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Notes to the consolidated financial statements
For the year ended 31 December 2022
1.
General information
CHL was incorporated under the laws of Bermuda on 6 October 2020 and, on 7 December 2020, all of its common
shares of par value $0.01 per share were admitted to the standard listing segment of the Official List of the UK Financial
Conduct Authority and admitted to trading on the LSE\u2019s main market for listed securities. CHL\u2019s registered office is
Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. CHL's consolidated financial statements as at, and for
the year ended 31 December 2022 include the Company's subsidiaries (together referred to as the \u201cGroup\u201d). The
principal activity of Conduit is to provide reinsurance products and services to its clients worldwide.
A full listing of Conduit's related parties can be found in note 22.
2. Summary of significant accounting policies
The basis of preparation, use of judgements and estimates, consolidation principles and significant accounting policies
adopted in the preparation of these consolidated financial statements are set out below. Excluding percentages, share
and per share data or where otherwise stated, all amounts in tables and narrative disclosures are in millions of US
dollars.
Basis of preparation
These consolidated financial statements are prepared on a going concern basis in accordance with IFRS as issued by
the IASB, prepared on a historical cost basis, except for items measured at fair value as disclosed in the relevant
accounting policies. In accordance with the requirements of IAS 1, the financial statements\u2019 assets and liabilities have
been presented in order of liquidity, which provides information that is more reliable and relevant for a financial
institution.
Where IFRS is silent, as it is in respect of certain aspects relating to the measurement of reinsurance contracts, the
IFRS framework allows reference to another comprehensive body of accounting principles. In such instances, Conduit\u2019s
management determines appropriate measurement bases, to provide the most useful information to users of these
consolidated financial statements, using their judgement and considering US GAAP. In the course of preparing these
consolidated financial statements, no judgements have been made in the process of applying Conduit\u2019s accounting
policies, other than those involving estimations as noted in the \u2018Use of judgements and estimates\u2019 section, that have
had a significant effect on amounts recognised in these consolidated financial statements.
Going concern
The consolidated financial statements of Conduit have been prepared on a going concern basis. In assessing Conduit's
going concern position as at 31 December 2022, the Directors have considered a number of factors, including the
current balance sheet position, Conduit\u2019s strategic and financial plan, taking account of possible changes in trading
performance and funding retention, stress testing and scenario analysis, and the COVID-19 pandemic. Conduit only
commenced underwriting activities during the twelve months ended 31 December 2021 and, with COVID-19 exclusions
included in policy wordings, does not believe it has any exposure to reinsurance losses from COVID-19. The assessment
therefore concluded that Conduit has sufficient capital and liquidity for the next 12 months. Conduit\u2019s capital ratios and its
capital resources are comfortably in excess of regulatory solvency requirements, and internal stress testing indicates
Conduit can withstand severe economic and competitive stresses.
As a result of the assessment, the Directors have a reasonable expectation that Conduit and Conduit Re have
adequate resources to continue in operational existence for the foreseeable future and therefore believe that
Conduit is well placed to manage its business risks successfully. Accordingly, they continue to adopt the going
concern basis in preparing the consolidated financial statements.
Changes in accounting standards
While a number of amended IFRS standards have become effective during the year ended 31 December 2022,
none of these standards have had a material impact on Conduit.
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Notes to the consolidated financial statements
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Future accounting changes
Of the upcoming accounting standard changes, we anticipate that IFRS 17 will have the most material impact on the
financial statements\u2019 results, and presentation and disclosures. Conduit will apply IFRS 17 for the first time on 1
January 2023. We have substantially completed the build-out of the necessary systems and processes to implement
IFRS 17, and testing is in progress. As relevant to Conduit, a brief overview of each of these standards and the
applicable accounting policies and the impact, where we can reliably quantify it, is provided below:
IFRS 17, Insurance Contracts
IFRS 17, Insurance Contracts, issued in May 2017, specifies the financial reporting for insurance contracts. The new
standard replaces IFRS 4, Insurance Contracts, and is effective for accounting periods beginning on or after 1
January 2023 and will significantly change the accounting for, valuation of, and presentation of insurance contracts.
Classification
Contracts that transfer significant reinsurance risk at the inception of the contract are accounted for as
reinsurance contracts. Contracts that do not transfer significant reinsurance risk are accounted for as investment
contracts. The adoption of IFRS 17 will not change the classification of Conduit's reinsurance contracts.
Before accounting for a reinsurance contract based on the guidance in IFRS 17, Conduit analyses whether the
contract contains components that must be separated. IFRS 17 distinguishes three categories of components that
must be accounted for separately:
\u2022
Cash flows relating to embedded derivatives that are required to be separated.
\u2022
Cash flows relating to distinct investment components.
\u2022
Promises to transfer distinct goods or distinct non-insurance services.
Conduit applies IFRS 17 to all remaining components of the contract. Where contracts contain multiple reinsurance
components that meet the requirements for separation, these are separated and accounted for as standalone
contracts.
Some of Conduit's reinsurance contracts issued contain profit commission arrangements. Under these arrangements,
there is a minimum guaranteed amount that the policyholder will always receive \u2013 either in the form of profit commission
or as claims or another contractual payment, irrespective of the insured event happening. These are typically considered
non-distinct investment components. The impact of the non-distinct investment components are excluded from the
consolidated statement of comprehensive loss.
Level of aggregation
Conduit manages reinsurance contracts issued by class of business within an operating segment. Classes of
business are then aggregated into portfolios of contracts that are subject to similar risks. Each portfolio is further
disaggregated into groups of contracts that are issued within a calendar year (annual cohorts) and are (i) contracts
that are onerous at initial recognition; (ii) contracts that at initial recognition have no significant possibility of becoming
onerous subsequently; or (iii) a group of remaining contracts. These groups represent the level of aggregation at
which reinsurance contracts are initially recognised and measured. Such groups are not subsequently reconsidered.
Conduit assumes there are no contracts in the portfolio that are onerous at initial recognition, unless there are facts
and circumstances which may indicate otherwise. Management considers the following in order to determine whether
there are facts and circumstances that mean a group of contracts are onerous:
\u2022
Pricing information.
\u2022
Results of similar contracts it has recognised.
\u2022
External factors, e.g., a change in market experience or regulations.
Measurement model
Under IFRS 17, Conduit's reinsurance contracts issued and reinsurance contracts held are substantially all eligible
to be measured by applying the Premium Allocation Approach (\"PAA\"). The PAA simplifies the measurement of
reinsurance contracts in comparison with the General Model under IFRS 17.
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continued
The measurement principles of the PAA differ from the \u2018earned premium approach\u2019 used under IFRS 4 in the following
key areas:
\u2022
The liability for remaining coverage reflects premiums received less deferred acquisition expenses less amounts
recognised in revenue for reinsurance services provided.
\u2022
If contracts are assessed as being onerous, a loss component is recognised.
\u2022
The recognition of reinsurance acquisition cash flows includes an allocation of acquisition-related operating
expenses incurred in the period. All acquisition related cash flows are deferred and amortised over the coverage
period of the group of contracts.
\u2022
Measurement of the liability for incurred claims (previously losses and loss adjustment expenses) is
determined on a discounted probability-weighted expected value basis and includes an explicit risk adjustment
for non-financial risk.
Significant judgements and estimates
Conduit will estimate the liability for incurred claims as the fulfilment cash flows related to incurred claims. The fulfilment
cash flows incorporate, in an unbiased way, all reasonable and supportable information available without undue cost or
effort about the amount, timing and uncertainty of those future cash flows. They reflect current estimates from the
perspective of the entity and include an explicit adjustment for non-financial risk (the risk adjustment). The liability for
incurred claims is discounted using market-based yield curves.
Conduit will generally determine yield curves by leveraging the bottom-up method of applying a liquidity premium to a
risk-free yield curve to reflect the differences between the liquidity characteristics of the risk-free rate and the liquidity
characteristics of the insurance liabilities.
Conduit intends to determine the risk adjustment by leveraging indications developed by Conduit's actuaries,
historical reinsurance loss experience and estimates of pricing adequacy trends, as well as a combination of
management's judgement and experience. The risk adjustment is then translated to a confidence interval, which
will be disclosed in the financial statements as a significant judgement and estimate.
Presentation and disclosure
Presentation and disclosure will change significantly. The balance sheet will continue to contain related assets and
liabilities for reinsurance business, albeit in a different, more condensed form. The most significant change will be in the
presentation of the consolidated statement of comprehensive loss where premiums and claims related line items will be
replaced by reinsurance revenue and reinsurance service expenses. Certain commissions on reinsurance contracts
issued which were previously presented as acquisition expenses will now be presented as a deduction to revenue under
IFRS 17. Commissions and reinstatement premiums on reinsurance contracts that are dependent on claims will be
treated as claims cash flows and presented as part of reinsurance service expenses. All insurance contract assets and
liabilities will be monetary items with any revaluation adjustments being recognised in the consolidated statement of
comprehensive loss.
