Conduit Re sees tight mid-year renewals, won’t lose its head for rate

Property, casualty and specialty reinsurer  Conduit Re suspects capacity constraints at the mid-year renewals could create “a tougher renewal season” with upward price pressures, but  Conduit need not dive in over its own head even on strong price action.

“We do see some signs of capacity constraint,” chief underwriting officer Greg Roberts (pictured) told the Q1 earnings call of market conditions going into the key US renewals. While it remains “a little bit early” for specific forecasts, “it’s certainly looking to be a tougher renewal season than in the past.”

Conduit Re has more than pure price on its mind. “This isn’t just about price, this is about structure and the elements of risk transfer between cedents and reinsurers and we are, in general, probably looking for a better balance than to this point.”

“Price alone might not solve it,” Roberts said.

The bottom line:  Conduit can keep its head level. “We are a progressive builder of our portfolio so we wouldn’t likely change the texture there very rapidly,” Roberts told investors and analysts. “But as the book grows as a whole, we are able to consider additional risks across the board.”

Management will be “closely monitoring” North Atlantic wind storm conditions but walk into the July renewals with an underweight position on Florida wind (1:100 PML represents 4.5% of tangible capital as of end March 2022).

Conduit Re claims to have avoided the major Q1 nat cat events like Australian floods, European windstorms and a Japanese earthquake largely on underwriting discipline trained to take the book the other way.

“Our terms and conditions and how we structure our risk generally means we’ve had limited exposure to those sorts of events,” Roberts said. “We are aware of them, we see them in our portfolio, but …. on the balanced nature of our portfolio we are perhaps less sensitive to some of those scenarios.”

Some 70% of premiums written in the first quarter are outside of the nat cat field, a metric officials claim has been relatively steady of the company’s short history. Gross written premiums more than doubled year on year in Q1 to $177.5 million, led by 275% catch-up growth for casualty ahead of 90% y/y growth in casualty.

Quota share increased as a portion of first quarter ultimate written premium by 6.3 percentage points to 67.6% of the whole in Q1 2022. Quota share of excess of loss treaties were pinched down.

“Our target markets remain attractive to us, particularly at the primary level, and you see this in our product selection of quote share over excess of loss,” Roberts said.

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