Conduit Re says retro buffered Ida impact, expects Euro rate rises

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Conduit Re, a Class of 2021 reinsurance start-up that raised close to $1.1 billion of capital in an initial public offering (IPO) and listing before it began underwriting, highlighted the importance of its retrocession in buffering its results against the impacts of hurricane Ida.

conduit-re-logoIn an interim trading statement published this morning, Conduit Re is reported to have written $291.2 million of gross premiums so far in 2021, with an estimated target of $387.7 million so far this year.

The lag between gross and estimated is due to the quota share focus Conduit Re has launched with, which means booking premiums can run a little behind.

Conduit Re said that reinsurance market conditions remain strong and it is seeing “continuing rate increases and improvements in terms and conditions.”

As a reinsurance start-up, sometimes major catastrophe loss events can be particularly challenging. Start-ups often have to write business to build up their books in a hurry, but Conduit has taken an approach that appears to have a more diversified and protected focus.

It’s evident in the catastrophe losses the reinsurer has reported this morning, as the company said that its net incurred losses from Hurricane Ida and the European Floods amounted to only $28.6 million, after outward reinsurance and reinstatement premiums are taken into account.

That breaks down as $15.8 million in respect of Hurricane Ida and $12.8 million in respect of the European Floods.

Part of the reason for the relatively low catastrophe loss burden is that Conduit Re’s retrocessional reinsurance program has come into play, particularly around hurricane Ida, it seems.

Commenting on the third-quarter, Neil Eckert, Group Executive Chairman, said, “We continue to build our business as we set out in our initial plans and remain on track to deliver on these. This quarter saw two major catastrophe loss events and our relatively limited exposures to these demonstrates the quality of the portfolio that Trevor and the team have been carefully building. This justifies the Conduit Re approach of building a focussed, diversified and balanced business model.”

Trevor Carvey, Group Chief Executive Officer, added, “We passed our first test as a global reinsurer during the quarter with the experiences of the European Floods and Hurricane Ida. Both of these events serve as a poignant reminder of the potential severity and frequency of natural events in the reinsurance marketplace.”

Carvey went on to explain that retro has helped to protect Conduit against a more significant impact from the hurricane, “Whilst Ida in particular is a major event for the Industry, it sits well within our retrocession programme and has therefore only had a limited impact on our financial performance. Our reinsurance programme remains strong for the rest of the year.”

Helping Conduit, when it comes to major US catastrophe events, is its underwriting approach to construct a “flatter ‘peak event’ risk profile with the goal of delivering a robust, balanced and differentiated portfolio,” across US property risks, the company explained this morning.

Interestingly though, Conduit has not reported income figures, expenses, or a combined ratio to-date, so it’s making the company a little hard to understand for analysts it seems. But this morning the majority seem extremely pleased with the way the company has built out its book and avoided too large an impact from the major catastrophe losses experienced.

Looking forward, Conduit Re is positive on market conditions and expects to find opportunities to deploy more capital at the January reinsurance renewals.

“We anticipate that these events, together with the continuing pressure of claims inflation and concerns about the increased frequency of catastrophe events, will support continued upward pressure on pricing. We are well positioned ahead of the key 1 January renewals,” CEO Carvey explained.

The company also noted that in Europe, where it has been underweight in its portfolio mix so far as it finds pricing less attractive there, things may be about to change after the floods and catastrophe losses experienced.

Conduit explained that, “We anticipate that recent events will provide the catalyst for a long overdue pricing review in European reinsurance.”

“The business is in a strong position to capitalise on what we see as increasing opportunities in the upcoming key 1 January 2022 renewal season,” the company’s trading statement continued.

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