AM Best Assigns ‘A-‘ Rating to Newly Formed Conduit Reinsurance Ltd.

AM Best has assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-” to Conduit Reinsurance Ltd., with a stable outlook.

The ratings reflect Conduit Re’s balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management (ERM).

Conduit Re’s Bermuda-based holding company, Conduit Holdings Ltd., conducted an initial public offering earlier this month, raising $1.1 billion, which, AM Best said, has been downstreamed into Conduit Re as capital.

The company is one of a group of companies that have formed to take advantage of hardening rates in the reinsurance market. Two recent startups are Vantage Risk, which launched earlier this month, and Inigo Ltd., a new London insurance group, which raised $800 million in start-up capital and has received approval to start underwriting at Lloyd’s on Jan. 1, 2020.

On the other hand, many existing companies have raised capital to bolster their balance sheets as a result of COVID-19 claims and to take advantage of the hardening market. These companies include Beazley Fidelis, Hiscox, Lancashire and QBE.

AM Best said its strong balance sheet assessment of Conduit Re is underpinned by the expectation that Conduit Re will maintain the strongest level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), over its five-year start-up phase, taking into account AM Best’s additional capital requirements for new company formations.

Conduit Re’s adequate operating performance assessment is based on its well-defined business plans, and takes into account its competitive environment and heightened execution risk during the start-up phase, said AM Best.

AM Best views Conduit Re’s business profile as limited, given its lack of competitive position and established distribution network in a competitive reinsurance marketplace.

“However, the experience of senior management and underwriters in the targeted classes of business increases the likelihood of market acceptance and successful execution of the company’s business plans,” said the ratings agency. Conduit Re has a clearly defined enterprise risk management (ERM) framework in advance of writing business, which includes plans to control key risks.

Topics Reinsurance AM Best