Speaking with Artemis in Monte Carlo this morning at the annual Rendez-Vous de Septembre event, Trevor Carvey, CEO of Conduit Re, explained that the reinsurer plans to continue its work in the catastrophe bond space.
Carvey was discussing Conduit Re’s successful first sponsorship of a catastrophe bond earlier this year, the reinsurance company secured $100 million of retrocession through the Stabilitas Re Ltd. (Series 2023-1) issuance.
He explained, “On the cat bond, that was a successful process for us during this year. We laid the groundwork pretty much at the end of 2022, it was just a question of where the market pricing was at that stage. It was definitely more beneficial for us this year.”
“I think for us, we have our protection in place for the business, now in the cat bond space and also in the traditional market.”
“I think that blend is very useful, it’s beneficial for the business. Gives you a bit more stability around the protection that we buy.”
“So, we want to carry on that work, of what more we could do around the cat bond space going forward. We’re definitely open to that.”
On market conditions, Carvey suggested the cat bond market could see strong investor demand, while this could also play into sponsors hands, especially for the more attractive structures.
“It remains to be seen what happens in Q4. But it is just a function of supply and demand and it’s a truism isn’t it, in terms of supply and demand, there does seem to be some increased interest in funds flowing into the bond space,” Carvey said.
Adding that, “I think that’s probably a function of how transparent the structure is in a cat bond. There are some quite complicated structures which are available but that will probably attract less investor interest.”
He also said that the industry-loss structured catastrophe bond could prove popular again with investors, which was the same trigger mechanism as the one used in Conduit Re’s first Stabilitas Re cat bond.
From which you might read that, if market conditions are conducive, Conduit Re might find it attractive to explore the cat bond market for retrocession again later this year, or early into 2024.
Asked whether any other ILS structures, such as a reinsurance sidecar had been considered by Conduit Re, Carvey told us, “As ever, in the ILS space, there’s always lots of conversations that people bring to us. It’s not something which is in our current plan.”