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Reinsurance | 12 Months Ended
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Dec. 31, 2025
Insurance [Abstract] |
Reinsurance | Reinsurance In the ordinary course of business, the Company cedes losses and LAE to other reinsurance companies. These arrangements reduce the net loss potentially arising from large or catastrophic risks and to manage regulatory capital requirements. Certain of these arrangements consist of excess of loss and catastrophe contracts, which protect against losses exceeding stipulated amounts. The ceding of risk through reinsurance does not relieve the Company from its obligations to policyholders and the Company remains primarily liable with respect to ceded losses and LAE in the event that any reinsurer does not meet obligations assumed under the reinsurance agreements. The Company does not have any significant unsecured aggregate recoverable for losses, paid and unpaid including IBNR, loss adjustment expenses, and unearned premium with any individual reinsurer. The Company maintains proportional reinsurance contracts which cover all of the Company's products and geographies, and transferred, or “cedes,” a specified percentage of the premium to reinsurers. The Company also opted to manage the remaining percentage of the business with alternative forms of reinsurance through non-proportional reinsurance contracts. Whole Account Quota Share Reinsurance Contracts The Company agreed to the terms of a reinsurance program effective July 1, 2024 through June 30, 2025 which included Whole Account Quota Share Reinsurance Contracts by and among the Company, LIC, MIC and Lemonade Insurance N.V. ("LINV"), and each of Hannover Ruck SE (“Hannover”), MAPFRE Re Compania De Reaseguros S.A. (“MAPFRE”), and Swiss Reinsurance America Corporation (collectively referred to as “Reinsurers”) ("Reinsurance Program"). Under the Reinsurance Program, which covers all products and geographies, the Company transfers, or "cedes," approximately 55% to the Reinsurers. In exchange, these Reinsurers pay the Company a ceding commission on all premiums ceded to the Reinsurers, in addition to funding the corresponding claims, subject to certain limitations, including but not limited to, the exclusion of hurricane losses, and a limit of $10,000,000 per occurrence for non-hurricane catastrophe losses. The Per Risk Cap across the contracts is $750,000. Additionally, the contracts are subject to loss ratio caps and variable ceding commission levels, which align the Company's interests with those of its Reinsurers, and is settled primarily on a funds-withheld basis. The Reinsurance Program with Hannover and MAPFRE was renewed effective July 1, 2025 and will expire on June 30, 2026, with a reduced effective cession rate of approximately 20% and with other terms similar to the contracts that expired on June 30, 2025. Property Per Risk Excess of Loss and Auto Facultative Property Per Risk Reinsurance Contracts LIC and MIC entered into a Property Per Risk Excess of Loss Reinsurance Contract with a panel of reinsurance companies (the "PPR Contract") which was effective July 1, 2024 and expired on June 30, 2025. Under the PPR Contract, claims in excess of $750,000 were 100% ceded up to a maximum recovery of $2,250,000, and further subject to certain limitations. The PPR Contract was renewed at similar terms effective July 1, 2025 and will expire on June 30, 2026. LIC entered into an Automatic Facultative Property Per Risk Excess of Loss Reinsurance Contract with Arch Reinsurance (the “Automatic Facultative PPR Contract”), which was effective July 1, 2023 and expired on June 30, 2024. The Automatic Facultative PPR Contract, in which claims in excess of $3,000,000 were 100% ceded with a potential recovery of at least $10,000,000, subject to certain limitations, expired on June 30, 2024, and was not renewed. Captives The Company entered into an Excess of Loss ("XOL") Reinsurance Contract through a captive in Bermuda in which the Company has variable interest. This XOL reinsurance contract primarily to covers catastrophe risk on property and auto business underwritten by LIC and MIC over the initial $50,000,000 limit for each loss occurrence, and further subject to a limit of $80,000,000 for each loss occurrence and in aggregate. This XOL reinsurance contract effective July 1, 2024 expired on June 30, 2025, and was renewed at similar terms effective July 1, 2025 and will expire on June 30, 2026. The Company is also exposed to some risks on property, auto and pet insurance underwritten by LIC and MIC ceded through the Quota Share ("QS") Reinsurance Contract which is retained in an offshore captive subsidiary, Lemonade Re SPC. The MIC QS reinsurance contract which became effective July 1, 2023 was terminated and the parties agreed to a new QS reinsurance contract effective July 1, 2025 on the same terms except for the increase in cession rate to 35% and ceding commission. The new MIC QS reinsurance contract shall remain effective for an indefinite period until terminated by either party. The LIC QS reinsurance contract was effective on July 1, 2025 and will expire on June 30, 2026. Through the offshore captives, the Company is exposed to the risk of natural catastrophe events and other covered risks under the reinsurance contracts from policies underwritten by LIC and MIC. Reinsurance recoverable Amounts recoverable from reinsurers are recognized in a manner consistent with the claims liabilities associated with the reinsurance placement and presented on the balance sheet as reinsurance recoverable. Such balance as of December 31, 2025 and 2024 are presented in the table below ($ in millions).
