In the earnings call held yesterday, Conduit Re’s CEO Trevor Carvey shared insights into the company’s risk management strategy, shedding light on their consideration of cat bonds as an additional layer of protection.
Carvey stated that while they have been comfortable with their existing retrocession, they are keen on exploring alternatives to further bolster their risk coverage.
“The strategic approach for us around that is, we’re pretty comfortable with the retro tower that we buy, that’s been in place through 21, 22 and 23, obviously renewed each year. But it’s always good to have alternatives out there and additional sources of retrocession protection to sit alongside it,” he explained.
The CEO revealed that Conduit Re had initially examined the cat bond market around six to seven months ago but found the pricing at that time to be unappealing, comparable to what they were obtaining in the standard retrocession market.
However, the company closely monitored the market and eventually issued a cat bond in June, the $100 million Stabilitas Re Ltd. (Series 2023-1), benefiting from the more attractive pricing levels available at that time.
Carvey expressed his satisfaction with the pricing in June, referring to it as being in their “sweet spot.” The move to acquire cat bond protection has given Conduit Re a strategic advantage by securing a block of capacity in the capital markets, offering a multi-year solution that complements their existing risk management program.
While Conduit Re’s traditional retrocession tower primarily covers large events from a severity standpoint, the cat bond provides an additional layer of protection that responds to severe events in a similar manner.
Carvey emphasised the complementary nature of cat bonds, which serve as an essential element in their risk mitigation strategy.
“So, it’s complementary to it and, to a large extent, it enables us to have a block of capacity in that cat bond market rolling forward.”
Conduit Re reported its H1 2023 results yesterday, posting an 83.1% combined ratio for the six months ended 30 June 2023, a 22.7-point improvement from a year-ago period, as it expanded gross premiums written by 52.9% into the current insurance hard market.
In the first half of 2023, Conduit Re’s pricing levels and favourable terms and conditions improved significantly, driving increased interest from potential clients and presenting promising avenues for expansion.
