Hurricane Ian drives up Conduit Re loss ratio

Conduit Re has revealed a combined ratio of 107% (119%) in its second year of operation, driven by the high number of natural catastrophes over the course of 2022.

The Bermuda-based pure-play reinsurance company made a small underwriting profit and reported a net investment loss of $52.8m.

Trevor Carvey, chief executive officer, commented: “Our planned growth path has continued over the last 12 months while all the time we have maintained our same disciplined approach to risk selection.

”We have seen exceptional growth, supported by our legacy-free balance sheet and a strong capital base. In a year where the industry has experienced extreme natural and man-made losses, the resilience of our results validates our business model.

”Looking forward, we are perfectly positioned to take advantage of the current exceptional market conditions. As the business grows, we will see the benefit from increasing efficiencies of scale and the significant pipeline of revenue we have in place which will continue to flow through to earnings.”

Bullish outlook

Carvey said he was excited by the prospects for growth in 2023, after a strong renewals. The 1 January 2023 renewal season exhibited significant hardening of pricing and terms and conditions.

Estimated ultimate premiums written at 1 January 2023 of approximately $421.4m (2022: $262.6 million), an annual increase of 60.5%.

The significant movement in pricing and terms and conditions is evidence of a structural shift in the marketplace caused by a fundamental re-pricing of risk and an imbalance in the supply and demand of capital, said the company in its outlook.

The reinsurer sees this as an “enduring environment creating the opportunity for improved margins” throughout 2023 and beyond.

Neil Eckert, executive chairman, commented: “We have delivered outstanding premium growth in 2022 and have continued that trajectory at the 1 January 2023 renewals.

“More importantly, we have delivered our first underwriting profit in a year notable for its elevated catastrophe activity. Our business has capital to continue its planned growth and to take advantage of the opportunities that we see.”

Another year of major cat losses

Both 2021 and 2022 were characterised by higher than average natural catastrophe losses for the industry, with 2022 also experiencing losses from the crisis in Ukraine.

The Group’s net loss ratio was 71.7% compared with 73.2% for 2021. The accident year loss ratio for 2022, including the impact of foreign exchange revaluations, was 72.9% compared to 73.2% for 2021.

Hurricane Ian made landfall in Florida as a strong Category 4 hurricane on 28 September 2022, resulting in estimated industry losses of approximately $55 billion. Conduit Re’s ultimate loss estimate for Hurricane Ian is $40.9m.

As regards the ongoing conflict in Ukraine resulting from the Russian invasion commencing on 24 February 2022, Conduit Re has potential exposure across its property and specialty reinsurance books, via classes such as aviation, war on land and marine war.

There is significant uncertainty in estimating losses emanating from the conflict, not least as it is an ongoing event. Based on current information, Conduit Re’s previously announced estimated ultimate loss in relation to the conflict is unchanged at $24.6m.

While there were a number of other smaller catastrophe events, such as European storms Eunice and Dudley, hailstorms in France, floods in Australia and South Africa, and winter storm Elliott in the United States, none of these had a material impact on the 2022 results.