Conduit Re, the pure-play Bermuda reinsurance company, has announced its intention to purchase more retrocession to protect its earnings from volatility due to secondary peril loss impacts, while the company has also announced that CEO Trevor Carvey is stepping down.
The company reiterated its expectation that the California wildfires in January 2025 will generate a $100 million to $140 million ultimate loss for the group, net of reinsurance and reinstatement premiums.
That implies Conduit Re made some retrocessional reinsurance recoveries after the wildfires that so badly impacted the Los Angeles region, given the mention of reinstatement premiums being paid.
The company stated, “It is, however, our intention to enter into additional reinsurance purchases to assist in protecting Conduit from further earnings volatility through this current financial year, and specifically as regards secondary perils.”
Which implies Conduit Re will now go to market to purchase more retrocession, with a secondary peril focus, to protect its balance-sheet earnings through the rest of this year.
Conduit Re said that the cost of the additional retro reinsurance cover, as well as other adjustments it intends to make to its portfolio, “will reduce our previous guidance of potential forecast RoE for the year to between high single digits and low double digits.”
“We believe securing the additional protection in a year with such a significant loss event so early in the year is a prudent measure. We maintain our cross-cycle mid-teens RoE guidance target,” the company explained.
With secondary peril coverage the focus for this additional retrocession purchase, it remains to be seen what market’s Conduit Re taps for it.
As a reminder, back in 2023, Conduit Re sponsored its first catastrophe bond, the $100 million Stabilitas Re Ltd. (Series 2023-1), which provides the firm with US named storm and US earthquake retrocessional protection.
With the cat bond market focused more on peak perils, it’s perhaps more likely Conduit Re seeks out traditional or other collateralized forms of retrocession, possibly from ILS or third-party capital players for additional secondary peril retro.
But, it is worth noting that the cat bond market has recently accepted wildfire exposures, via the recent $100 million Greengrove Re catastrophe bond sponsored by Sutton National, while plenty of other recent cat bonds cover other secondary perils, which shows cat bonds could be one option Conduit Re explores, perhaps.
On the aforementioned stepping down of its CEO, the company said Trevor Carvey notified the Board of his intention to step down as Chief Executive Officer and director and retire with effect from April 11th 2025.
Conduit said the move is a “result of a change in personal circumstances requiring his return to the UK” and that Neil Eckert, Executive Chairman of Conduit Holdings, will assume the responsibilities of interim Chief Executive Officer with immediate effect.
A search has been initiated to find a permanent CEO replacement for Carvey.
Neil Eckert commented, “The Board of Directors is grateful to Trevor for his dedication and contribution. He led the business through its start-up phase and significant premium growth, and we wish him well in the future. Since its formation in 2020, Conduit Re has become a quality business with a sizeable and growing income stream. The balance sheet is strong, with ample capacity for further growth. We look forward to driving Conduit forward into the next phase of its development.”
Trevor Carvey added, “It has been an honour to lead Conduit Re over the last four years and I am confident that the company is well-positioned for future success.”
