more detail, and any further work required by the Group team was then performed by

the component audit teams.

• Inspected component audit teams’ key work papers in person and/or using remote technology capabilities to evaluate the quality of execution of

the audits of the components.

125Lancashire Holdings Limited | Annual Report & Accounts 2023

Financial Statements

4. The impact of climate change on our audit

In planning our audit, we performed a risk assessment, including enquiries of management, to determine how the impact of commitments made by

the Group in respect of the transition to net zero carbon emissions, as well as the physical risks of climate change, and transition risks faced by the

Group’s customer base, could impact on the financial statements and our audit. We held discussions with our own climate change professionals to

challenge our risk assessment. Through the procedures we performed, we did not identify any material impact of climate change on the Group’s

material accounting estimates and there was no significant impact of this assessment on our key audit matters.

The Group underwrites short-tail catastrophe risks. Climate change may result in an increase in the frequency and severity of climate-related

catastrophe events, leading to higher insurance pay-outs. However, the short-term nature of the Group’s insurance contracts means that the impact

of losses from catastrophes for the year ended 31 December 2023 is already recorded within the Group’s liability for incurred claims at the balance

sheet date. The Group considers this loss experience in evaluating individual risk exposures, and the setting of insurance premium rates for both new

policies and the periodic renewal of its existing insurance underwriting portfolio. The Group expects any increase in the frequency and severity of

climate-related catastrophe events to be reflected in future market premium rates. These considerations are factored into the Group’s going concern

assessments, in the assessment of which the Group performed a specific climate change stress scenario.

The Group also holds investments and assesses climate risk exposure within the portfolio. Given the predominantly short-term nature of these investments,

we have assessed that there is no significant risk related to climate with regards to the valuation of these investments at the balance sheet date.

Taking into account the extent of the headroom of the recoverable amount over the carrying amount of the cash generating units including the

Group’s intangible assets with indefinite useful lives, we assessed the risk of climate change to the carrying amount of these assets at the balance

sheet date to be not significant.

We have read the disclosures of climate related information in the Annual Report and Accounts and considered their consistency with the

consolidated financial statements and our audit knowledge.

5. Going concern

The directors have prepared the consolidated financial statements on the going concern basis as they do not intend to liquidate the Group or to cease

its operations, and as they have concluded that the Group’s financial position means that this is realistic. They have also concluded that there are no

material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of

approval of the consolidated financial statements (“the going concern period”).

We used our knowledge of the Group, its industry, and the general economic environment to identify the inherent risks to its business model and

analysed how those risks might affect the Group’s financial resources or ability to continue operations over the going concern period. The risk that we

considered most likely to adversely affect the Group’s available financial resources over this period was the valuation of the liability for incurred claims

given the estimation and judgement involved in setting these reserves.

We also considered less predictable but realistic second order impacts that could affect demand in the Group’s markets, such as the impact of climate change

on the Group’s results and operations, the performance of the investment portfolio, credit ratings for key insurance subsidiaries, solvency and capital adequacy.

We considered whether these risks could plausibly affect the liquidity and solvency in the going concern period by comparing severe, but plausible

downside scenarios and the degree of downside changes in assumptions that, individually and collectively, could result in a liquidity and solvency issue

taking into account the Group’s current and projected financial resources (a reverse stress test).

We considered whether the going concern disclosure on page 135 of the consolidated financial statements gives a full and accurate description of the

Directors’ assessment of going concern, including the identified risks and dependencies.

Our conclusions based on this work:

• we consider that the Directors’ use of the going concern basis of accounting in the preparation of the consolidated financial statements is appropriate;

• we have not identified, and concur with the Directors’ assessment that there is not, a material uncertainty related to events or conditions that, individually

or collectively, may cast significant doubt on the Group’s ability to continue as a going concern for the going concern period; and

• we have nothing material to add or draw attention to in relation to the Directors’ statement on page 120 of the consolidated financial statements on the

use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Group’s use of that basis for the going

concern period, and we found the going concern disclosure on page 135 to be acceptable

However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements

that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group will continue in operation.

Independent Auditor’s Report to the Members of Lancashire Holdings Limited continued

126 Lancashire Holdings Limited | Annual Report & Accounts 2023

6. Fraud and breaches of laws and regulations – ability to detect

Identifying and responding to risks of material misstatement due to fraud

To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to

commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:

• Enquiring of Directors, the Audit Committee, internal audit, the Risk function, Head of Group legal and the Company Secretary, together with

inspection of policy documentation, as to the Group’s high-level policies and procedures to prevent and detect fraud, including the internal audit

function, and the Group’s channel for “whistleblowing”, as well as whether they have knowledge of any actual, suspected or alleged fraud.

