AM Best has assigned a Preliminary Credit Assessment (PCA) to Conduit Re with a Financial Strength Assessment of A- pca (Excellent) and a Long-Term Issuer Credit Assessment of “a-” pca. The outlook assigned to these PCAs is stable.
The new reinsurance company will focus on producing strong risk-adjusted returns from a diversified and focused business plan, and expects to write property, casualty, and specialty lines of business.
The PCAs reflect Conduit Re’s balance sheet strength, which AM Best categorises as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).
The very strong balance sheet assessment is underpinned by AM Best’s expectation that Conduit Re will maintain the strongest level of risk-adjusted capitalisation, as measured by Best’s Capital Adequacy Ratio (BCAR), over its five-year start-up phase, taking into account AM Best’s additional capital requirements for new company formations.
Funding of $1.1 billion is expected to be raised through an initial public offering of its holding company, Conduit Holdings Limited.
Conduit Re’s adequate operating performance assessment is based on its well-defined business plans, and takes into account its competitive environment and heightened execution risk during the start-up phase.
AM Best views Conduit Re’s business profile as limited, given its lack of competitive position and established distribution network in a competitive reinsurance marketplace.
However, the experience of senior management and underwriters in the targeted classes of business increases the likelihood of market acceptance and successful execution of the company’s business plans. Conduit Re has a clearly defined ERM framework in advance of writing business, which includes plans to control key risks.