Under IFRS 17, changes in the carrying amounts of groups of contracts arising from the effects of the time value of
money are presented as reinsurance finance income or expenses. Conduit has elected not to disaggregate reinsurance
finance income or expenses and will present the total amount in the consolidated statement of comprehensive loss.
Transition
Conduit will adopt the full retrospective approach for all changes in accounting policies due to the
implementation of IFRS 17.
IFRS 9, Financial Instruments
IFRS 9, Financial Instruments: Classification and Measurement, is effective for annual periods beginning on or after 1
January 2018. The amendments to IFRS 4, Insurance Contracts, issued in 2016, provided a temporary exemption from
applying IFRS 9 for companies whose predominant activity is to issue insurance contracts. The carrying value of
Conduit\u2019s liabilities connected with insurance activities comprised over 90% of the total liabilities. The activities of Conduit
are therefore predominantly connected with insurance which satisfies the criteria set out in IFRS 4 for the temporary
exemption from IFRS 9. The exemption lasts until the
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Notes to the consolidated financial statements
continued
implementation date of IFRS 17 and addresses the accounting consequences of applying IFRS 9 to insurers prior to
the adoption of IFRS 17.
Classification and measurement
IFRS 9 introduces new classification and measurement requirements for financial instruments. IFRS 9 requires all
financial assets to be assessed based on a combination of Conduit's business model for the management of the assets
and the instruments' cash flow characteristics. Conduit currently anticipates that all investments will be classified as at
FVTPL, because they are managed on a fair value basis. Conduit's fixed maturity securities portfolio is currently
classified as FVTPL. As a result, the adoption of IFRS 9 is not expected to result in any changes to the measurement of
Conduit\u2019s investments, which will continue to be at FVTPL. Conduit will apply any changes resulting from IFRS 9
retrospectively.
Presentation and disclosure
To reflect the differences between IAS 39 and IFRS 9, IFRS 7 Financial Instruments: Disclosures was also
amended. Conduit will apply the amended disclosure requirements at the same time as applying IFRS 9.
Estimated impact of the adoption of IFRS 17 and IFRS 9
Conduit has assessed the estimated impact that the initial application of IFRS 17 and IFRS 9 will have on its
consolidated financial statements. Based on the assessments undertaken to date, we estimate that the cumulative
IFRS 17 impact will be an increase to shareholders\u2019 equity as at 1 January 2022 of between $6.0 million and $9.0
million, which represents between 0.6% and 0.9% of Conduit\u2019s reported shareholders\u2019 equity as at 31 December 2021.
No financial impact is expected from the initial application of IFRS 9.
The increase to shareholders\u2019 equity from IFRS 17 is predominantly driven by the discounting of loss reserves which
were previously undiscounted, the deferral of certain acquisition related operating expenses and the revaluation of
insurance balances that are now considered monetary items under IFRS 17. The impacts of discounting and the
deferral of acquisition related operating expenses are timing differences as both will be unwound over the settlement of
claims liabilities and insurance contract coverage periods respectively.
Conduit is still performing assessments of the impact of IFRS 17 for the financial year ended 31 December 2022,
however we expect the impact of discounting, given the rising rate environment, to be significant.
The assessment above is preliminary as the transition work has not yet been fully finalised or subject to external audit.
Therefore, the reported impact of the adoption of IFRS 17 in the 2023 consolidated financial statements may deviate
from that noted above, although any such deviation is unlikely to be material.
Use of judgements and estimates
The preparation of financial statements in conformity with IFRS requires Conduit to make judgements and estimates
that affect the reported and disclosed amounts at the balance sheet date, revenues and expenses during the reporting
period and the associated financial statement disclosures. All estimates are based on management\u2019s knowledge of
current facts and circumstances, assumptions based on that knowledge and their prediction of future events. Actual
results may differ significantly from the estimates made.
The most significant estimates made by management are in relation to losses and loss adjustment expenses, both gross
and net of ceded reinsurance, as discussed within the \"Risk disclosures\" section and in note 14.
Less significant estimates are made in determining the estimated fair value of certain financial instruments, as
discussed in note 12.
In addition, some management judgement is exercised in determining the ultimate premiums expected from which to
establish the recognition of gross premiums written.
While not significant, estimates are also used in the estimated fair value of the MIP as discussed in note 7 and the
valuation of intangible assets as discussed in note 16.
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Notes to the consolidated financial statements
continued
Consolidation principles
These consolidated financial statements comprise the financial statements of Conduit and its subsidiaries as at and for
the year ended 31 December 2022. Subsidiaries are those entities that are controlled by Conduit and are fully
consolidated from the date on which Conduit obtains control and continue to be consolidated until the date when such
control ceases. Control is achieved when Conduit is exposed, or has rights, to variable returns from its involvement with
the subsidiary and has the ability to affect those returns through its power over the subsidiary.
Intragroup balances and transactions are eliminated in preparing the consolidated financial statements.
Subsidiaries\u2019 accounting policies are generally consistent with Conduit\u2019s accounting policies.
Foreign currency
The functional currency, which is the currency of the primary economic environment in which the entity operates, for all
Group entities is US dollars. Items included in the financial statements of each of the Group\u2019s entities are measured
using the functional currency. These consolidated financial statements are presented in US dollars.
Foreign currency transactions are recorded in the functional currency for each entity using the exchange rates
prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are
revalued at period end exchange rates. The resulting foreign exchange differences on revaluation are recorded in the
consolidated statement of comprehensive loss within net foreign exchange gains (losses). Non-monetary assets and
liabilities denominated in a foreign currency are carried at historic rates. Non-monetary assets and liabilities carried at
estimated fair value and denominated in a foreign currency are translated at the exchange rate at the date the fair
value was determined.
Reinsurance contracts
Classification
Contracts that transfer significant reinsurance risk at the inception of the contract are accounted for as
reinsurance contracts. Contracts that do not transfer significant reinsurance risk are accounted for as investment
contracts. Reinsurance risk is transferred when a reinsurer agrees to compensate a policyholder if a specified
uncertain future event adversely affects the policyholder.
Premiums
Conduit writes both excess of loss and proportional (also known as quota share or pro-rata)
reinsurance contracts.
Excess of loss contracts
For the majority of excess of loss contracts, premiums written are recorded based on the minimum and deposit or flat
premium, as defined in the contract. Subsequent adjustments to the minimum and deposit premium are recognised in
the period in which they are determined. For excess of loss contracts where no deposit is specified in the contract,
premiums written are recognised based on estimates of ultimate premiums provided by the ceding company. Initial
estimates of premiums written are recognised in the period in which the contract incepts, or the period in which the
contract is bound, if later. Subsequent adjustments, based on reports of actual premium by ceding companies, or
revisions in estimates, are recorded in the period in which they are determined. For multi-year policies that are payable
in annual instalments generally only the initial annual instalment is included as premiums written at policy inception
due to the ability of the reinsured to commute or cancel the policy. The remaining annual instalments are included as
premiums written at each successive anniversary date within the multi-year term.
Premiums written are generally earned evenly over the term of the underlying risk period of the reinsurance contract,
except where the period of risk differs significantly from the contract period. In these circumstances, premiums are
recognised over the period of risk in proportion to the amount of reinsurance protection provided. The portion of the
premium related to the unexpired portion of the risk period is reflected in unearned premiums. Where contract terms
require the reinstatement of coverage after a ceding company\u2019s loss, the estimated mandatory reinstatement premiums
are recorded as premiums written and earned when a specific loss event occurs. Reinstatement premiums are not
recorded for losses included within the provision for IBNR that do not relate to a specific loss event.
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Notes to the consolidated financial statements
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Proportional contracts
Premiums written for proportional contracts are recognised based on estimates of ultimate premiums provided by the
ceding company, supplemented by management's estimates of premiums based on its experience with the ceding
company, familiarity with each market, the timing of the reported information and its understanding of the
characteristics of each class of business. Initial estimates of premiums written are recognised in the period in which
the contract incepts, or the period in which the contract is bound, if later. Contracts written on a \u2018risks attaching\u2019 basis
cover claims which attach to the underlying reinsurance policy written during the term of the respective policy.
Premiums earned on such policies generally extend beyond the original term of the contract. Subsequent adjustments,
based on reports of actual premium by the ceding company, or revisions in estimates, are recorded in the period in
which they are determined.