• Reading Board and Audit Committee minutes.

• Considering remuneration incentive schemes and performance conditions for management remuneration which includes the annual change in

diluted book value per share and return on equity.

• Using analytical procedures to identify any unusual or unexpected relationships.

We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit. This included

communications from the Group audit team to full scope component audit teams of relevant fraud risks identified at the Group level and requests to

full scope component audit teams to report to the Group audit team any instances of fraud that could give rise to a material misstatement at the

Group level.

As required by auditing standards, and taking into account possible pressures to meet profit targets, recent revisions to guidance and our overall

knowledge of the control environment, we perform procedures to address the risk of management override of controls in particular the risk that

management may be in a position to make inappropriate accounting entries and the risk of bias in accounting estimates and judgements such as the

valuation of liability and asset for incurred claims. On this audit we do not believe there is a fraud risk related to revenue recognition because insurance

revenue is recognised based on standard non-complex revenue earning patterns.

We also identified a fraud risk in relation to the following area:

• The valuation of liability and asset for incurred claims due to the estimation required in setting these liabilities (and associated reinsurance asset)

and the ability for changes in the valuation to be used to impact profit.

In order to address the risk of fraud specifically as it relates to the valuation of liability and asset for incurred claims, we involved actuarial specialists to

assist in our challenge of management. We challenged management in relation to the selection of assumptions and the consistency of those

assumptions both year on year and across different aspects of the financial reporting process.

Further detail in respect of our procedures around the valuation of liability (and asset) for incurred claims is set out in the key audit matter disclosures

in section 2 of this independent auditor’s report.

In determining the audit procedures we took into account the results of our evaluation and testing of the operating effectiveness of some of the

Group-wide fraud risk management controls. The Audit Committee report on pages 83 to 88 also references the entity level controls in operation

across the Group.

We also performed procedures including:

• Identifying journal entries and other adjustments to test for all full scope components based on risk criteria and comparing the identified entries to

supporting documentation. These included those posted by individuals who do not frequently post journals, those posted with descriptions

containing key words or phrases, those posted to unusual accounts including those related to cash, consolidation journals and post-closing journals

meeting certain criteria.

• Assessing whether the judgements made in making accounting estimates are indicative of a potential bias.

127Lancashire Holdings Limited | Annual Report & Accounts 2023

Financial Statements

Identifying and responding to risks of material misstatement related to compliance with laws and regulations

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the consolidated financial statements from

our general commercial and sector experience, through discussion with the Directors and other management (as required by auditing standards), from

inspection of the Group’s regulatory and legal correspondence and discussed with the Directors and other management the policies and procedures

regarding compliance with laws and regulations.

As certain entities within the Group are regulated, our assessment of risks involved gaining an understanding of the control environment including an

entity’s procedures for complying with regulatory requirements. This was achieved through the procedures noted above.

We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the

audit. This included communication from the Group audit team to full-scope component audit teams of relevant laws and regulations identified at the

Group level, and a request for full scope component auditors to report to the Group audit team any instances of non-compliance with laws and

regulations that could give rise to a material misstatement at the Group level.

The potential effect of these laws and regulations on the consolidated financial statements varies considerably.

Firstly, the Group is subject to laws and regulations that directly affect the consolidated financial statements including financial reporting legislation

(including related companies legislation), distributable profits legislation, taxation legislation and regulatory capital, solvency and liquidity regulations

and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.

Secondly, the Group is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on

amounts or disclosures in the consolidated financial statements, for instance through the imposition of fines, litigation or loss of regulatory approval

to write insurance contracts. We identified the following areas as those most likely to have such an effect: anti-bribery and certain aspects of company

legislation, recognising the financial and regulated nature of certain of the Group’s activities and its legal form. Auditing standards limit the required

audit procedures to identify non-compliance with these laws and regulations to enquiry of the Directors and other management and inspection of

regulatory and legal correspondence, if any. Therefore, if a breach of operational regulations is not disclosed to us or evident from relevant

correspondence, an audit will not detect that breach.

We discussed with the Audit Committee and those charged with governance matters related to actual or suspected breaches of laws or regulations,

for which disclosure is not necessary, and considered any implications for our audit.

Context of the ability of the audit to detect fraud or breaches of law or regulation

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the

consolidated financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For

example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the consolidated financial

statements, the less likely the inherently limited procedures required by auditing standards would identify it.

