Trading Statement

Lancashire Holdings Limited
17 May 2006


                          Lancashire Holdings Limited


Hamilton, Bermuda, 17 May 2006


             LANCASHIRE REPORTS CONTINUED STRONG TRADING CONDITIONS


Lancashire Holdings Limited ('Lancashire' or 'the Company') today released a
statement on current trading conditions and on operations.


Lancashire, which writes a diversified portfolio of insurance, reinsurance and
retrocession business, is continuing to experience strong overall trading
conditions. Lancashire's worldwide underwriting focus is on short-tail property,
energy, marine and aviation classes.


Lancashire's largest single class is offshore energy, having quickly established
itself as one of the leading writers of this line in the market. Trading
conditions for offshore energy have been significantly better than anticipated
and are continuing to improve further as market capacity decreases. In the Gulf
of Mexico, pricing has increased by several hundred percent while coverage has
been severely restricted. In the direct facultative property market, pricing has
been steadily improving and Lancashire's writings are accelerating. Property
retrocession has experienced excellent conditions to date, while property
catastrophe reinsurance is becoming more attractive in select areas. Lancashire
has the flexibility to allocate capacity between property retrocession and
property catastrophe reinsurance to best take advantage of available
opportunities. The Marine classes have been inconsistent. January saw a
disappointing renewal season for marine reinsurance however we have seen
stronger renewals more recently in certain direct classes. Aviation business is
modestly ahead of plan so far, with a major renewal date still to come in the
last quarter of the year.


Richard Brindle, Chief Executive Officer and Chief Underwriting Officer,
commented:

'Lancashire has made an excellent start. Broker support for our clean capital
and strong management team has been broad, the quality of bound deals has been
high, and the pricing and terms in our focus areas have been extremely
encouraging. However, underwriting discipline has been and always will be our
first priority and where we have found risks to be unacceptable, we have
declined them. We continue to keep our powder dry in key classes where capacity
is increasingly limited. Since our previous trading statement, we are pleased to
have recruited five senior personnel to our team: Simon Burton as Deputy Chief
Underwriting Officer, Bryan Bumsted as Property Retrocession Underwriter, Simon
Thurgood as Terrorism Specialist, Vince Lombardi as Marine Specialist and Colin
Alexander as Operations Director. Each new team member brings with them deep
experience in their respective fields.'


Richard Brindle continued:

'Looking forward, we are very optimistic that Lancashire will develop into a
world-class specialty insurer which will stand the test of time. While we
continue to build out our front and back office functions, we are committed to
remaining a nimble organization, capable of right-sizing our business through
hard and soft cycles. We will maintain underwriting discipline throughout, and
our top line and capital levels across the cycle will naturally reflect the
volume of business which meets our return criteria. We believe that this proven
strategy will generate superior returns for shareholders over the long term.'


Gross written premium bound and expected to be bound for the six months through
30 June is projected at between $320 and $350 million. Based on current trading
conditions, it is anticipated that gross premium for 2006 on an underwriting
year basis will be between $675 and $800 million compared with an illustrative
projection of $822 million at the time of the IPO. On a GAAP basis, we expect
2006 gross premium of between $615 million and $725 million. The updated premium
projections primarily relate to disappointing conditions in marine business
where we have declined a high number of submissions together with a slow start
in the terrorism class, partially offset by better than expected conditions in
offshore energy. As the year progresses and the level of bound deals continue to
build, we expect to narrow this range of projected premium.


For the business bound, rates and terms have been better than anticipated and
expected profitability on the deals written is higher overall than Lancashire
expected at the time of its launch. Returns on equity in this first year of
business are projected at between 16 and 20% after tax, in line with the
business plan for 2006. This range assumes a normal level of loss activity
across the portfolio.