Premiums receivable
Reinsurance premiums receivable from cedants are recorded net of commissions, brokerage, premium taxes and other
levies on premiums, unless the contract specifies otherwise. A significant portion of amounts included as premiums
receivable are not currently due based on the terms of the underlying contracts. These balances are regularly reviewed
for impairment, with any impairment loss recognised as an expense in the period in which it is determined. Based on
currently available information, management believes that the premium estimates included in premiums receivable will be
collectable and therefore no provision for doubtful accounts has been recorded.
Acquisition expenses
Acquisition expenses represent commissions, brokerage, profit commissions and other variable costs that relate directly
to the successful securing of new contracts and renewing existing contracts. Generally, acquisition expenses are
deferred over the period in which the related premiums are earned to the extent they are recoverable out of expected
future revenue margins. All other acquisition expenses are recognised as an expense when incurred.
Ceded reinsurance premiums
Ceded reinsurance is purchased in the normal course of business to increase capital capacity, limit the impact of
individual risk losses and loss events impacting multiple cedants (such as natural-catastrophes), or both. Conduit may
purchase ceded reinsurance on both an excess of loss and proportional basis, and may in future supplement this with the
use of catastrophe bonds or other capital market products. Ceded reinsurance premiums, being the cost of reinsurance
contracts entered into, are accounted for in the period in which the contract incepts or is bound if that date is later. Ceded
reinsurance premiums are generally earned in the same manner as the inwards contracts, depending on the terms of the
contract. The provision for the reinsurers\u2019 share of unearned premiums represents the part of ceded reinsurance
premiums which are estimated to be earned in future periods. Deferred ceded acquisition expenses are recognised as a
liability using the same principles.
Net losses and loss adjustment expenses
Net losses and loss adjustment expenses in the consolidated statement of comprehensive loss include changes in
the provision for outstanding losses and ACRs, changes in the provision for IBNR, plus related expenses and losses
paid in the period. Amounts are net of any changes in the provision for reinsurance recoverable and related expenses
for the period. Net losses and loss adjustment expenses are recognised in total comprehensive income as they are
incurred.
Losses and loss adjustment expenses in the consolidated balance sheet represent the estimated ultimate cost of settling
all reinsurance claims arising from events which have occurred up to the end of the reporting period, including a provision
for IBNR. Conduit does not currently discount its liabilities for unpaid losses. Outstanding losses are initially set on the
basis of reported losses received from cedants. ACRs are determined where management\u2019s best estimate of the
reported loss is greater than that reported. Estimated IBNR reserves may also consist of a provision for additional
development in excess of losses reported by cedants, as well as a provision for losses which have occurred but have not
yet been reported by cedants. IBNR reserves are estimated initially using expected loss and loss adjustment expense
ratios which are selected based on information derived by underwriters and actuaries during the initial pricing of the
business. These estimates are reviewed regularly and, as experience develops and new information is received, the
reserves are adjusted as necessary. As actual loss information is reported, and Conduit develops its own loss
experience, management will use various actuarial methods as well as a combination
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Notes to the consolidated financial statements
continued
of management\u2019s judgement and experience, historical reinsurance industry loss experience and estimates of pricing
adequacy trends to estimate IBNR reserves. Any adjustments to initial expectations are reflected in the consolidated
statement of comprehensive loss in the period in which they are determined.
The estimation of the ultimate loss and loss adjustment expense liability is a complex process which incorporates a
significant amount of judgement. It is reasonably possible that uncertainties in the reserving process, delays in cedants
reporting losses to Conduit, together with the potential for unforeseen adverse developments, could lead to a material
change in estimated net losses and loss adjustment expenses.
Any amounts recoverable from reinsurers are estimated using the same methodology as for the underlying losses.
Management monitors the creditworthiness of its reinsurers on an ongoing basis and assesses any reinsurance assets
for impairment, with any impairment loss recognised as an expense in the period in which it is determined.
Liability adequacy tests
At each balance sheet date, Conduit performs a liability adequacy test to determine if there is an overall excess of
expected claims over unearned premiums for the period of unexpired risk by using current best estimates of future
cash outflows generated by its reinsurance contracts, plus any investment income thereon. If, as a result of these
tests, the carrying amount of Conduit\u2019s reinsurance liabilities is found to be inadequate, the deficiency is charged to
the consolidated statement of comprehensive loss for the period, initially by writing off deferred acquisition costs and
subsequently by establishing a provision.
Financial instruments
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held on call with banks, money market funds, and other
short-term highly liquid investments with a maturity of three months or less at the date of purchase. Carrying amounts
approximate fair value due to the short-term nature and high liquidity of the instruments.
Investments
Conduit\u2019s fixed maturity securities portfolio is classified as FVTPL and carried at estimated fair value in the consolidated
balance sheet. The classification of financial assets is determined at the time of initial purchase. A financial asset is
classified at FVTPL if it is managed and evaluated on a fair value basis or if acquired principally for the purpose of selling
in the short term, or if it forms part of a portfolio of financial assets in which there is evidence of short-term profit taking.
Presentation of these securities in the FVTPL category is consistent with how management monitors and evaluates the
performance of these securities.
Regular way purchases and sales of investments are recognised at estimated fair value on the trade date, and are
subsequently carried at estimated fair value. Balances pending settlement are reflected in the consolidated balance
sheet in other assets or other payables. The estimated fair value of Conduit\u2019s fixed maturity securities portfolio is
determined based on bid prices from recognised exchanges, broker-dealers, recognised indices or pricing vendors.
Changes in estimated fair value of investments classified as FVTPL are recognised in the consolidated statement of
comprehensive loss within net unrealised gains and losses on investments.
Investments are derecognised when Conduit has transferred substantially all the risks and rewards of ownership.
On derecognition of an investment held at FVTPL, previously recorded unrealised gains and losses are recycled
from net unrealised gains and losses on investments to net realised gains and losses on investments.
Interest income, amortisation and accretion of premiums and discounts on fixed maturity securities are calculated
using the effective interest rate method and recognised in net investment income. The carrying value of accrued
interest income approximates estimated fair value due to its short-term nature and high liquidity.
Intangible assets
Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring into use the
specific software. An intangible asset with a finite useful life is amortised on a straight-line basis
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Notes to the consolidated financial statements
continued
over the useful life. The useful life is reviewed annually to determine if any changes are required to the
amortisation period.
Leases
Conduit recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is
initially measured at cost, which comprises the initial measurement of the corresponding lease liability adjusted for any
lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of
any costs to be incurred at the expiration of the lease agreement.
Right-of-use assets are subsequently measured at cost less accumulated depreciation and any impairment losses.
Straight-line depreciation is calculated from the commencement date of the lease to the earlier of either the end date
of the lease term or the useful life of the underlying asset.
The lease liability is initially measured at the present value of the future lease payments at the lease commencement
date. Lease payments are discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, Conduit's incremental borrowing rate. Lease payments included in the measurement of the lease liability
include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease
payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
The lease liability is subsequently measured by increasing the lease carrying amount to reflect the interest due on the
lease liability using the effective interest rate method and reducing the carrying amount to reflect the lease payments
made. Conduit re-measures the lease liability and the related right-of-use asset whenever there is a change in future
lease payments arising from a change in index or rate, if Conduit changes its assessment of whether it will exercise a
purchase, extension or termination option or if there is a revised in-substance fixed lease payment.
Right-of-use assets and lease liabilities are presented as separate financial statement line items in the
consolidated balance sheet.
Employee benefits
Equity-based incentives
Conduit currently operates a MIP under which shares are subscribed for or nil cost options are granted. The fair
value of the instruments granted is estimated on the date of grant. The estimated fair value is recognised as an
expense pro-rata over the vesting period of the instrument, adjusted for the impact of any non-market vesting
conditions. No adjustment to vesting assumptions is made in respect of market vesting conditions.
During 2022 Conduit established a DSBP. A percentage of each employee's bonus is automatically deferred into shares
as nil cost options. These nil cost awards vest annually in separate equal tranches over a three-year period from the
date of grant and do not have associated performance criteria attached to the awards. These awards accrue dividend
equivalents for all dividends declared where the record date falls between the grant date and date of exercise, and are
paid at the time of exercise.
At each balance sheet date, Conduit revises its estimate of the number of instruments that are expected to become
exercisable. It recognises the impact of the revision of original estimates, if any, as equity-based incentive expense in
the consolidated statement of comprehensive loss, and a corresponding adjustment is made to other reserves in
shareholders\u2019 equity over the remaining vesting period.
On exercise, the differences between the expense charged to the consolidated statement of comprehensive loss and
the actual cost to Conduit, if any, is transferred to other reserves in shareholders\u2019 equity.
Pensions
Conduit\u2019s pension plans are based on defined contributions or equivalent cash in lieu, subject to applicable law and
local market standards. On payment of contributions to the plans or cash in lieu there is no further obligation to
Conduit. Contributions or payments of cash in lieu are recognised as employee benefits in the consolidated statement
of comprehensive loss in the period when the services are rendered.