In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these may involve collusion, forgery, intentional omissions,

misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible

for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.

Independent Auditor’s Report to the Members of Lancashire Holdings Limited continued

128 Lancashire Holdings Limited | Annual Report & Accounts 2023

7. We have nothing to report on the other information in the Annual Report and Accounts

The directors are responsible for the other information presented in the Annual Report and Accounts together with the consolidated financial

statements. Our opinion on the consolidated financial statements does not cover the other information and, accordingly, we do not express an audit

opinion or, except as explicitly stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our consolidated financial statements audit work, the

information therein is materially misstated or inconsistent with the consolidated financial statements or our audit knowledge. Based solely on that

work we have not identified material misstatements in the other information.

Directors’ remuneration report

In addition to our audit of the consolidated financial statements, the Directors have engaged us to audit the information in the Directors’

Remuneration Report that is described as having been audited, which the Directors have decided to prepare as if the Company was required to comply

with the requirements of Schedule 8 to The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (SI 2008 No.

410) made under the UK Companies Act 2006.

In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the UK Companies Act

2006, as if those requirements applied to the Company.

Disclosures of emerging and principal risks and longer-term viability

We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ disclosures in respect of emerging

and principal risks and the viability statement, and the consolidated financial statements and our audit knowledge.

Based on those procedures, we have nothing material to add or draw attention to in relation to:

• the Directors’ confirmation within the viability statement on page 120 that they have carried out a robust assessment of the emerging and

principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity;

• the Emerging and Principal Risks disclosures describing these risks and how emerging risks are identified, and explaining how they are being

managed and mitigated; and

• the Directors’ explanation in the viability statement of how they have assessed the prospects of the Group, over what period they have done so

and why they considered that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will

be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures

drawing attention to any necessary qualifications or assumptions.

Our work is limited to assessing these matters in the context of only the knowledge acquired during our consolidated financial statements audit. As we cannot

predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the

time they were made, the absence of anything to report on these statements is not a guarantee as to the Group’s longer-term viability.

Corporate governance disclosures

We are required to perform procedures to identify whether there is a material inconsistency between the Directors’ corporate governance disclosures

and the consolidated financial statements and our audit knowledge.

Based on those procedures, we have concluded that each of the following is materially consistent with the consolidated financial statements and our

audit knowledge:

• the Directors’ statement that they consider that the Annual Report and Accounts taken as a whole is fair, balanced and understandable, and

provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy;

• the section of the Annual Report and Accounts describing the work of the Audit Committee, including the significant issues that the Audit

Committee considered in relation to the consolidated financial statements, and how these issues were addressed; and

• the section of the Annual Report and Accounts that describes the review of the effectiveness of the Group’s risk management and internal control

systems.

We are required to review the part of the Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK

Corporate Governance Code specified by the Listing Rules for our review. We have nothing to report in this respect.

129Lancashire Holdings Limited | Annual Report & Accounts 2023

Financial Statements

8. Respective responsibilities

Directors’ responsibilities

As explained more fully in their statement set out on page 121, the directors are responsible for: the preparation of the consolidated financial

statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation

of consolidated financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group’s ability to continue

as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either

intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material

misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does

not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can

arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic

decisions of users taken on the basis of the consolidated financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.

The Company is required to include these financial statements in an annual financial report prepared under Disclosure Guidance and Transparency

Rule 4.1.17R and 4.1.18R. This auditor’s report provides no assurance over whether the annual financial report has been prepared in accordance with

those requirements.

9. The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the Company’s members, as a body, in accordance with section 90 of the Bermuda Companies Act 1981 and the terms of

our engagement by the Company. Our audit work has been undertaken so that we might state to the Company’s members those matters we are

required to state to them in an auditor’s report, and the further matters we are required to state to them in accordance with the terms agreed with the

Company, and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the

Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Salim Tharani

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

15 Canada Square, London, E14 5GL

5 March 2024

Independent Auditor’s Report to the Members of Lancashire Holdings Limited continued

