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Conduit Re off to a strong start after successful IPO, say execs

23rd February 2021 - Author: Luke Gallin

Conduit Re, the newly-launched property and casualty reinsurer, has reported a strong start to business in attractive and improving market conditions at the January 1st, 2021 reinsurance renewals.

Conduit ReAfter completing its successful IPO, which raised net proceeds of $1.057 billion (£790mn) and led to a Financial Strength Rating of A- (Excellent) from A.M. Best, Conduit Re commenced underwriting at the key Jan 1st renewals.

With the IPO in December but the firm not starting to write business until 1/1, its consolidated financial statements from incorporation to December 31st, 2020, include mostly the expense form the IPO and operating expenses from the first month of setting up operations.

This resulted in a loss after tax of $4.6 million for the period, driven mostly by payroll, legal and regulatory expenses, resulting in a small negative return on equity of 0.4%.

“While it will take some time for us to fully build out our underwriting book, and therefore fully deploy our capital, we are focused on risk selection and will maintain a balanced approach. Conduit is an underwriting business, first and foremost, and that is rightly where our principal focus is. Capital preservation and liquidity will, therefore, remain the primary objective of our investment strategy in order to support our underwriting goals,” said Elaine Whelan, the company’s Chief Financial Officer (CFO).

Neil Eckert, Executive Chairman, added: “Conduit Re has got off to a flying start. We have launched the business in attractive and improving market conditions. We have already established a top class management and underwriting team.

“We are embracing the benefits that technology brings for the new generation of reinsurance underwriters and we have established strong relationships with our key trading partners around the market. It is an exciting time to be building a new reinsurance business and we couldn’t have asked for a better beginning to the establishment of Conduit as a new breed of reinsurer.”

Additionally, explained Eckert, the new reinsurer is working hard on its environmental, social and governance (ESG) strategy.

To accelerate ESG efforts, the company has announced the appointment of Sir Nicholas Soames as Chair of the newly established Conduit Foundation, designed to engage in both social and environmental projects.

Trevor Carvey, Chief Executive and Chief Underwriting Officer, explained that after getting off to a strong start at Jan 1st, Conduit Re continues to build its underwriting portfolio according to plan.

“We have seen wide acceptance by brokers and clients alike as an attractive and value-adding business partner and we are well positioned to deliver on our stated strategy of building a balanced and diversified portfolio,” said Carvey.

“We are the beneficiaries of attractive and improving market conditions in the classes of business we are targeting, which allows us to remain highly selective in the way we deploy our capital, a hallmark of the Conduit Re underwriting philosophy. The underlying pressures driving improvements in both rates and terms are coming from the primary markets and permeating at an increasing rate into the reinsurance markets. We believe this will lead to a more sustained improvement taking into account the many factors that led to deteriorations in industry loss ratios in recent years.

“Consequently, we have been more focused initially on taking a pro-rata share of primary insurance via the underwriting of quota share reinsurance treaties rather than on excess of loss in our early trading. However, we still expect to deliver a balanced portfolio across all classes and territories and we look forward to the upcoming April and mid-year renewals with optimism,” he added.

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