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Notes to the consolidated financial statements
continued
Tax
Income tax on the profit or loss for the period comprises current and deferred tax. Current tax is the expected tax
payable on the taxable income for the year using tax rates enacted or substantively enacted at the year-end reporting
date and any adjustments to tax payable in respect of prior periods.
Deferred tax is provided, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial statements. The amount of deferred tax provided is based on
the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates
enacted or substantively enacted at the reporting date. Deferred tax assets are recognised in the consolidated balance
sheet to the extent that it is probable that future taxable profit will be available against which the temporary differences
can be utilised.
Own shares
Own shares include shares repurchased under share repurchase authorisations and held in treasury, plus shares
repurchased and held in trust, for the purposes of employee equity-based incentive schemes. Own shares are
deducted from shareholders\u2019 equity. No gain or loss is recognised on the purchase, sale, cancellation or issue of own
shares and any consideration paid or received is recognised directly in equity.
Share capital and issuance costs
Shares are classified as shareholders' equity if there is no obligation to transfer cash or other financial assets.
Transaction costs that are attributable to the issuance of new shares are treated as a deduction from equity.
3.
Risk disclosures
Introduction
Conduit is exposed to risks from several sources, classified into six primary risk categories. The primary risk categories
are: (a) reinsurance risk; (b) market risk; (c) liquidity risk; (d) credit risk; (e) operational risk; and
(f) strategic risk. These are discussed in detail on the following pages. The primary risk to Conduit is
reinsurance risk.
The Board is responsible for determining the nature and extent of the principal risks Conduit is willing to take in
achieving its strategic objectives and should maintain sound risk management and internal control systems. To this
end, the Board has established various committees to support the execution of its responsibilities and has reviewed
the committee structures at CRL. The Board, and committees thereof, define the risk preferences and appetites within
which management is authorised to operate.
The risk function is responsible for supporting the Board, and the CRL Board, with the day-to-day oversight of the risks
that Conduit seeks or is exposed to in pursuit of its strategic objectives, and the satisfaction of certain regulatory risk
management expectations relevant to CRL. The framework under which risks are managed contemplates risk appetite
and tolerance constraints, prescribed by the Board and which are reviewed at least annually, with consideration of the
financial and operational capacity of Conduit. The use of financial capacity in this context relates to calculated or
modelled capital requirements, based on residual unmitigated risk exposures. Current capital requirements are
determined by reference to rating agency and regulatory capital requirements, with an internal capital model to be
developed in due course.
Day-to-day management of risk is the responsibility of management, operating within the defined appetite and
tolerances of the Board, or the CRL board, approved delegations of authority. The risk framework prescribes a
standardised approach to the management of risk, oversight and challenge by the risk function and independent
assurance provided by the internal audit function. The risk framework also addresses the reporting of risks, emerging
risks, risk events and compliance with risk appetite and tolerance statements to executive management and the Board,
and relevant Board committees, of CRL and CHL. To ensure transparency and accountability of the business all
independent Non-Executive Directors, four independent Non-Executive Directors from the Board have been appointed
to the Board of CRL. Furthermore, the Board is invited to attend operating entity board level meetings and see all
minutes and records of such operating entity Board and committee meetings.
COVID-19
The COVID-19 pandemic has caused significant disruption in global financial markets and to worldwide economies. The
COVID-19 pandemic is an ongoing situation making it exceptionally difficult to predict what
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Notes to the consolidated financial statements
continued
the ultimate impact for the reinsurance industry will be. Conduit only commenced underwriting operations during the
twelve months ended 31 December 2021 and, for any reinsurance business underwritten during that period, had
COVID-19 related exclusions in its reinsurance contracts and policy wordings. As a result, Conduit does not believe it
has any exposure to reinsurance losses associated with the COVID-19 pandemic during the period. The impacts of the
COVID-19 pandemic on Conduit are discussed throughout these consolidated financial statements.
Climate change
Conduit is exposed to risks associated with climate change but also potential opportunities arising from that risk. Risks
from climate change can include physical risk and those associated with a changing economy. Physical risks are those
relating to the physical impacts of climate change, which can be from increased frequency and/or severity of climate-
related events, or structural, due to longer-term shifts in climate patterns. Economic risks are those relating to the
transition to a lower carbon economy and include risks such as policy and legal risk, technology risk, market risk and
reputational risk. The potential financial impact from these risks is mitigated by Conduit\u2019s strategic and risk management
policies.
Global tax reform
Conduit continues to monitor and assess the implications arising from the Organisation for Economic Co-operation and
Development\u2019s inclusive framework agreement that aims to implement a global minimum tax rate of 15%, along with the
potential impacts of other global tax reforms that are relevant to Conduit\u2019s business operations.
a. Reinsurance risk
Conduit underwrites both short-tail and long-tail reinsurance contracts on a worldwide basis. These reinsurance
contracts transfer insurance risk, including risks exposed to both natural and man-made catastrophes, and risk and
liability losses. The risk in connection with underwriting reinsurance contracts is, in the event of a covered loss, whether
the premiums will be sufficient to meet the associated loss payments and expenses. The underwriters evaluate and
estimate the level of premiums sufficient to cover expected losses, expenses and profitability through a combination of
sophisticated risk modelling tools, past experience and knowledge of loss events, current industry trends and broader
economic indicators. In order to ensure appropriate reinsurance risk selection and limits on the concentration and
diversification of the aggregate portfolio, Conduit has established risk management and internal control systems to
evaluate and assess the expected losses of each individual contract, class of business, geographic region and the
aggregate portfolio. These controls, include, but are not limited to:
\u2022
Conduit has a five-year strategic plan that defines the over-riding business goals that management and the Board
aim to achieve.
\u2022
A detailed business plan is produced annually and considers current market conditions and the risk-adjusted
profitability of the underwriting portfolio.
\u2022
Conduit's internal capital requirements consider the probability and magnitude of reinsurance losses varying
adversely from the expected losses considered during the underwriting and subsequent reserving processes.
\u2022
Forecasts are produced periodically to assess the progress toward the business plan and the strategic
plan.
\u2022
Each underwriter has a clearly defined limit of underwriting authority.
\u2022
Each contract underwritten is subject to a pre-bind peer review.
\u2022
An underwriting roundtable meeting, typically held daily, where deal flow, pricing and opportunities are
discussed.
\u2022
Pricing models are used in all areas of the underwriting process.
\u2022
Risk appetite and tolerance statements have been established and the CRO reports quarterly on
adherence.
\u2022
A number of modelling tools are used to model catastrophes and expected losses.
\u2022
Outwards reinsurance is purchased to mitigate both frequency and severity of losses, and to protect Conduit\u2019s
capital base.
Catastrophe management
Certain of Conduit\u2019s classes of business provide coverage for natural-catastrophes (e.g., earthquakes, floods, hurricanes
and wildfires) and are subject to seasonal variation and the impacts of climate change. Conduit\u2019s business has exposure
to large catastrophe losses in North America, Europe and Japan as a result of
Conduit Holdings Limited Annual Report and Accounts 2022
104
Financial statements
Notes to the consolidated financial statements
continued
windstorms. The level of windstorm activity, and landfall thereof, during the North American, European and Japanese
wind seasons may materially impact loss experience. The North American and Japanese wind seasons are typically
June to November and the European wind season November to March. Conduit also has exposure to other natural-
catastrophes, such as earthquakes, tsunamis, droughts, floods, hail and tornadoes, which can occur throughout the
year. In addition, Conduit is exposed to risk losses throughout the year from perils such as fire, explosion, war,
terrorism, political risk and other events, including loss arising from legal liabilities rather than physical damage.
Conduit has defined its appetite and tolerances for risk accumulations and uses models to determine the expected
frequency and severity of aggregating exposures. As with all such models, there is a risk that modelled expectations
may not reflect actual outcomes and the scope of the models are such that not all exposures are captured.
Conduit has set tolerances around various scenarios. Of these, at the commonly reported 100-year and 250-year return
periods, Conduit\u2019s most significant exposures to any single peril and region combination are to Florida windstorm and
California earthquake perils, respectively. The table below shows the estimated net exposures to these peak zone perils
on a first occurrence basis. Net positions are calculated by applying relevant reinstatement premiums and outwards
reinsurance to the respective modelled gross exposures.
As at 31 December 2022
As at 31 December 2021
% of
% of
tangible
tangible
Net
capital
Net
capital
Return period
Peril
$m
%
$m
%
100-year
Florida windstorm
18.5
2.3
9.6
1.0
250-year
California earthquake
74.8
9.2
61.8
6.3
There can be no guarantee that the modelled assumptions and techniques deployed in calculating these figures are
accurate. There could also be an unmodelled loss which exceeds these figures. The models also contain loss
scenarios which could cause a larger loss to capital than the modelled expectation from the above return periods.
