Conduit “actively considering” cat bond as retro alternative: Carvey

Accessing the catastrophe bond market as an alternative form of retrocession, is something Bermuda-headquartered reinsurance company Conduit Re is “actively considering”, according to Trevor Carvey, CEO.

Speaking today about the first-quarter results Conduit Re reported this morning, the firm’s chief executive officer explained that a cat bond could soon be “in the pipeline” for the reinsurer.

Carvey had previously said that Conduit Re was beginning to explore the potential to sponsor a cat bond earlier this year.

This afternoon he said, “On the cat bond, yes, we recognised that at year-end it is a useful alternative to the standard tower of cover that we bought, which is essentially excess-of-loss on a tower basis.

“So, we certainly did a lot of work at year-end. That’s in the pipeline. We did some work on that, we’ve dusted that off now.”

He continued to explain, in response to our question during the earnings briefing, “Obviously, that’s a space that you know well. Spreads have moved in our favour as a potential buyer, so it’s something which we’re actively considering as a potential alternative, or counterpoint, to the current tower that we buy.

“And it would make sense, we think, to have a kind of ability to be able to flex the two alternative forms of retrocession cover as we go through the rest of this year and into next year. So, it’s something that’s on our slate and we’re looking at it.”

Conduit Re’s Chief Underwriting Officer Greg Roberts also responded on the firm’s retrocession tower, as well as dynamics in the retro market.

Roberts said, “We made the comment that we were very happy with the core placement of our retro at 1/1. Clearly, it’s not a big market so it’s a tough market, and the retro market probably in the last few years has been ahead of the reinsurance market in looking for margin.

“I suppose the big dynamic now is the reinsurance market has probably, on the excess-of-loss side anyway, caught up somewhat.”

Roberts also said that it is, “Interesting to see different strategies around allocating capital, particularly to writing retro, and so we expect to see some dynamic changes through the rest of the year with sellers of retro in particular.”

So, it seems possible that if market conditions for sponsoring catastrophe bonds remain conducive, we could see Conduit Re venture into the capital markets to sponsor its debut cat bond later this year, or early next.