130 Lancashire Holdings Limited | Annual Report & Accounts 2023

Consolidated statement of comprehensive income

For the year ended 31 December 2023

Lancashire Holdings Limited

| Annual Report & Accounts 2023

131

			Restated
		22002233	2022
	Notes	$$mm	$m
Insurance revenue	2, 13	1,519.9	1,226.5
Insurance service expenses	2, 3, 6,13	(696.2)	(994.6)
Insurance service result before reinsurance contracts held		823.7	231.9
Allocation of reinsurance premium	2, 13	(424.8)	(371.8)
Amounts recoverable from reinsurers	2, 3, 13	(16.8)	281.5
Net expense from reinsurance contracts held		(441.6)	(90.3)
Insurance service result		382.1	141.6
Net investment return	2, 4	160.5	(76.7)
Finance (expense) income from insurance contracts issued	2, 3	(98.3)	20.1
Finance income (expense) from reinsurance contracts held	2, 3	31.7	(6.7)
Net insurance and investment result		476.0	78.3
Share of profit (loss) of associate	15	12.1	(5.4)
Other income	5	2.9	6.5
Net foreign exchange losses		(4.1)	(0.6)
Other operating expenses	2, 6	(107.4)	(58.3)
Equity based compensation	7	(15.2)	(8.6)
Financing costs	8	(31.6)	(29.2)
Profit (loss) before tax		332.7	(17.3)
Tax (charge) credit	9	(11.2)	1.8
Profit (loss) after tax		321.5	(15.5)
Earnings (loss) per share
Basic	20	$1.35	($0.06)
Diluted	20	$1.32	($0.06)

131Lancashire Holdings Limited | Annual Report & Accounts 2023

Financial Statements

Consolidated statement of financial position

As at 31 December 2023

132

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| Annual Report & Accounts 2023

			Restated	Restated
		3311 DDeecceemmbbeerr 22002233	31 December 2022	1 January 2022
	Notes	$$mm	$m	$m
Assets
Cash and cash equivalents	10, 18	756.9	548.8	517.7
Accrued interest receivable		16.7	11.3	7.1
Investments	11, 12, 18	2,455.5	2,204.9	2,048.1
Reinsurance contract assets	13	387.8	474.3	326.5
Other receivables		58.4	30.0	18.8
Corporation tax receivable		—	1.1	—
Investment in associate	12, 15	16.2	59.7	120.1
Right-of-use assets	16	19.3	20.3	13.4
Property, plant and equipment		9.8	1.1	0.8
Intangible assets	17	181.1	172.4	157.9
Total assets		3,901.7	3,523.9	3,210.4
Liabilities
Insurance contract liabilities	13	1,823.7	1,673.5	1,302.3
Other payables		80.6	44.6	37.4
Corporation tax payable		2.0	—	1.6
Deferred tax liability	14	16.2	10.3	11.6
Lease liabilities	16	24.7	23.3	17.9
Long-term debt	18	446.6	446.1	445.7
Total liabilities		2,393.8	2,197.8	1,816.5
Shareholders’ equity
Share capital	19	122.0	122.0	122.0
Own shares	19	(29.7)	(34.0)	(18.1)
Other reserves	19	1,233.2	1,221.9	1,221.6
Retained earnings		182.4	16.2	67.9
Total shareholders’ equity attributable to equity shareholders of LHL		1,507.9	1,326.1	1,393.4
Non-controlling interests		—	—	0.5
Total shareholders’ equity		1,507.9	1,326.1	1,393.9
Total liabilities and shareholders’ equity		3,901.7	3,523.9	3,210.4

The consolidated financial statements were approved by the Board of Directors on 5 March 2024 and signed on its behalf by:

PPeetteerr CCllaarrkkee

NNaattaalliiee KKeerrsshhaaww

Director/Chair

Director/CFO

132 Lancashire Holdings Limited | Annual Report & Accounts 2023

Consolidated statement of changes

in shareholders’ equity

For the year ended 31 December 2023

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133

							Shareholders’		Restated
							equity
					Accumulated		attributable
					other		to equity		Total
		Share	Own	Other	comprehensive	Retained	shareholders of	Non-controlling	shareholders’
		capital	shares	reserves	income	earnings	LHL	interests	equity
	Notes	$m	$m	$m	$m	$m	$m	$m	$m
Balance as at 1 January 2022, as previously reported		122.0	(18. 1)	1,221. 6	2.9	83.9	1, 412.3	0. 5	1, 412.8
Initial application of IFRS 9 - Financial instruments, net of tax	24	—	—	—	(2.9)	2.9	—	—	—
Initial application of IFRS 17 - Insurance contracts, net of tax	23	—	—	—	—	(18.9)	(18.9)	—	(18.9)
Balance as at 1 January 2022 (restated)		122.0	(18.1)	1,221. 6	—	6 7.9	1,393.4	0.5	1,3 93.9
Loss for the year (restated)		—	—	—	—	(15.5)	(15.5)	—	(15.5)
Share repurchases	19	—	(23.3)	—	—	—	(23.3)	—	(23.3)
Distributed by the trust	19	—	8.1	(8.9)	—	—	(0.8)	—	(0.8)
Shares donated to the trust	19	—	(0.7)	0.7	—	—	—	—	—
Dividends on common shares	19	—	—	—	—	(36.2)	(36.2)	—	(36.2)
Repurchase of shares from non-controlling interest		—	—	(0.6)	—	—	(0.6)	(0.5)	(1.1)
Net deferred tax		—	—	0.1	—	—	0.1	—	0.1
Equity based compensation		—	—	9.0	—	—	9. 0	—	9.0
Balance as at 31 December 2022 (restated)		122.0	(34.0)	1,221.9	—	16.2	1,326.1	—	1,326.1
Profit for the year		—	—	—	—	321.5	321.5	—	321.5
Distributed by the trust	19	—	4.3	(4.8)	—	—	(0.5)	—	(0.5)
Dividends on common shares	19	—	—	—	—	(155.3)	(155.3)	—	(155.3)
Net deferred tax		—	—	0.4	—	—	0.4	—	0.4
Equity based compensation		—	—	15.7	—	—	15.7	—	15.7
Balance as at 31 December 2023		122.0	(29.7)	1,233.2	—	182.4	1,507.9	—	1,507.9

133Lancashire Holdings Limited | Annual Report & Accounts 2023

Financial Statements

Consolidated statement of cash flows

For the year ended 31 December 2023

134

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				Restated
			22002233	2022
		Notes	$$mm	$m
Cash flows from operating activities
Profit (loss) before tax			332.7	(17.3)
Adjustments for:
Tax paid			(1.9)	(2.1)
Depreciation			4.3	3.1
Amortisation on intangible assets		17	0.2	—
Impairment of intangible assets		17	1.4	—
Interest expense on long-term debt		16	25.8	25.8
Interest expense on lease liabilities		16	1.5	0.8
Interest income			(95.4)	(46.1)
Dividend income			(11.3)	(8.1)
Net unrealised (gains) losses on investments		4	(53.4)	103.0
Net realised (gains) losses on investments		4	(3.9)	24.7
Equity based compensation			15.2	8.6
Foreign exchange losses (gains)			3.9	(7.9)
Share of (profit) loss of associate		15	(12.1)	5.4
Changes in operational assets and liabilities
•	Insurance and reinsurance contracts		220.4	239.7
•	Other assets and liabilities		14.5	(5. 8)
Net cash flows from operating activities			441.9	323.8
Cash flows used in investing activities
Interest income received			90.0	41.9
Dividend income received			11.3	8.1
Purchase of property, plant and equipment			(9.6)	(0.7)
Purchase of underwriting capacity		17	(3.3)	(4.2)
Internally generated intangible asset		17	(7.0)	(10.3)
Investment in associate		22	55.6	55.0
Purchase of investments			(1,057.4)	(1,130.2)
Proceeds on sale of investments			866.1	845.5
Net cash flows used in investing activities			(54.3)	(194.9)
Cash flows used in financing activities
Interest paid			(25.8)	(25.8)
Lease liabilities paid		16	(3.8)	(3.6)
Dividends paid		19	(155.3)	(36.2)
Share repurchases			—	(23.3)
Distributions by trust			(0.5)	(0.8)
Purchase of shares from non-controlling interest			—	(1.1)
Net cash flows used in financing activities			(185.4)	(90.8)
Net increase in cash and cash equivalents			202.2	38.1
Cash and cash equivalents at beginning of year			548.8	517.7
Effect of exchange rate fluctuations and other items on cash and cash equivalents			5.9	(7.0)
Cash and cash equivalents at end of year			756.9	548.8

134 Lancashire Holdings Limited | Annual Report & Accounts 2023

Accounting policies

For the year ended 31 December 2023

Lancashire Holdings Limited

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135

The basis of preparation, use of judgements, estimates and assumptions, consolidation principles, and material accounting policies adopted in the

preparation of these consolidated financial statements are set out below. Effective from 1 January 2023, the Group adopted IFRS 17, Insurance

Contracts and IFRS 9, Financial Instruments: Classification and Measurement. The related changes from adopting these standards are set out in

notes 23 and 24 respectively.

The consolidated financial statements have been prepared in accordance with IFRS (as issued by the International Accounting Standards Board), as

adopted by E.U.

