Lemonade is scaling back its quota share reinsurance from roughly 55% to 20%, a move driven by stronger capital generation and improved underwriting performance, not changes in its risk exposure strategy.
CEO and Co-Founder Daniel Schreiber confirmed on the company’s Q2 2025 earnings call that the shift reflects increased confidence in Lemonade’s financial position and operational maturity.
Schreiber emphasized that the decision to reduce ceded premiums came entirely from internal strategy. He noted that key product lines and geographies have become more stable and predictable, with the company’s trailing 12-month loss ratio falling to 67%.
A 70% trailing 12-month loss ratio is aligned with our long-term goals. The confidence to make such a move directly stems from our multiyear track record of improving loss ratios as key products and geographies have become more mature and predictable
Daniel Schreiber, Lemonade CEO and Co-Founder
He highlights how this shift has turned Lemonade’s insurance entities from capital-consuming to capital-generating. The company reported $25mn in adjusted cash flow for the quarter, a tenfold increase year-over-year.
According to CFO Timothy Bixby, the transition from 55% to 20% won’t happen immediately. Because quota share programs are written on a risk-attaching basis, policies written between July 2025 and June 2026 will gradually reflect the new quota share level. Lemonade expects to cede about 45% in H2 2025, moving to 20% by Q3 2026.
By Q3 2026, we expect to be ceding roughly 20% of premium. And in the second half of 2025, we expect to cede roughly 45% due to those transition dynamics.
Timothy Bixby, Lemonade CFO
“Second, a reduction in our quota share program does increase our revenue retention but has no impact on IFP. As a result, we are about to enter a period during which revenue growth rates are expected to outpace IFP growth rates. And finally, all else equal, a smaller quota share increases regulatory capital needs.
While the change increases revenue retention, Bixby clarified it won’t impact in-force premium (IFP). Instead, Lemonade expects revenue growth to outpace IFP growth in the short term. The move also slightly raises regulatory capital needs. However, improved loss ratios and increased use of its wholly owned captive are expected to offset any capital strain.
Schreiber reiterated that Lemonade has always used quota share reinsurance primarily for capital efficiency—not for managing catastrophe risk.
“Quota share doesn’t materially change gross versus net loss ratios,” he said, adding that during recent California wildfires, it was other forms of reinsurance—not the quota share—that protected the company from significant net losses.
He pointed to separate risk-concentration policies that protect against large losses in a specific region or claims above certain thresholds. These remain unchanged despite the reduction in quota share.
Schreiber also acknowledged the role of Lemonade’s reinsurance partners, stating they’ve provided long-term support.
Still, he was clear: “When you engage in quota share reinsurance, you are margin stacking. You’re giving up EBITDA in exchange for capital efficiency. Now that we generate our own capital, we can afford to retain more.”
This strategic shift marks a notable milestone in Lemonade’s evolution—from a high-growth, loss-heavy startup to a more mature insurer focused on profitability, capital self-sufficiency, and sustained revenue growth.