| December 31,
| 2025 |  | 2024
Reinsurance recoverable on paid losses | $ | 19.6 |  |  | $ | 20.9 |
Ceded unpaid loss and LAE | 133.8 |  |  | 149.5 |
Total reinsurance recoverable | $ | 153.4 |  |  | $ | 170.4 |
To reduce credit exposure to reinsurance recoverable balances, the Company obtains letters of credit from certain reinsurers that are not authorized as reinsurers under U.S. state insurance regulations. In addition, under the terms of its reinsurance contracts, the Company may retain funds due to reinsurers as security for those recoverable balances. The Company has the following unsecured reinsurance recoverable balances from reinsurers at December 31, 2025 and 2024 with a majority of the reinsurers having A.M. Best rating of A (Excellent) or better ($ in millions):
AM Best Rating |  |  |  | December 31,
| Reinsurer |  | 2025 |  | 2024
A+ |  | Hannover Rueck SE |  | $ | 48.9 |  |  | $ | 104.0 |
A |  | MAPFRE Re, Compania De Reaseguros S.A. |  | 29.3 |  |  | 34.0 |
A+ |  | Swiss Reinsurance America Corporation |  | 13.2 |  |  | 26.3 |
A+ |  | Aviva Insurance Limited |  | 8.9 |  |  | 2.7 |
NR |  | Lloyd's Underwriter Syndicate no. 2791 MAP |  | 1.2 |  |  | 2.1 |
A++ |  | Tokio Marine & Nichido Fire Insurance Company Limited |  | 1.2 |  |  | 1.9 |
NR |  | Lloyd's Underwriter Syndicate no. 1084 CSL |  | 0.7 |  |  | 1.1 |
A++ |  | The Travellers Indemnity Company |  | 0.1 |  |  | 0.4 |
A+ |  | Odyssey Reinsurance Company |  | 0.1 |  |  | 0.2 |
A+ |  | Lloyd's Underwriter Syndicate No. 2001 AML |  | 0.1 |  |  | 0.2 |
|  |  |  | $ | 103.7 |  |  | $ | 172.9 |
|  | Other reinsurers |  | 0.2 |  |  | 0.4 |
|  |  |  | $ | 103.9 |  |  | $ | 173.3 |
Premium written, earned and losses and LAE incurred The impact of reinsurance treaties on the Company's consolidated statements of operations and comprehensive income (loss) is as follows ($ in millions):
| December 31,
| 2025 |  | 2024 |  | 2023
Premium written: |  |  |  |  |
Direct | $ | 1,142.0 |  |  | $ | 916.4 |  |  | $ | 730.9 |
Assumed | 29.3 |  |  | 12.6 |  |  | 7.5 |
Ceded | (407.8) |  |  | (513.9) |  |  | (389.1) |
Net premium written | $ | 763.5 |  |  | $ | 415.1 |  |  | $ | 349.3 |
Premium earned: |  |  |  |  |
Direct | $ | 1,026.8 |  |  | $ | 815.9 |  |  | $ | 667.2 |
Assumed | 24.0 |  |  | 11.4 |  |  | 5.1 |
Ceded | (514.5) |  |  | (456.7) |  |  | (357.1) |
Net premium earned | $ | 536.3 |  |  | $ | 370.6 |  |  | $ | 315.2 |
Loss and LAE incurred: |  |  |  |  |
Direct | $ | 650.2 |  |  | $ | 593.3 |  |  | $ | 563.4 |
Assumed | 21.8 |  |  | 11.7 |  |  | 6.0 |
Ceded | (325.0) |  |  | (328.0) |  |  | (289.0) |
Net loss and LAE incurred | $ | 347.0 |  |  | $ | 277.0 |  |  | $ | 280.4 |

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- Definition The entire disclosure pertaining to the existence, magnitude and information about insurance that has been ceded to or assumed from another insurance company, including the methodologies and assumptions used in determining recorded amounts. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 944 -SubTopic 605 -Name Accounting Standards Codification -Section 55 -Paragraph 15 -Publisher FASB -URI https://asc.fasb.org/1943274/2147477548/944-605-55-15 Reference 2: http://www.xbrl.org/2003/role/exampleRef -Topic 944 -SubTopic 605 -Name Accounting Standards Codification -Section 55 -Paragraph 12 -Publisher FASB -URI https://asc.fasb.org/1943274/2147477548/944-605-55-12 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 944 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 4 -Publisher FASB -URI https://asc.fasb.org/1943274/2147479838/944-20-50-4 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 944 -SubTopic 605 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Publisher FASB -URI https://asc.fasb.org/1943274/2147479032/944-605-50-3 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 944 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Publisher FASB -URI https://asc.fasb.org/1943274/2147479838/944-20-50-3 + Details
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