Going concern basis of accounting

The consolidated financial statements have been prepared on a going concern basis. In assessing the Group’s going concern position as at 31

December 2023, the Directors have considered a number of factors. These include:

• the current balance sheet and liquidity position;

• the level and composition of the Group’s capital and solvency ratios;

• the Group’s ability to service its long-term debt financing arrangements;

• the current performance against the Group’s strategic and financial business plan;

• the Group’s dividend distribution policy; and

• the current market environment, including consideration for climate change.

In addition, the ORSA report is a key document informing the Group’s going concern assessment that is submitted to the Board.

The Group’s financial forecasts reflect the outcomes that the Directors consider most likely, based on the information available at the date of

signing these consolidated financial statements. To assess the Group’s going concern, the financial stability of the Group was modelled for a period

of at least 12 months and a number of sensitivity, stress and scenario tests were applied. This included a best estimate forecast, as well as various

scenarios. This incorporated different magnitudes of reserve releases and attritional, large and catastrophe loss events, plus optimistic and

pessimistic investment return scenarios.

To further stress the financial stability of the Group, additional stress testing was performed. This included modelling the breakeven capital

requirements of our regulators and rating agencies, the impact of potential management actions to reduce the Group’s exposure to climate

change-related risks, and a combination of large losses and catastrophe losses, which would result in a net loss for the Group, and finally a reverse

stress test scenario designed to render the business model unviable. The testing identified that even under the more severe but plausible stress

scenarios, the Group had more than adequate liquidity and solvency headroom.

Based on the going concern assessment performed, the Directors consider there to be no material uncertainties that may cast significant doubt

over the Group’s ability to continue to operate as a going concern. The Directors have formed a judgement that there is a reasonable expectation

that the Group has adequate resources to continue in operational existence in the foreseeable future, a period of at least 12 months from the date

of signing these consolidated financial statements.

Currency and liquidity

All amounts, excluding share data or where otherwise stated, are in millions of U.S. dollars ($m), with amounts rounded to the nearest $0.1 million

where appropriate. The consolidated statement of financial position is presented in order of decreasing liquidity.

Use of judgements, estimates and assumptions

The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that

affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual amounts may

differ from these estimates.

Assumptions and estimates are based on information, knowledge and data available when the consolidated financial statements are prepared.

However, existing circumstances and assumptions about future developments may change, or circumstances may arise that are beyond the control

of the Group. Such changes are reflected in the assumptions when they occur, and are recognised prospectively. It is considered impracticable to

determine the effect that changes in these assumptions and estimates are expected to have on future periods.

Key assumptions concerning the future, and sources of estimation uncertainty

The Group has considered both key assumptions concerning the future, and sources of estimation uncertainty, that might be expected to have a

significant risk of causing a material adjustment to the carrying amounts of assets and liabilities in a subsequent financial year.

Consolidated statement of cash flows

For the year ended 31 December 2023

134

Lancashire Holdings Limited

| Annual Report & Accounts 2023

Restated

Notes

22002233

$$mm

2022

Cash flows from operating activities

Profit (loss) before tax 332.7 (17.3)

Adjustments for:

Tax paid (1.9)

(2.1)

Depreciation 4.3 3.1

Amortisation on intangible assets 17 0.2 —

Impairment of intangible assets 17 1.4 —

Interest expense on long-term debt 16 25.8 25.8

Interest expense on lease liabilities 16 1.5 0.8

Interest income (95.4)

(46.1)

Dividend income (11.3)

(8.1)

Net unrealised (gains) losses on investments 4 (53.4)

103.0

Net realised (gains) losses on investments 4 (3.9)

24.7

Equity based compensation 15.2 8.6

Foreign exchange losses (gains) 3.9 (7.9)

Share of (profit) loss of associate 15 (12.1)

5.4

Changes in operational assets and liabilities

• Insurance and reinsurance contracts 220.4 239.7

•

Other assets and liabilities

14.5 (5.8)

Net cash flows from operating activities 441.9 323.8

Cash flows used in investing activities

Interest income received 90.0 41.9

Dividend income received 11.3 8.1

Purchase of property, plant and equipment (9.6)

(0.7)

Purchase of underwriting capacity 17 (3.3)

(4.2)

Internally generated intangible asset 17 (7.0)

(10.3)

Investment in associate 22 55.6 55.0

Purchase of investments (1,057.4)

(1,130.2)

Proceeds on sale of investments 866.1 845.5

Net cash flows used in investing activities

(54.3)

(194.9)

Cash flows used in financing activities

Interest paid (25.8)

(25.8)

Lease liabilities paid 16 (3.8)

(3.6)

Dividends paid 19 (155.3)

(36.2)

Share repurchases — (23.3)

Distributions by trust (0.5)

(0.8)

