Conduit Re boosts retro, trims 1/1 exposure

Conduit Re took a more cautious stance into the New Year, expanding its retrocession cover following a series of major losses and signalling a conservative approach to its 1/1 treaty renewals and broader renewal outlook.

What was recently a fast-growth start-up is now fully “focused on sustainable shareholder returns” and puts underwriting profitability ahead of top line growth, management says. 

Conduit Re upped its retrocession purchases for 2026, a continuation of a new strategy put in place after outsized unmodelled losses on California wildfires in 2025 and south-eastern wind storms in 2024. 

“Conduit has expanded its retrocession coverage for peak and secondary perils to manage earnings volatility and protect our capital from tail events,” management said, citing increased limit in the core programme, as well as aggregate coverage.

Peak peril PMLs at 100-year and 250-year return periods are largely down. The 1-in-100 North Atlantic windstorm PML is down four percentage points to 10% of tangible equity. Other 1-in-100 peak perils are down by a point. The 1-in-250 markers are down notably in North Atlantic windstorm and North American earthquake. 

Secondary perils have also been slashed from the net tally, management claims, although modelling figures are still not being provided. 

Placing the new programme over the 2025 California wildfire exposure, however, management claims the same events that ripped through Q1 2025 earnings would have done less than half the net damage. 

Those wildfires had cost Conduit Re a net $120 million, 1.7x what Conduit Re had said was its maximum probable loss against a monster 1-in-250 year Florida hurricane. Wildfire had presumably been left unmodelled. Heads rolled in the C-suite.

Conservatism appeared to have led Conduit’s 1/1 reinsurance renewals as well, with management offsetting talk of “select new business” and supporting cedants “in a more meaningful way” with word of reductions and exits.

“As markets softened in 2025 and into 2026, our growth rate has moderated as we have reduced or exited business that did not meet our pricing or performance standards,” management said but did not provide specific premium dynamics. 

Risk adjusted rates in the Conduit Re renewal book were down 5%, led by 7% declines in property and specialty ahead of a 1% rate decline in casualty. 

Property brought select new opportunities, but saw Conduit Re reduce or exit elsewhere as terms got tight amid rising market capacity.  

In casualty, Conduit Re claimed to have focused on diversifying its relatively young book, taking some new business with “trusted partners” and elsewhere holding existing shares and making select exits.  

Specialty enjoyed strong submission flow, but ran into heavy overcapacity on the market to dampen rate save for some loss-impacted lines. Again, management claims to have taken “a hard line on marginal business and exited certain treaties that did not meet our profitability expectations.”

Things could slow as markets continue to soften, management noted. 

“Market conditions remain adequate in most lines of business, although continued softening could lead to moderating premium growth rates over the course of the year, particularly in property and specialty segments,” management said of outlook. 

It’s not just a go-slow, but a continued rebalancing with retro-managed net exposure. 

“We expect portfolio rebalancing over future renewal periods, along with a more comprehensive retrocession programme, which will better protect us from attritional volatility and large secondary perils going forward.”

Despite the massive Q1 loss and the ensuing costly purchase of after-the-fact retrocession, Conduit managed a nine-digit annual profit and a double digit return on equity. Investment earnings and the accounting joys of IFRS17 offered help. 

Underwriting is near break-even for the year, depending on your measurement. The old-school undiscounted combined ratio rose 4.4 points to a loss-making 101.5% for the year. IFRS17-discounted for the forward value of money and Conduit is back in the black at 89.1%, up 3.1 points from 2024. 

Gross premiums written for FY2025 rose close to 7% led by 23% growth for casualty, well ahead of 2.2% annual growth for the largest segment of property and the 3.6% decline suffered by specialty.

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