Newly-launched Conduit Re secures A- rating from AM Best post $1.1bn IPO

AM Best has assigned a financial strength rating of A- (excellent) with a stable outlook to Conduit Re, a new property and casualty (P&C) and specialty reinsurer that is set to start underwriting business on January 1, 2021.

The rating action comes shortly after the start-up raised £826 million (approximately $1.1 billion) in its initial public offering (IPO) - said to be the largest ever start-up IPO on the London Stock Exchange (LSE).

AM Best views Conduit Re's balance sheet as "very strong" based on its expectation that the start-up will maintain the strongest level of risk-adjusted capitalisation, and operating performance as "adequate" based on its "well-defined business plans", taking into account its competitive environment and heightened execution risk during the start-up phase.

The agency noted that Conduit Re’s business profile is limited given its lack of competitive position and established distribution network in a competitive reinsurance marketplace, though this is to some extent offset by the experience of its senior management and underwriters.

Additionally, it said the company has a clearly defined ERM framework in advance of writing business, which includes plans to control key risks.

Conduit Re will operate as a Bermudian reinsurer with a class IV license issued by the Bermuda Monetary Authority.

The company expects to write reinsurance in the property, casualty and specialty classes, and is targeting a dividend payout of 5 percent to 6 percent of equity capital in 2021.