Conduit Re: No major retro changes, sidecars & other vehicles always “under review”, Carvey

There were no major changes to Conduit Re’s retrocession arrangements around the middle of this year, but the company is always keeping other third-party capital partnerships such as sidecars under review, CEO Trevor Carvey has explained.

Speaking during an earnings call today, CEO of the Bermudian reinsurance firm Trevor Carvey noted that the Conduit Re retrocession strategy remains stable.

There is some evidence of additional retro limit being bought, as Conduit Re’s results statement shows that its ceded reinsurance expense rose for the first-half of 2024.

Ceded reinsurance expenses for the first-half were $43.8 million, up from $35.9 million for the same period in 2023.

The reinsurer reported that, “The increase in cost relative to the prior period reflected additional limits purchased due to the growth of the inwards portfolio.”

Conduit Re’s reinsurance revenues grew by 37% across the entire portfolio, while property reinsurance revenues grew slightly faster at 38% year-on-year in H1 2024.

The ceded reinsurance expense reported was up 22% across the reinsurance portfolio and 21% in property risks, showing the company managing and optimising its risk using cessions to retrocessional partners, but still building out its retained business to the benefit of shareholders at a faster rate.

On the use of retrocession at Conduit Re, CEO Carvey explained during the call, “The retro outlook for us, there were obviously some moving parts around that in the mid-year, with capacity changing shape, the supply of it changing from the start to the end. So, it was reasonably mobile and certainly active.

“Our approach has been pretty much the same as before. Obviously, we have a combination of traditional retrocession covers that we place and largely we’ve renewed them, and then the cat bond that operates around that. That’s the same position as we sit here now and go forward into the renewal season. So, no major change for us.”

Conduit Re made its first foray into the catastrophe bond market in 2023 with the $100 million Stabilitas Re Ltd. (Series 2023-1) transaction.

That remains a core multi-year component of its retrocession arrangements and a key lynchpin for developing relationships with the insurance-linked securities (ILS) market and its investors.

Asked by Artemis whether the company might explore other third-party capital structures in future, to support its continued growth, Carvey explained that things are constantly under review, with new opportunities analysed.

“Sidecars and other vehicles, yes, absolutely, we’re pretty aware of the way they operate and the benefits that they can bring,” Carvey responded to our question.

Adding that, “We’ve kept an eye on that market over the course of the four years since we started the business. We always keep it under review.

“It’s something which we look at and it forms part of our thought processes we go into a new year. So, it’s something which we’ll keep under review now.”

As a growing traditional reinsurance company, we expect Conduit Re will over-time deepen its relationships with third-party capital providers.

So, additional ILS structures, such as quota share sidecars or other collateralized retrocession vehicles, could well be embraced in time and the Stabilitas Re cat bond may also be a structure that it looks to expand on in future, as the inward business portfolio underwritten continues to grow.