Bermuda-headquartered reinsurance firm Conduit Re significantly expanded its portfolio at the January 2023 renewal season and the company also expanded its panel of retrocessionaires and outwards reinsurance limit at 1/1.
As we reported early this morning, Conduit Re said that it secured risk-adjusted rate changes of 39% across its property reinsurance portfolio underwritten at the January 2023 renewals.
As well as taking advantage of the hard reinsurance market to grow, Conduit Re also expanded its property premiums written by 81% year-on-year.
Speaking this morning, Trevor Carvey, CUO of Conduit Re, commented on the firm’s retrocession buy at 1/1, which is a key renewal for the reinsurer.
With many of its quota shares and other reinsurance treaties renewed in January, Conduit Re also places an outwards reinsurance arrangement with retrocessionaires, to ensure the inwards book is protected at the tolerance levels the company desires.
Carvey explained that, “We have an expanded panel and we bought expanded limits. That’s important because obviously we’re growing the account.
“We operate with key tolerances around the net PML. Our retrocession programme is predominantly placed at 1/1, so a lot of work was done in securing that placement.
“Our style on that, is to sit down with the participants that we have, find out what is driving their needs and wants and essentially put together the programme around what we know that they want to sell.
“There’s no point trying to force coverages into negotiations if there’s a resistant party, so we’ve done a very good job, I think, of building that panel out with expanded participants.
“It’s there to secure around our long term tolerances, that we set out in the original five-year business plan.”
Carvey explained that retro costs have moved up in 2023, but Conduit Re is always balancing this, looking at the inwards business margin, versus the outwards.
He explained that, as new business is written, the Conduit Re team is considering the “the cost of protecting that,” as the outwards reinsurance “needs to be part of that embedded IRR.”
While costs of retrocession have risen, Carvey noted that they remain within Conduit Re’s original five-year business plan range, but that this is now “at the upper-end”.
Finally, Carvey also commented on capital and while he said new capital was limited around 1/1, there was some late capital that came in to help on retro.
Increased interest is expected to be a “trend” given the higher rates and returns on offer in reinsurance.
But Carvey said that this isn’t expected to be, “enough to make a significant dent in the supply-demand imbalance that we see, and probably limited to areas of property cat where non-rated underwriters can enter quickly.”