Conduit Re: no end in sight to E&S boon from admitted market woes

Primary carrier departures from key US jurisdictions are playing to the hand of Bermuda-based reinsurer  Conduit Re with its focus on spillover E&S property covers where the group can find no end to upside in sight.

“It’s the best market conditions I’ve seen in my career,” executive chairman Neil Eckert told his company's Q2 earnings call.

And problems in regulated retail markets in key US states are bringing “a structural change in the US primary market,” Eckert said. “Admitted carriers are resigning from business in some key states, driving strong growth across E&S markets, core markets for Conduit.”

At issue are moves by the likes of Allstate and State Farm, with a combined 13.5% of the California homeowners market, to put the kibosh on new business in that state. The market's #2 Farmers has caps in place to avoid mopping up too much of the slop. Nationwide has also established limits on new business.

“There's lots of developments still to happen there with a pretty long elongation of that trend,” chief underwriting officer Greg Roberts added of the ensuing shift into E&S.

Admitted market primary insurance carriers have struggled to put rate past state regulators at a pace to keep up with the double-whammy of rebounded frequency and inflation- and climate-driven severity.

“The E&S market is reflecting the fact that admitted carriers are struggling to make up rate,” Roberts said. “Non-admitted market is obviously able to respond to that much faster.”

Conduit managed gross written premium growth of 53% in H1 to $542.2 million as it kicks off its third year. GWP in property was up 62.4%,k well ahead of 39.2% growth in the casualty book.

Spill-over to the non-admitted book has been a driver of growth for Conduit Re since it first started dabbling in property.

“We are in that space and happy with the business that we see,” CEO Trevor Carvey (pictured) said. The bifurcation of the admitted and non-admitted markets was underway as much as 18 months ago and is already built into the Conduit Re book.

As Conduit grows the book, exposure may grow in the 1:100 PML, but not in longer-shot risks like the 1:250, an earnings presentation showed. But Conduit will be building the book to its long-promised allocations, with no deeper dive into cat, officials indicated.

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