Executives from Bermuda-based Conduit Re have emphasised the significant impact of the California wildfires on the re/insurance market, highlighting the potential for the event to halt rate declines ahead of crucial upcoming renewals.
Speaking at a briefing following the release of the firm’s 2024 results, Neil Eckhart, Executive Chairman, described the California wildfire event as one of the four most serious he has witnessed in his career, comparing it to Hurricane Andrew, Hurricane Katrina, and the World Trade Center attacks.
“Market commentators are saying $35 to $50 billion in insured losses, and these are concentrated in a very built-up area. It’s different from a hurricane, which covers thousands of square kilometres. This is a concentrated loss and its high impact,” Eckhart said.
He continued, “Some commentators are already talking about stabilisation, or in part, rate increase. We believe it will affect pricing, which will enable the opportunity for us to continue to develop our business.”
Eckhart explained that the re/insurance market is approaching a critical renewal period and that the wildfires will undoubtedly halt rate declines, with the potential for other adverse impacts.
On the same topic, Gregory Roberts, CUO of Conduit Re, described the California wildfires as a significant data point for the industry to better understand exposures.
Roberts said the event will likely highlight key findings around insurance-to-value, the growth of total insured values (TIVs), and the broader need for both insurance and reinsurance.
He noted that in times like these, the value of insurance products becomes even clearer, and he expects this to drive increased demand for specific contracts.
Roberts went on, “With an extreme tail event like this, there’s the mechanics of understanding exposure is recorded and understood. Insurance players, whether they’re homeowners or commercial buyers, are they buying enough cover? They look at this and think, okay, events occur. Is my insurance policy behaving as expected? And this will often lead to a greater demand for the insurance product, such as what it does.
“And I think from the sellers, this always is an exercise in refining and responding to policy contract and language as well. The industry is always trying to improve understanding and clarity, and these sorts of things tend to improve language and understanding, managing expectations.
“I think there’ll be an awful lot of findings over the short term, and I certainly expect that to be reflected in how the industry trades risk going forward. You know, away from rate, it’s more about the underlying policy itself as well. It’s really important.”
In its 2024 results, Conduit Re reported a preliminary undiscounted ultimate loss estimate across all divisions for the California wildfires of between $100 and $140 million, net of reinsurance recoveries and reinstatement premiums.
Elsewhere in the briefing, Trevor Carvey, CEO of Conduit Re, discussed the firm’s growth ahead of its planned IPO and provided insights into its expected future growth rate.
“It’s been across the three divisions that we refer to as property, casualty, and specialty. So, there’s been growth, I would say, across all three of those, but it’s obviously at a higher run rate than we forecasted,” Carvey said.
He added, “That’s really the tailwinds that have come from the market. Legacy on the casualty side back here has driven that. General inflation concerns have driven rates, particularly on the ground-up quota share business.
“And then within property, you’re seeing heightened awareness around the demand to buy reinsurance. Underlying asset values are increasing, and in that respect, the demand for property reinsurance has just continued to grow.
“So, across all three, there’s different drivers, but a series of tailwinds which has produced the high rate of premium growth.”
Conduit Re generated gross premiums written of $1.16 billion in 2024, an increase of almost 25% year-on-year, as the company reported a return on equity of 12.7% for the year despite the elevated catastrophe experience.
The reinsurer stated that it achieved “deliberate and targeted” growth across its three business segments, driven by attractive underwriting opportunities in target classes.
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