Conduit Re’s Carvey: QS v XoL mix to shift as market dynamics evolve

Conduit Re will continue to adjust the balance of its portfolio between quota share and excess of loss (XoL) as it manages fluctuations in the cycle, CEO Trevor Carvey has said, with the Bermudian reinsurer confident of expanding its footprint at the upcoming mid-year renewals.

In an interview with The Insurer TV, Carvey said the future balance of the business mix will be driven by the dynamics of the underlying market.

“We said from day one that at different points of the cycle different dynamics apply,” Carvey explained. “The QS v XoL discussion was always part of the way in which we set up our portfolio to write treaty reinsurance.”

“When we came into being at the start of last year we saw really strong movements on the underlying primary business. When compared with XoL business that was being presented in comparison, we saw the better value was coming from that underlying primary marketplace.”

As a result, in its first year of trading Conduit wrote a larger proportion of quota share business than in its original business plan.

Of its $262.6mn in expected ultimate premiums bound at 1 January this year, 64 percent was for quota share business with the remaining 36 percent being XoL.

Carvey said the evolution of that business mix will be driven by how the market reacts and where the greatest opportunities lie.

Broker support

Conduit’s executive chairman Neil Eckert was also bullish in his assessment of the Bermuda-based firm’s first five quarters of trading.

“We’ve been really well supported by the major reinsurance brokers,” Eckert said.

The industry entrepreneur, who was founding CEO of Lloyd’s insurer Brit and has launched a series of other businesses, said the company’s business model had been “properly road-tested” by the market conditions and major loss events of the past year.

“Our January renewal season was ahead of our internal projections, and rates are still going in the right direction,” he said.

He acknowledged that the Russia-Ukraine conflict presented a complex scenario for industry practitioners, but confirmed that aviation was only a very small part of the overall Conduit book of business, with aviation war “an even smaller part of that”.

“The overall industry claims in comparison to an event such as Hurricane Ida or a similar natural catastrophe will likely be much smaller, but the difference with this claim is it will be concentrated in a small part of the market,” he said.

Managing inflation

Carvey said he believed the industry was reacting responsibly to the current challenges around inflation, and highlighted how managing inflation risk was “front and centre” in the way the industry operates.

“We are having a number of conversations with clients to understand how they are pricing inflation into their products,” he said.

“Awareness in the industry is flowing down from boards and into the underwriting fraternity. It is important companies continue to be vigilant, and budget to allow for any growth in exposure as a result of inflation.”

Despite these challenges, he said Conduit now feels “more positive about the market opportunities than when we put the business plan together”.

And being a recent launch, the company does not have the headache of having to readjust back years to factor in the impact of inflation on reserves, he said.

Watch the full interview for more from Eckert and Carvey on:

  • Expectations for the upcoming mid-year renewals
  • Plans for the next phase of growth at Conduit Re
  • How the Russia-Ukraine crisis could impact the ESG agenda
  • And the importance of having expertise based in one location

The Insurer TV: Conduit Re