Bermuda-based reinsurer Conduit Re deliberately skewed its portfolio in favour of ground up quota share verses excess of loss, in an effort to leverage what group Chief Executive Trevor Carvey considers to be more favourable pricing opportunities.
Speaking during a recent earnings call, Carvey noted how the recovery underway in the market is very much ground up lead.
He added that, in terms of improving policy wordings and pricing, the market has very much been moving more in that direction recently.
Strategically, Carvey said Conduit Re wrote more quota share out the gate at 1/1 for two reasons.
“One, was the rates we’ve been seeing in that primary, ground-up business,” he said. “The quota share, in a number of cases, has made more sense. That’s why we’ve done it.
“It also reduces some of the volatility. The quota share obviously attaches many thousands of contracts to us in a very diversified way.”
Carvey sees this as a good way of getting the portfolio base established, noting “Excess of loss tends to produce more volatility and spikes in the portfolio at an early stage, so we always thought Q1 was going to be trended towards more quota share.
“In terms of a long-term, strategic decision, the excess of loss will definitely form a bigger part of the portfolio as we migrate through this year and into next year, but it’s in this first quarter it’s been a useful tool to us for those two reasons.”
