Conduit Re grows top line 9% but catastrophe and risk losses dent H1’25 underwriting result

Bermuda-based reinsurer Conduit Re fell to a comprehensive loss of $13.5 million with a negative reinsurance service result of $15.2 million in the first half of 2025, as the discounted net loss ratio increased significantly year-on-year to 95.8% as a result of the highly active period of natural catastrophe events and risk losses.

For Conduit Re, the California wildfires were the most significant event in the period at $118.3 million, so within the previously announced range of $100 million to $140 million. The wildfires in California contributed 31.6% to the firm’s undiscounted net loss ratio of 109.6%.

The reinsurer also highlights severe convective storms in the US, several aviation losses, and other losses during the period, but notes that although the first half the year was an active loss period for the industry, no event loss, individually or in the aggregate, had a material impact on the firm.

During H1 2025, Conduit Re recorded favourable development in the discounted net liability for incurred claims for prior accident years of $3.8 million, but also experienced some adverse development on prior year reserves, primarily as a result of the UK High Court ruling on the aviation losses in connection with the Russian invasion of Ukraine.

In total, reinsurance losses and loss related amounts hit $383 million in H1 2025, driven by losses of $204.8 million in property, compared with total losses of $214.6 million a year earlier. Ceded reinsurance recoveries amounted to $19.1 million in H1 2025, resulting in net reinsurance service expenses of $395.1 million in H1 2025, up from $238.5 million in H1 2024.

In light of the wildfire impact, Conduit Re purchased additional secondary perils retrocession coverage, and also purchased additional limits due to growth of the inwards portfolio, which all led to an increase in the ceded reinsurance expense for H1 2025 to $53.4 million, compared with $43.8 million in H1 2024.

As a result of the higher loss ratio and higher reinsurance operating expense ratio, partially offset by a slightly lower other operating expense ratio, Conduit Re’s discounted combined ratio increased to 108.3% from 75.1%, and the undiscounted combined ratio increased to 122.1% from 85.7%, which is reflected in the negative, aforementioned reinsurance service result of -$15.2 million, which compares with a gain of $99.7 million in H1 2024.

Year-on-year, net reinsurance revenue increased to $379.9 million from $338.2 million, with growth in property, casualty, and specialty, partially offset by the higher ceded reinsurance expense in property as the firm enhanced its outwards reinsurance.

In terms of top-line growth, Conduit Re has today reported gross premiums written (GPW) for H1 2025 of $803.3 million, up 9% on H1 2024’s $737.8 million, with growth of 10% in property to $483.6 million, 14% growth in casualty to $169 million, and 2% growth in specialty to $150.7 million.

“We have experienced a number of new business opportunities and increased demand in Property, and in Casualty we have selectively expanded partnerships with existing cedants that have demonstrated disciplined behaviour. The growth rate in Specialty slowed compared to recent periods as we have reduced our growth in lines experiencing more pressure on pricing and terms,” said the company.

Turning to pricing, and Conduit Re notes that despite some moderation, “pricing levels and terms and conditions continued to be attractive” in H1 2025.

“Certain Casualty lines continued to benefit from market correction driven by reserve deterioration and loss emergence, primarily from pre-2020 years. Market conditions across Property and Specialty segments reflected some increased competition following significant pricing increases over the past several years,” explained the firm.

Conduit Re’s overall risk-adjusted rate change for H1 2025, net of claims inflation, was -3%, and by segment was -5% in property, +1% in casualty, and -4% in specialty.

On the asset side of the balance sheet, the Bermudian reinsurer recorded net investment income, excluding realised and unrealised gains and losses, of $38.8 million, an increase on the prior year’s $29.9 million. The total investment return, including net investment income, net realised gains and losses, and net change in unrealised gains and losses, was a gain of $63.8 million in H1 2025, compared with a gain of $23 million in H1 2024.

The result of all of the above is the comprehensive loss of $13.5 million for H1 2025, a decrease of almost 114% from H1 2024’s profit of $98.1 million, which again, reflects the elevated loss experience in the period.

“We are in a period of transition as we begin positioning the business to be more resilient. We have started initiatives to manage net exposures better, including enhancing our outwards reinsurance programme and refining our portfolio. The process of rationalising our quota share exposure is underway and will lead to less premium in this area, while we have an increased appetite for excess of loss business. These adjustments are intended to reduce attritional loss exposure and improve diversification, which we believe will help drive more consistent returns in the future. The actions are further supported by targeted senior hires across key functions bringing valuable expertise and fresh perspectives to the team,” said Neil Eckert, Chief Executive Officer.

“We have delivered 8.9% growth in gross premiums written and continue to see adequate pricing across many of our target classes, though market dynamics are shifting due to increased capacity. Our high-quality and growing investment portfolio continued to deliver strong results, with 29.8% growth in net investment income and a 3.9% return through 30 June.

“The first half was marked by elevated loss activity above our normal plan, including wildfires, severe convective storms and aviation events. Further, the recent UK High Court judgement regarding the 2022 Ukraine loss has significantly increased the industry’s insured loss from the event. The actions to rebalance our portfolio, together with increased losses during the second quarter and an increase in our reserves related to Ukraine, have resulted in a further reduction to our RoE expectations to the mid single digits for 2025. However, we believe Conduit has a strong foundation from which to build upon, and we are taking steps to advance the business and drive resilience to support long-term value creation across market cycles,” he added.

Looking forward, the reinsurer reveals that it is in the process of realigning its portfolio towards a greater share of excess of loss business, with the team actively identifying opportunities that align with its risk appetite and strategic objectives to improve both diversification and margins.

The firm notes that it also making necessary changes to enhance the resilience of its portfolio and better manage net exposure going forward, including broader outwards reinsurance protections, particularly related to secondary perils.

“The strategic changes we are actioning are focused on generating more stable and resilient returns for shareholders, and we continue to target a mid-teens RoE across the cycle,” said Conduit Re.

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