Purchase of shares from non-controlling interest — (1.1)

Net cash flows used in financing activities (185.4)

(90.8)

Net increase in cash and cash equivalents 202.2 38.1

Cash and cash equivalents at beginning of year 548.8 517.7

Effect of exchange rate fluctuations and other items on cash and cash equivalents 5.9 (7.0)

Cash and cash equivalents at end of year

756.9

548.8

135Lancashire Holdings Limited | Annual Report & Accounts 2023

Financial Statements

Accounting policies continued

136

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| Annual Report & Accounts 2023

Insurance contracts issued and reinsurance contracts held

The Group has determined that its most significant area of estimation uncertainty is in relation to the measurement of insurance contracts issued

and reinsurance contracts held. Changes in assumptions made may materially change the FCF that make up these balances. The FCF are the current

estimates of the future cash flows within the contract boundary of a group of insurance or reinsurance contracts that, we expect to collect

premiums from, and pay out claims, benefits and expenses in respect of, adjusted to reflect the timing and uncertainty of those amounts. Changes

in the following key assumptions may change the FCF materially:

• assumptions about the amount and timing of future cash flows;

• assumptions about claims development;

• assumptions about discount rates, including any illiquidity premiums; and

• assumptions about the risk adjustment for non-financial risk.

The estimation of the FCF is a complex actuarial process which incorporates a significant amount of judgement, in particular in relation to the

estimation of the LIC and AIC. Delays in reporting losses to the Group, together with unforeseen loss development, increase uncertainty over the

accuracy of loss reserves. A significant portion of the Group’s business is in classes with high attachment points of coverage and therefore a low

frequency but high severity of claims. This adds further complexity to the reserving process due to the limited volume of industry data available

from which to reliably predict ultimate losses following a loss event. Volatility for the majority of losses is limited on a net basis by the reinsurance

protection purchased.

Information about these key assumptions and estimates are included within our risk disclosures on pages 148 to 166.

Level (iii) investments

The Group holds a relatively straightforward investment portfolio consisting mainly of standard fixed maturity products. Level (iii) investments are

securities for which valuation techniques are not based on observable market data, and require significant management judgement to determine an

appropriate fair value. The Group determines securities classified as Level (iii) to include hedge funds, private investment funds and loans made to

the Lloyd’s central fund. The estimation of fair value, specifically for Level (iii) investments, is discussed in note 11.

Annual impairment assessments

The syndicate participation rights and goodwill are intangible assets with an indefinite life and subject to an annual impairment assessment. The

Group applies judgement when determining the input assumptions to the value in use calculation. The input assumptions and their sensitivity are

disclosed in note 17.

Management judgements, other than those involving estimations

Lancashire is an insurance group whose primary focus is on underwriting and actively balancing risk and return. In doing so it focuses on ensuring

premium revenue and investment return exceeds the cost of claims, outwards reinsurance and operating expenses. The main areas in which

judgement is applied is therefore in the measurement and recognition of insurance contracts and financial assets.

Simplified premium allocation measurement model

IFRS 17 allows for the use of a simplified measurement model. The PAA can be applied by the Group for a group of insurance contracts which it

underwrites if the coverage period of each contract within the Group is one year or less, or if the liability for remaining coverage determined under

the PAA is not expected to differ materially from that calculated under the GMM. The Group applies the PAA to simplify the measurement of all its

insurance contracts issued and reinsurance contracts held. Groups of insurance contracts issued and reinsurance contracts held which include

contracts with a coverage period of more than one year require a PAA eligibility assessment upon initial recognition, which in turn requires

management judgement to be made in respect of 1) the allocation of an individual insurance or reinsurance contract to a portfolio of insurance

contracts based on those individual contracts having similar risks and being managed together, 2) the division of the portfolios of insurance

contracts into the three IFRS 17 groups of insurance contracts (as defined within the insurance contracts issued and reinsurance contracts held

accounting policies section below), and 3) the performance of the underlying insurance contracts.

The Group considers that it is eligible to apply the PAA measurement model to its portfolios and groups of insurance contracts, on the basis that

the measurement of the LRC is not reasonably expected to differ materially from that calculated under the GMM. In the years prior to IFRS 17

adoption, and in the initial year of adoption, this assessment was made through detailed modelling of all portfolios and groups of insurance

contracts. Going forward the assessment will likely be more qualitative in nature, unless there is a significant shift in business mix, material new

lines of business are entered into, or significant changes in relevant economic factors occur.