Operating segments
The underwriting business is comprised of three principal divisions: property, casualty and specialty. These divisions
are also considered to be Conduit's operating segments. Details of each operating segment and gross premiums
written by geographic region and operating segment are as follows:
Property
Casualty
Specialty
Total
Total
Year ended 31 December 2022
$m
$m
$m
$m
%
US
174.7
171.9
8.7
355.3
55.7
Worldwide
93.5
29.0
81.2
203.7
32.0
Europe
16.3
33.3
10.2
59.8
9.4
Other
15.1
2.5
1.1
18.7
2.9
Gross premiums written
299.6
236.7
101.2
637.5
100.0
Property
Casualty
Specialty
Total
Total
Year ended 31 December 2021
$m
$m
$m
$m
%
US
105.4
118.7
3.9
228.0
60.2
Worldwide
62.3
7.1
62.3
131.7
34.8
Europe
6.0
2.8
-
8.8
2.3
Other
9.7
0.4
0.2
10.3
2.7
Gross premiums written
183.4
129.0
66.4
378.8
100.0
Conduit Holdings Limited Annual Report and Accounts 2022
105
Financial statements
Notes to the consolidated financial statements
continued
Property reinsurance
Conduit is exposed to large natural-catastrophe losses, such as windstorm and earthquake losses, primarily from
assuming risks associated with property treaties. Exposure to natural-catastrophe events is controlled and measured by
managing to predefined limits within stochastic modelling and deterministic accumulations across classes per geographic
zone and peril. The accuracy of these analyses is limited by the quality of data and the effectiveness of the modelling. It
is possible that a catastrophic event significantly exceeds the expected modelled event loss.
Natural-catastrophe risk is written across both the US and internationally on an excess of loss and capped quota
share basis. Reinsurance structures are offered strategically, most notably in respect of peril, geography and
probability of activation or exhaustion.
Property per risk treaties are offered with the strategy to minimise natural-catastrophe exposure, focusing on fire risk.
This is considered by both natural-catastrophe specific metrics, treaty conditions and excess of loss structure.
Ceded reinsurance may be purchased to mitigate exposures to large natural-catastrophe losses. Ceded reinsurance is
typically purchased on an excess of loss basis, however industry loss warranties, catastrophe bonds, or proportional
treaty arrangements may also be entered into.
Casualty reinsurance
Conduit underwrites a balanced portfolio of casualty classes of business, comprised of both excess of loss and
proportional contracts, on a worldwide basis.
Casualty claims tend to take longer to be reported and ultimately settled than physical damage risks. Conduit typically
maintains net reserves for losses and loss adjustment expenses for casualty classes of business over a longer period of
time than for the property and specialty classes of business where the costs of claims are generally known and settled
within a shorter time frame.
Conduit will purchase ceded reinsurance to protect against any \u2018clash\u2019 between losses arising in its casualty
portfolio.
The sub-classes of casualty business include directors and officer\u2019s liability, financial institutions liability, general
liability for multiple sub-classes and, on an excess and umbrella basis, medical malpractice, professional liability
and transactional liability. Conduit has limited appetite for, and generally avoids, workers compensation, standalone
auto and cyber treaties.
Directors and officers liability
Directors and officers liability policies offer protection for company managers and directors and officers against
claims that may arise in the normal course of operations. Coverage includes legal expenses and liability to
shareholders, bondholders, creditors or others owing to actions or omissions by a director or officer of a private or
public corporation, or not-for-profit organisation.
Financial institutions liability
Financial institutions coverage may cover risks such as computer and commercial crime, professional indemnity
and civil liability.
General liability
General liability commonly provides cover for losses arising from the legal liability of an original insured and statutory
liability in the case of employers\u2019 liability which result in bodily injury or disease to third parties or physical damage to
third-party property. The Group offers a wide range of general liability reinsurance products including contractors
general liability, excess general liability, umbrella, energy and environmental.
Medical malpractice
Medical malpractice reinsurance generally covers professional liability and errors and omissions specifically in the
healthcare industry, protecting physicians and other healthcare professionals against claims of negligent acts or injury
of patients under their care. Medical malpractice reinsurance does not cover intentional or criminal acts.
Conduit Holdings Limited Annual Report and Accounts 2022
106
Financial statements
Notes to the consolidated financial statements
continued
Professional liability
Professional liability generally provides coverage for third-party losses resulting from legal liability or civil liability or
negligence, errors or omissions or wrongful acts arising from the provision of, or failure to provide, professional services
by an original insured. Sub-classes of this business would include lawyers, accountants, architects and engineers, errors
and omissions, plus miscellaneous professional liability.
Transactional liability
Transactional liability reinsurance is used by parties to various business transactions, such as mergers, acquisitions
and divestitures, to transfer certain transaction-related risks to the reinsurance market. There can be a broad range of
risks covered, including warranty, litigation, pension and tax uncertainties and employment matters.
Specialty reinsurance
Conduit's specialty classes of business are written on both an excess of loss and proportional basis and can provide
reinsurance coverage against physical damage (short-tail) or against legal liability (long-tail) losses. Although specialty
classes of business are exposed to natural-catastrophe risk, it is generally to a lesser extent than property classes of
business. They are more likely to be affected by specific large loss events such as accidents, collisions, fires and similar
man-made catastrophe events. Specialty classes of business are highly diverse in nature and require specific market
expertise and experience. The specialty classes of business include aviation, energy, marine, renewables, political
violence and terrorism and are offered on both a specific and a whole account basis.
Conduit purchases ceded reinsurance protection to reduce exposure to both large risk losses and an accumulation
of smaller losses. Ceded reinsurance is typically purchased on an excess of loss basis, but, from time to time,
proportional arrangements may be entered into.
Aviation
The aviation class of business provides cover to the insurers of the world\u2019s major airlines and aircraft manufacturers
and includes cover for the aircraft themselves as well as losses arising from passenger and third-party liability claims
against airlines and/or manufacturers.
Energy
The energy class of business provides reinsurance cover for a global spread of accounts that can include primary
risks such as downstream energy, upstream energy, energy liability, construction energy and Gulf of Mexico offshore
energy programmes. Policies typically cover property for physical damage (including natural-catastrophe) and
machinery breakdown perils plus consequential business interruption exposure, often with loss limits set at a level
commensurate with a modelled estimated maximum loss scenario.
Marine
Marine cargo is an international account and covers the reinsurance of commodities or goods in transit. Typically, transit
cover is provided on an all-risks basis for marine perils for the full value of the goods concerned. Static cover is also
provided for losses to cargo, from both elemental and non-elemental causes. In addition, the cargo account can include
for example, fine art, vault risks, artwork on exhibition and marine war and terrorism business relating to cargo in the
ordinary course of transit.
Marine liability is mostly the reinsurance of the International Group of Protection and Indemnity Clubs. Marine
builders\u2019 risk covers the building of ocean-going vessels in specialised yards worldwide and their testing and
commissioning.
The marine hull class generally consists of worldwide coverage spanning physical damage, hull and machinery
breakdown, loss of hire and mortgagees\u2019 interests for a range of maritime vessels from cargo and passenger ships to
private pleasure craft. Products typically cover both risk and catastrophe exposures.
Political violence and terrorism
Political violence and terrorism coverage is provided for US and worldwide property risks, but typically excluding
nuclear, chemical, biological and cyber coverage in most territories.
Conduit Holdings Limited Annual Report and Accounts 2022
107
Financial statements
Notes to the consolidated financial statements
continued
Whole account
Coverage is generally provided on a worldwide basis and covers a broad spectrum of the cedants risks under a single
policy. The classes of business covered under a whole account reinsurance policy can include traditional property and
casualty classes of business including commercial and personal automobile, general liability, workers\u2019 compensation,
employers\u2019 liability, excess casualty and umbrella, as well as selected professional liability coverage.
Ceded reinsurance
Ceded reinsurance is purchased in the normal course of business to increase capital capacity, limit the impact of
individual risk losses and loss events impacting multiple cedants (such as natural-catastrophes), or both. Ceded
reinsurance may also be purchased from time to time to optimise the risk-adjusted return of Conduit's aggregate
underwriting portfolio. Conduit may purchase ceded reinsurance on both an excess of loss and proportional basis, and
may in future supplement this with the use of catastrophe bonds or other capital market products. The mix of ceded
reinsurance coverage is dependent on specific loss mitigation requirements, market conditions and available capacity. In
certain market conditions, Conduit may deem
it more economic to hold capital than purchase ceded reinsurance. Ceded reinsurance does not relieve Conduit of its
obligations to policyholders. Conduit is exposed to reinsurance risk where ceded reinsurance contracts put in place to
reduce gross reinsurance risk do not perform as anticipated, result in coverage disputes or prove inadequate in terms
of the limits purchased. Failure of a ceded reinsurer to pay a valid claim is considered a credit risk which is detailed in
the credit risk section below. Ceded reinsurance coverage is not intended to be available to meet all potential loss
circumstances. Conduit will retain certain losses, as the cover purchased is unlikely to transfer the totality of Conduit\u2019s
exposure. Any loss amount which exceeds the ceded reinsurance coverage purchased would be retained by Conduit.