Neil McConachie, Chief Financial Officer and Chief Operating Officer, commented:

'Capital levels remain appropriate and Lancashire is operating well within risk
management tolerances at this time. Our shareholder funds are now fully
invested, with a primary focus on limiting the downside potential. On the
operational front, the development of Lancashire's infrastructure continues
apace. We are steadily adding to our team with 27 employees now recruited. As
well as additional front office personnel, we have expanded in the finance,
modeling and operations departments.'


Lancashire's next trading update will incorporate the announcement of interim
results for the six month period ended 30 June 2006.


There will be a conference call on Wednesday 17 May at 1600 UK time (BST) on 
[phone]. This conference call will be hosted by Richard Brindle,
Chief Executive Officer and Chief Underwriting Officer; Neil McConachie, Chief
Financial Officer and Chief Operating Officer; and Simon Burton, Deputy Chief
Underwriting Officer. A replay of the conference call will be available for two
weeks until 31 May 2006. The dial in number for replay is [phone]
and the pass code is 3344385#. The replay facility can also be accessed at
www.lancashire.bm.



For further information, please contact:

Lancashire Holdings                         [phone]
Neil McConachie

Financial Dynamics                          [phone]
Rob Bailhache
Nick Henderson                                


www.lancashire.bm


About Lancashire


Lancashire was established in 2005 as a new insurance and reinsurance business
to take advantage of the favourable underwriting conditions expected to arise
from the large insured losses incurred in 2004 and 2005. The Company has an A.M.
Best rating of A- (Excellent) with a stable outlook.


Lancashire was admitted to AIM on 16 December 2005 following an Offer of Common
Shares to investors. The Common Shares trade on AIM under the ticker symbol LRE.





                   NOTE REGARDING FORWARD-LOOKING STATEMENTS


CERTAIN STATEMENTS MADE IN THIS ANNOUNCEMENT OR ON THE CONFERENCE CALL THAT ARE
NOT BASED ON CURRENT OR HISTORICAL FACTS ARE FORWARD-LOOKING IN NATURE
INCLUDING, WITHOUT LIMITATION, STATEMENTS CONTAINING WORDS 'BELIEVES',
'ANTICIPATES', 'PLANS', 'PROJECTS', 'INTENDS', 'EXPECTS', 'ESTIMATES',
'PREDICTS', 'MAY', 'WILL', 'SEEKS', 'SHOULD' OR, IN EACH CASE, THEIR NEGATIVE OR
COMPARABLE TERMINOLOGY. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS
INCLUDING, WITHOUT LIMITATION, THOSE REGARDING THE GROUP'S FINANCIAL POSITION,
RESULTS OF OPERATIONS, LIQUIDITY, PROSPECTS, GROWTH, BUSINESS STRATEGY, PLANS
AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS (INCLUDING DEVELOPMENT PLANS
AND OBJECTIVES RELATING TO THE GROUP'S INSURANCE BUSINESS) ARE FORWARD-LOOKING
STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER IMPORTANT FACTORS THAT COULD CAUSE THE ACTUAL RESULTS,
PERFORMANCE OR ACHIEVEMENTS OF THE GROUP TO BE MATERIALLY DIFFERENT FROM FUTURE
RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS SPEAK ONLY AS AT
THE DATE OF THIS ANNOUNCEMENT OR OTHER INFORMATION CONCERNED. LANCASHIRE
HOLDINGS LIMITED EXPRESSLY DISCLAIMS ANY OBLIGATION OR UNDERTAKING (SAVE AS
REQUIRED TO COMPLY WITH ANY LEGAL OR REGULATORY OBLIGATIONS (INCLUDING THE AIM
RULES)) TO DISSEMINATE ANY UPDATES OR REVISIONS TO ANY FORWARD-LOOKING
STATEMENTS CONTAINED HEREIN TO REFLECT ANY CHANGES IN THE GROUP'S EXPECTATIONS
WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS OR CIRCUMSTANCES ON
WHICH ANY SUCH STATEMENT IS BASED.



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