Level of aggregation

Judgement is required to determine the level of aggregation under IFRS 17. Insurance contracts issued that are subject to similar risks and that are

managed together are classified into a portfolio of insurance contracts.

The following considerations have been given most weight in the definition of similar risks:

• risk aggregations used for other business purposes such as reserving;

• segmentations used for underwriting; and

• perils covered and incidence of risk over time.

136 Lancashire Holdings Limited | Annual Report & Accounts 2023

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137

Each portfolio of insurance contracts is then further disaggregated into annual cohorts, and each annual cohort is classified into three IFRS 17

groups of contracts for recognition and measurement purposes based on their expected profitability.

Onerous contract assessment

Management applies judgement to assess whether facts and circumstances indicate that a group of insurance contracts is onerous at initial

recognition, or subsequently assesses whether facts and circumstances indicate any changes in the onerous group’s profitability, and whether any

loss component remeasurement is required.

Approach to transition

Judgement was applied to determine whether sufficient, reasonable and supportable information was available to apply a fully retrospective

approach when transitioning to the new IFRS 17 and IFRS 9 accounting standards (see note 23 and 24).

Classification of investment portfolio

The classification of the Group’s investment portfolio requires judgement in assessing the business model within which assets are held. The Group

has established that all investment classes are managed, and their performance evaluated, on a fair value basis and therefore they are classified at

FVTPL. This classification is discussed on page 144.

IFRS 17 and IFRS 9

Effective from 1 January 2023 the Group adopted IFRS 17, Insurance Contracts and IFRS 9, Financial Instruments: Classification and Measurement,

including any consequential amendments to other standards. These standards have brought significant changes to the accounting for insurance

contracts issued and reinsurance contracts held, and financial instruments. The impact of retrospectively adopting IFRS 17 and IFRS 9 is summarised

in notes 23 and 24.

The Group’s accounting policies that were impacted by the adoption of IFRS 17 and IFRS 9, are disclosed on pages 191 to 195.

OECD global minimum tax and Bermuda corporate income tax

To address concerns about uneven profit distribution and tax contributions of large multinational corporations, various agreements have been

reached at the global level, including an agreement by over 135 jurisdictions to introduce a global minimum tax rate of 15%. Legislation was also

passed in Bermuda on 27 December 2023, to implement a corporate income tax regime from 1 January 2025.

The UK has substantively enacted Pillar Two tax legislation, to implement the global minimum top-up tax on 20 June 2023. The Group could

potentially be subject to the top-up tax in relation to its operations.

The IASB has issued an amendment to IAS 12 ‘International Tax Reform – Pillar Two Model Rules’ which includes an exception from accounting for

deferred taxes which was endorsed for use in the E.U. on 2 June 2023. Prior to the endorsement, the Group had developed an accounting policy

applying the guidance in IAS 8. Under this accounting policy, the Group does not recognise the deferred tax impact of the top-up tax or remeasure

existing deferred taxes. Instead, any incremental effect of the top up tax is recognised as current tax as it is incurred.

Refer to note 14 for further information.

Other accounting changes

Effective from 1 January 2023, the IASB issued amendments to IAS 1 Presentation of Financial Statements, together with an update to IFRS Practice

Statement 2 Making Materiality Judgements. The changes primarily relate to considering accounting policies and transactions as either material or

significant, and have been determined to be immaterial to the Group’s financial statements.

There are also amendments to other existing standards and interpretations that are mandatory for the first time for financial periods beginning 1

January 2023. These are not currently relevant for the Group and do not impact the consolidated financial statements of the Group.

The Group consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at and for the year ended 31

December 2023. Subsidiaries are fully consolidated from the date of acquisition or incorporation, being the date on which the Group obtains

control, and continue to be consolidated until the date when such control ceases. Intercompany balances, profits and transactions are eliminated.

Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the subsidiary, and has the ability to

affect those returns through its power over the subsidiary.

The Group participates in two syndicates at Lloyd’s, which are managed by the Group’s Lloyd’s managing agent subsidiary. In view of the several

liability of underwriting members at Lloyd’s, the Group recognises its proportion of all the transactions undertaken by the syndicates in which it

participates within its consolidated statement of comprehensive income. Similarly, the Group’s proportion of the syndicates’ assets and liabilities

has been reflected in its consolidated statement of financial position. This proportion is calculated by reference to the Group’s participation as a

percentage of each syndicate’s total capacity for each underwriting year of account.

Subsidiaries’ accounting policies are generally consistent with the Group’s accounting policies. Where they differ, adjustments are made on

consolidation to bring the subsidiaries accounting policies in line with that of the Group.