Some ceded reinsurance policies have limited reinstatements, therefore the number of claims which may be recovered
on second, and subsequent loss circumstances is limited.
Under Conduit\u2019s ceded reinsurance security policy, ceded reinsurers are assessed and approved based on their
financial strength ratings, amongst other factors. These decisions are regularly reviewed as an integral part of the
business planning and performance monitoring process. The management Counterparty Security Committee examines
and approves all Conduit\u2019s ceded reinsurers to ensure that they possess suitable security.
Net losses and loss adjustment expenses
A significant and critical judgement and estimate made by management is the estimation of net losses and loss
adjustment expenses. Management estimates net losses and loss adjustment expenses, and the associated reserves
to cover its estimated liability for both reported and unreported claims on events that have occurred up to the latest
valuation date. Management uses methodologies that calculate a point estimate for the ultimate losses, representing
management\u2019s best estimate of ultimate net losses and loss adjustment expenses. Conduit establishes its reserve for
losses and loss adjustment expenses by taking outstanding losses, adding an estimate for IBNR and, if deemed
necessary, ACRs which represent Conduit's estimate for losses related to specific contracts that the management
believes may not be adequately estimated by the client as of that date.
Loss reserves are not permitted until the occurrence of an event which may give rise to a claim. As a result, only loss
reserves applicable to losses that have occurred up to the reporting date are established, with no allowance for the
provision of a contingency reserve to account for expected future losses or for the emergence of new types of latent
claims. Claims arising from future events can be expected to require the establishment of substantial reserves from
time to time. All of Conduit\u2019s reserves are currently reported on an undiscounted basis.
The reserving process is dependent on management's judgement and is subject to meaningful uncertainty due to both
qualitative and quantitative factors, including, but not limited to: the nature of the business written, whether it is short-tail
or long-tail, whether it is excess of loss or proportional, the magnitude and timing of loss events, the geographic areas
impacted by loss events, time lags in the reporting process from the original claimant, limited claims data, policy
coverage interpretations, case law, regulatory directives, demand surge and inflation, potential uncertainties related to
reinsurance and ceding company reserving practices, and other factors inherent in the estimation process for net losses
and loss adjustment expenses.
Conduit Holdings Limited Annual Report and Accounts 2022
108
Financial statements
Notes to the consolidated financial statements
continued
The judgements and estimates used in establishing loss reserve calculations may be revised as additional experience
or other data becomes available. Loss reserves are also reviewed as new or improved methodologies are developed
and as laws or regulations change. Furthermore, as a business operating within a broker market, management must
rely on loss information reported to brokers by other insurers and their loss adjusters, who must estimate their own
losses at the policy level, often based on incomplete and changing information. The information management receives
varies by cedant and may include paid losses, estimated case reserves and an estimated provision for IBNR reserves.
Additionally, reserving practices and the quality of data reporting may vary among ceding companies, which adds
further uncertainty to management\u2019s estimates of the ultimate losses.
Conduit\u2019s internal actuaries review the reserving assumptions and methodologies on a quarterly basis and develop an
actuarial best estimate of Conduit\u2019s net losses and loss adjustment expenses using the processes outlined above. The
management Reserving Committee reviews the estimate for net losses and loss adjustment expenses on a quarterly
basis. The reserves are subject to a semi-annual independent review by Conduit\u2019s external actuaries. The results of the
internal and independent reserve reviews are presented to the Audit Committee.
Short-tail versus long-tail
Claims relating to short-tail risks are generally reported more promptly than those relating to long-tail risks. The
timeliness of reporting can be affected by such factors as the nature of the event causing the loss, the location of the
loss and whether the losses are from policies in force with primary insurers or reinsurers.
Excess of loss versus proportional
For excess of loss contracts, management is aided by the fact that each policy has a defined limit of liability arising from
one event. Once that limit has been reached, there is no further exposure to additional losses from that policy for the
same event. For proportional business, an initial estimated loss and loss expense ratio is generally used. This is based
upon information provided by the ceding company and/or their broker and management\u2019s historical experience of that
treaty, if any, and the estimate is adjusted as actual experience becomes known.
b. Market risk
Conduit is at risk of loss due to movements in market factors. The main market risks Conduit was exposed to include:
\u2022
Reinsurance risk;
\u2022
Investment risk;
\u2022
Currency risk.
Reinsurance risk
Conduit is exposed to reinsurance market risk from several sources, including the following:
\u2022
The advent or continuation of a soft market, which may result in a stabilisation or decline in premium rates
and/or terms and conditions for certain classes, or across all classes.
\u2022
The actions and reactions of key competitors, which may directly result in volatility in premium volumes and rates,
fee levels and other input costs.
\u2022
Market events, including unusual inflation in rates, may result in a limit in the availability of cover, causing political
intervention or national remedies.
\u2022
Failure to maintain broker and cedant relationships, leading to a limited or substandard choice of risks
inconsistent with Conduit\u2019s risk appetite.
\u2022
Changes in regulation including capital, governance or licensing requirements, and laws.
\u2022
Changes in the geopolitical environment.
The most important method to mitigate reinsurance market risk is to maintain strict underwriting standards.
Conduit manages reinsurance market risk in numerous ways, including the following:
\u2022
Reviews and amends underwriting plans and outlook as necessary.
\u2022
Reduces exposure to, or withdraws from, market sectors where conditions have reached
unattractive levels.
\u2022
Purchases appropriate, cost-effective reinsurance cover to mitigate exposures.
\u2022
Closely monitors changes in rates, terms and conditions, and inflation.
Conduit Holdings Limited Annual Report and Accounts 2022
109
Financial statements
Notes to the consolidated financial statements
continued
\u2022
Ensures through rigorous underwriting criteria that surplus capital does not drive short-term risk
appetite.
\u2022
Typically holds a daily underwriting briefing meeting for CRL to discuss deal flow, pricing and
opportunities.
\u2022
Holds a quarterly management Underwriting Oversight Committee meeting that considers matters that include
underwriting performance for CRL.
\u2022
Holds an annual strategy review meeting.
\u2022
Holds a quarterly management Underwriting Committee meeting that considers matters including
underwriting performance for CRL.
\u2022
Holds a quarterly management Risk, Capital and Compliance Committee meeting to review relevant risk and capital
considerations for CRL.
\u2022
Holds regular meetings with regulators and rating agencies.
Reinsurance contract liabilities are currently not directly sensitive to the level of market interest rates, as they are
undiscounted and contractually non-interest bearing.
Investment risk
Movements in investments resulting from changes in interest and inflation rates, credit spreads, and currency exchange
rates, among other factors, may lead to an adverse impact on the value of Conduit\u2019s investment portfolio. Conduit seeks
to invest in issuers with stronger ESG practices on balance, as it believes that this will also help reduce risk in the
portfolio.
The Investment Committee of CRL is responsible for all investment-related decisions and investment guidelines. The
investment guidelines set the parameters within which Conduit\u2019s external managers must operate. Important parameters
of these guidelines include permissible asset classes, duration1 ranges, credit quality, permitted currency, maturity,
industry sectors, geographical, sovereign and issuer exposures. Guideline compliance is monitored on a monthly basis.
The portfolio of fixed maturity securities is currently managed by three external managers. Their performance is
monitored on an ongoing basis. Conduit projects the level of funds required to meet near-term obligations and cash flow
needs following extreme events in order to ensure adequate liquidity is maintained. Conduit also prioritises liquid asset
classes with higher credit quality and shorter duration so that Conduit can meet reinsurance and other near-term
obligations. Conduit has split the portfolio into a short-tail mandate, to better match the property and specialty classes of
business, and a long-tail mandate, to better match the casualty classes of business and some aspects
of the specialty classes of business. The short-tail mandate will be slightly shorter duration than the long-tail
mandate.
Conduit reviews the composition, duration and asset allocation of its investment portfolio on a regular basis to respond
to changes in interest rates and other market conditions. If certain asset classes are anticipated to produce a higher
return within management\u2019s risk tolerance, an adjustment in asset allocation may be made. Conversely, if the risk profile
is expected to move outside of tolerance levels, adjustments may be made to reduce the risks in the portfolio.
Conduit models various periods of significant stress in order to better understand the investment portfolio\u2019s risks and
exposures. The scenarios represent what could, and most likely will, occur \u2013 albeit not in the exact form of the
scenarios, which are based on historic periods of volatility. Conduit also monitors the portfolio impact of more severe
scenarios consisting of extreme shocks.
