Conduit Re prices IPO, targets “exceptional market conditions”

Conduit Re, the pure reinsurance start-up targeting a $1.1 billion initial public offering (IPO) on the London Stock Exchange and set to begin operations in Bermuda, has now priced its IPO and looks forward to targeting what it calls “exceptional market conditions” for its launch.

Conduit has now completed the bookbuilding process, in relation to the initial public offering of its shares, at an offer price of 500 pence per share.

That gives the company a target capitalisation of around £826 million ($1.1 billion) when its shares begin trading on the LSE.

Conditional dealings in Conduits shares will begin today and the full listing is expected on December 7th.

Conduit Holdings and Conduit Reinsurance are being launched by a team led by Neil Eckert of Brit and IFEX fame and Trevor Carvey formerly of Markel, recognising the current opportunity to capitalise both on the state of the reinsurance market and appetite for investments in the sector at this time.

Conduit Re will launch with a largely traditional reinsurance business model, albeit with a recognition that they may underwrite some retrocession, industry-loss warranties (ILW’s) and also collateralised business as well.

Neil Eckert commented on the successful pricing of the IPO, “We are delighted that Conduit’s business proposition has been strongly received by a group of high-quality investors. Business conditions in our targeted reinsurance markets have continued to improve during our journey to IPO and we now move on to the launch of the business with confidence.”

Trevor Carvey added, “Conduit is well set for a successful launch and we have been positively received across the reinsurance community. I am excited to lead a legacy free business into these exceptional market conditions.”

IPO investment opportunities are particularly rare in reinsurance, as too are traded shares in companies with no legacy.

As a result, Conduit Re can capitalise on the novelty value of an IPO listing for a company with no track-record, but that has a significant opportunity to come into a hardening reinsurance market and create a portfolio of risk offering investors attractive returns.

The challenge now will be in securing deployment opportunities that do not just position Conduit as the cheapest capacity in the market, or yet another following-market with no differentiation.

Entering reinsurance is challenging at the best of times, but in the current market conditions the company may find itself forced to compete heavily for opportunities, especially as there isn’t really a lack of capacity available at this time for the classes of business Conduit Re will offer.

These are the challenges faced by every reinsurance start-up at this time, who can often find themselves forced to write the lowest-common denominator when it comes to business, brokers do love to make use of capital that needs to be deployed.

But with Eckert and Carvey at the helm it is to be hoped that Conduit Re takes a measured approach to deploying its shareholder capital and elects to hold back if market competition pushes its deployment towards some of the less attractive layers and programs in the market.

Jefferies acted as the lead left global coordinator to Conduit Holdings Ltd. on its IPO.