Conduit focuses on the most significant risks in its investment portfolio which are interest rate risk, credit risk and
liquidity risk, and has built, or is building, stress testing and risk analytics around these risks to ensure they are within
tolerances and preferences.
1.
Duration is the weighted average maturity of a security's cash flows, where the present values of the cash flows serve as the weights. The effect of convexity, or
sensitivity, of the portfolio's response to changes in interest rates is also factored in to the calculation.
Conduit Holdings Limited Annual Report and Accounts 2022
110
Financial statements
Notes to the consolidated financial statements
continued
Strategic asset allocation reviews will be undertaken periodically to assess Conduit\u2019s overall investment strategy and to
consider alternative asset allocations to achieve the best risk-adjusted return within Conduit's risk appetite. Any resulting
recommendations would be approved by the appropriate management committee(s) and reported to the Board. The
Investment Committee met quarterly to ensure that the strategic and tactical investment actions were consistent with
investment risk preferences, appetite, risk and return objectives and tolerances. The investment risk tolerances have
been incorporated into the ERM framework.
The investment mix by mandate and sector of Conduit's portfolio of fixed maturity securities is as follows:
Estimated
Estimated
Estimated
fair value
fair value
fair value
short-tail
long-tail
total
As at 31 December 2022
$m
$m
$m
Short-term investments
33.2
4.7
37.9
US treasuries
103.6
106.6
210.2
US agency debt
-
1.8
1.8
US municipals
10.0
5.2
15.2
Non-US government and agency
2.0
-
2.0
Asset-backed
102.6
61.2
163.8
US government agency mortgage-backed
52.7
47.9
100.6
Non-agency mortgage-backed
9.8
3.0
12.8
Agency commercial mortgage-backed
3.2
-
3.2
Non-agency commercial mortgage-backed
21.9
30.8
52.7
Corporate
263.6
157.9
421.5
Total
602.6
419.1
1,021.7
Estimated
Estimated
Estimated
fair value
fair value
fair value
short-tail
long-tail
total
As at 31 December 2021
$m
$m
$m
Short-term investments
8.9
-
8.9
US treasuries
52.4
119.4
171.8
US agency debt
-
2.0
2.0
US municipals
11.0
2.2
13.2
Non-US government and agency
2.2
-
2.2
Asset-backed
97.3
72.4
169.7
US government agency mortgage-backed
53.2
41.4
94.6
Non-agency mortgage-backed
13.6
5.6
19.2
Agency commercial mortgage-backed
3.2
-
3.2
Non-agency commercial mortgage-backed
24.3
34.1
58.4
Corporate
302.6
162.6
465.2
Total
568.7
439.7
1,008.4
Conduit Holdings Limited Annual Report and Accounts 2022
111
Financial statements
Notes to the consolidated financial statements
continued
Corporate and non-US government and agency bonds by country are as follows:
Non-US
Other
government
Financials
industries
and agency
Total
As at 31 December 2022
$m
$m
$m
$m
US
140.6
187.7
-
328.3
UK
21.7
5.5
-
27.2
Canada
23.2
0.5
-
23.7
Other countries
35.4
6.9
2.0
44.3
Total
220.9
200.6
2.0
423.5
Non-US
Other
government
Financials
industries
and agency
Total
As at 31 December 2021
$m
$m
$m
$m
US
153.5
214.8
-
368.3
UK
22.1
7.4
-
29.5
Canada
23.3
0.6
-
23.9
Other countries
37.6
5.9
2.2
45.7
Total
236.5
228.7
2.2
467.4
The sector allocation of corporate bonds is as follows:
2022
2021
As at 31 December
$m
%
$m
%
Financials
220.9
52.4
236.5
50.9
Industrials
180.3
42.8
209.5
45.0
Utilities
20.3
4.8
19.2
4.1
Total
421.5
100.0
465.2
100.0
Conduit\u2019s investment portfolio is comprised of fixed maturity securities and cash and cash equivalents. Fair values can
be impacted by movements in interest rates, credit ratings, exchange rates, the current economic environment and
outlook. The estimated fair value of the portfolio of fixed maturity securities is generally inversely correlated to
movements in market interest rates. If market interest rates fall, the estimated fair value of Conduit\u2019s portfolio of fixed
maturity securities would tend to rise and vice versa. The sensitivity of the price of fixed maturity securities to movements
in interest rates is indicated by their duration. The greater a security\u2019s duration, the greater its price volatility to
movements in interest rates. The sensitivity of Conduit\u2019s portfolio of fixed maturity securities to interest rate movements
is detailed below, assuming linear movements in interest rates.
Conduit Holdings Limited Annual Report and Accounts 2022
112
Financial statements
Notes to the consolidated financial statements
continued
2022
2021
As at 31 December
$m
%
$m
%
Immediate shift in yield (basis points)
100
(23.0)
(2.2)
(27.7)
(2.7)
75
(17.2)
(1.7)
(20.8)
(2.1)
50
(11.5)
(1.1)
(13.9)
(1.4)
25
(5.7)
(0.6)
(6.9)
(0.7)
0
-
-
-
-
-25
6.6
0.6
5.7
0.6
-50
13.2
1.3
11.5
1.1
-75
19.7
1.9
17.2
1.7
-100
26.3
2.6
22.9
2.3
Conduit mitigates interest rate risk on the investment portfolio by establishing and monitoring duration ranges in its
investment guidelines. The duration of the portfolio is matched to the modelled expected duration of the reinsurance
reserves, within a permitted range. The permitted duration range for the portfolio is between 1.5 and 5 years. The
overall duration for the fixed maturity securities, managed cash and cash equivalents is 2.2 years as at 31
December 2022 (31 December 2021: 2.4 years).
In addition to duration management, Conduit monitors VaR to measure potential losses in the estimated fair values of its
cash and invested assets and to understand and monitor risk. The VaR calculation is performed using
variance/covariance risk modelling. Securities are valued individually using standard market pricing models. These
security valuations serve as the input to many risk analytics. The principal VaR measure that is produced is an annual
VaR at the 99th percentile confidence level. Under normal conditions, the portfolio is not expected to lose more than the
VaR metric listed below, 99% of the time over a one-year time horizon. The appropriateness of this measure is
considered by the Investment Committee periodically.
Conduit\u2019s annual VaR calculation is as follows:
2022
2021
% of
% of
shareholders'
shareholders'
As at 31 December
$m
equity
$m
equity
99th percentile confidence level
62.0
7.6
30.2
3.1
Currency risk
Conduit is susceptible to fluctuations in rates of foreign exchange, principally between the US dollar and pound
sterling and the US dollar and the euro. Even though risks are assumed on a worldwide basis, they are
predominantly denominated in US dollars. Conduit is exposed to currency risk to the extent its assets are
denominated in different currencies to its liabilities. Conduit is also exposed to translation risk on non-monetary
assets such as unearned premiums and deferred acquisition costs. Foreign currency gains and losses are recorded
in the period they occur in the consolidated statement of comprehensive loss.
Conduit hedges monetary non-US dollar liabilities primarily with non-US dollar assets but may also use derivatives,
such as currency forwards, to mitigate foreign currency exposures. The main foreign currency exposure relates to its
reinsurance obligations, cash holdings, premiums receivable and dividend payable, if applicable.
Conduit Holdings Limited Annual Report and Accounts 2022
113
Financial statements
Notes to the consolidated financial statements
continued
The following table summarises the carrying value of total assets and total liabilities categorised by
Conduit\u2019s main currencies:
USD
GBP
EUR
Other
Total
As at 31 December 2022
$m
$m
$m
$m
$m
Total assets
1,515.9
26.1
24.2
2.2
1,568.4
Total liabilities
(691.3)
(9.1)
(44.9)
(8.7)
(754.0)
Net assets (liabilities)
824.6
17.0
(20.7)
(6.5)
814.4
USD
GBP
EUR
Other
Total
As at 31 December 2021
$m
$m
$m
$m
$m
Total assets
1,318.0
6.4
9.3
1.1
1,334.8
Total liabilities
(331.8)
(2.8)
(17.1)
(1.9)
(353.6)
Net assets (liabilities)
986.2
3.6
(7.8)
(0.8)
981.2
The impact on profit from a proportional foreign exchange movement of 10.0% against the US dollar at year end
spot rates would be a decrease or increase of $0.3 million (31 December 2021: $0.2 million).
c. Liquidity risk
Liquidity risk is the risk that cash may not be available to pay obligations when they are due without incurring
unreasonable costs. Conduit's main exposure to liquidity risk is with respect to its reinsurance and investment activities.
Conduit is exposed if proceeds from the sale of financial assets are not sufficient to fund obligations arising from
reinsurance contacts and/or other liabilities. Conduit can be exposed to fund daily calls on its available investment
assets, principally to settle reinsurance claims and/or to fund trust accounts following a large catastrophe loss, or other
collateral requirements.
Liquidity risk exposures related to reinsurance activities are as follows:
\u2022
Large catastrophic events, or multiple medium-sized events in quick succession, requiring the payment of high value
claims within a short time frame or to fund trust accounts established to collateralise claims payment liabilities.
\u2022
Failure of cedants to meet their contractual obligations with respect to the timely payment of premiums.
\u2022
Failure of Conduit\u2019s ceded reinsurers to meet their contractual obligations to pay claims within a timely
manner.
Liquidity risk exposures related to investment activities are as follows:
\u2022
Adverse market movements and/or a duration mismatch to obligations, resulting in investments needing to be
disposed of at a significant realised loss.
\u2022
An inability to liquidate investments due to market conditions.
Conduit's investment strategy is to hold high quality, liquid securities sufficient to meet reinsurance liabilities and other
near-term liquidity requirements. Portfolios are specifically designed to ensure funds are readily available in an extreme
event.
Conduit Holdings Limited Annual Report and Accounts 2022
114
Financial statements
Notes to the consolidated financial statements
continued
The maturity dates of Conduit's portfolio of fixed maturity securities are as follows:
Short-tail
Long-tail
Total
As at 31 December 2022
$m
$m
$m
Fixed maturity securities at FVTPL
Less than one year
167.9
46.0
213.9
Between one and two years
149.5
37.0
186.5
Between two and three years
54.2
12.5
66.7
Between three and four years
15.8
48.8
64.6
Between four and five years
4.9
21.0
25.9
Over five years
20.1
110.9
131.0
Asset-backed and mortgage-backed
190.2
142.9
333.1
Total
602.6
419.1
1,021.7
Short-tail
Long-tail
Total
As at 31 December 2021
$m
$m
$m
Fixed maturity securities at FVTPL
Less than one year
43.8
1.5
45.3
Between one and two years
145.7
70.6
216.3
Between two and three years
144.5
39.1
183.6
Between three and four years
21.3
9.5
30.8
Between four and five years
11.0
57.2
68.2
Over five years
10.8
108.3
119.1
Asset-backed and mortgage-backed
191.6
153.5
345.1
Total
568.7
439.7
1,008.4
The estimated maturity profile of the reinsurance contracts and financial liabilities of Conduit is as follows:
Years until liability becomes due \u2013 undiscounted
Carrying
Less than
One to
Three to
value
one
three
five
Over five
Total
As at 31 December 2022
$m
$m
$m
$m
$m
$m
Losses and loss adjustment expenses
459.3
161.5
156.6
72.5
68.7
459.3
Other reinsurance payables
15.0
15.0
-
-
-
15.0
Amounts payable to reinsurers
16.2
16.2
-
-
-
16.2
Other payables
8.7
8.7
-
-
-
8.7
Lease liabilities
2.4
0.6
1.3
0.7
-
2.6
Total
501.6
202.0
157.9
73.2
68.7
501.8
Conduit Holdings Limited Annual Report and Accounts 2022
115
Financial statements
Notes to the consolidated financial statements
continued
Years until liability becomes due \u2013 undiscounted
Carrying
Less than
One to
Three to
value
one
three
five
Over five
Total
As at 31 December 2021
$m
$m
$m
$m
$m
$m
Losses and loss adjustment expenses
171.6
65.0
62.7
23.1
20.8
171.6
Amounts payable to reinsurers
7.3
7.3
-
-
-
7.3
Other payables
19.0
19.0
-
-
-
19.0
Lease liabilities
2.9
0.6
1.3
1.3
-
3.2
Total
200.8
91.9
64.0
24.4
20.8
201.1
Actual maturities of the above may differ from contractual maturities because certain borrowers have the right to call or
prepay certain obligations with or without call or prepayment penalties. The estimation of the ultimate liability for net
losses and loss adjustment expenses is complex and incorporates a significant amount of judgement. The timing of
payment of net losses and loss adjustment expenses is also uncertain and cannot be predicted as simply as for other
financial liabilities. Actuarial and statistical techniques, past experience and management\u2019s judgement have been used
to determine a likely settlement pattern.
As at 31 December 2022, cash and cash equivalents were $112.9 million (31 December 2021: $67.5 million). Conduit
manages its liquidity risks via its investment strategy to hold high quality, liquid securities, sufficient to meet its
reinsurance liabilities and other near-term liquidity requirements. In addition, Conduit has established asset allocation
and maturity parameters within the investment guidelines such that the majority of the investments are in high quality
assets which could be converted into cash promptly and at minimal expense. Conduit monitors market changes and
outlook and reallocates assets as it deems necessary.
As at 31 December 2022, Conduit considers it has more than adequate liquidity to pay its obligations as they fall due
even if difficult investment market conditions were to prevail for a period of time.
d. Credit risk
Credit risk is the risk that a counterparty may fail to pay, or repay, a debt or obligation. Conduit is exposed to credit risk
on its fixed maturity investment portfolio, its premiums receivable from cedants, and on any amounts recoverable from
reinsurers. While Conduit has not experienced any such collection issues, the COVID-19 pandemic increased the risk of
defaults across many industries. The global recovery from the COVID-19 pandemic continues and the risk that
counterparties fail to meet their financial obligations as they fall due has decreased.
Credit risk on Conduit\u2019s portfolio of fixed maturity securities is mitigated through the investment policy to invest in
instruments of high credit quality issuers and to limit the amounts of credit exposure with respect to particular ratings
categories and any one issuer. Securities rated below an S&P or equivalent rating of BBB+ may comprise no more
than 10.0% of the portfolio. Conduit also limits exposure to individual issuers, with declining limits for less highly rated
issuers. Conduit therefore does not expect any significant credit concentration risk on its investment portfolio, except
for fixed maturity securities issued by the US government and its agencies.
Conduit is potentially exposed to counterparty credit risk in relation to the premiums receivable from reinsurance
brokers and cedants and on any amounts recoverable from Conduit\u2019s ceded reinsurers. Given the dislocation in the
market, the COVID-19 pandemic may adversely impact the ability to collect amounts due to Conduit. Credit risk on
inwards premiums receivable from cedants is managed by conducting business with reputable broking organisations,
with whom Conduit has established relationships, and by rigorous cash collection procedures. Conduit also has a
broker approval process in place. Credit risk from ceded reinsurance recoverables is primarily managed by the review
and approval of reinsurer security, with ongoing monitoring in place.
The table below presents an analyses of Conduit\u2019s major exposures to counterparty credit risk, based on their
rating. Premiums receivable are not rated, however there is limited default risk associated with these amounts.
Conduit Holdings Limited Annual Report and Accounts 2022
116
Financial statements
Notes to the consolidated financial statements
continued
Cash and cash
Reinsurance
equivalents
recoverable
and fixed
Inward
and other
maturity
premiums
reinsurance
securities
receivables
receivables
As at 31 December 2022
$m
$m
$m
AAA
651.4
-
-
AA+, AA, AA-
74.5
-
-
A+, A, A-
279.7
-
59.5
BBB+, BBB, BBB-
129.0
-
-
Other
-
260.5
29.9
Total
1,134.6
260.5
89.4
Cash and cash
Reinsurance
equivalents
recoverable
and fixed
Inward
and other
maturity
premiums
reinsurance
securities
receivables
receivables
As at 31 December 2021
$m
$m
$m
AAA
542.4
-
-
AA+, AA, AA-
75.6
-
-
A+, A, A-
306.2
-
30.8
BBB+, BBB, BBB-
151.7
-
-
Other
-
155.0
18.4
Total
1,075.9
155.0
49.2
The reinsurance recoverable classified as other is fully collateralised.
As at 31 December 2022 the average credit quality of Conduit's cash and cash equivalents and portfolio
of fixed maturity securities was AA (31 December 2021: AA-). The COVID-19 pandemic has increased the risk of
defaults across many industries and Conduit continually monitors credit risk, especially during this time of volatility.
Given the investment portfolio positioning, this is not expected to have a meaningful impact from a credit perspective,
although credit spreads are likely to remain volatile in the near-term. Potential interest rate rises are similarly not
expected to impact inwards premiums receivable.
The following table shows premiums receivable that are not yet due and those that are past due but not
impaired:
2022
2021
As at 31 December
$m
$m
Not yet due
227.3
123.0
Less than 90 days past due
29.8
22.2
Other
3.4
9.8
Total
260.5
155.0
For the year ended 31 December 2022 and 2021 no provisions have been made for impaired or irrecoverable balances
and no amount was charged to the consolidated statement of comprehensive loss in respect of bad debts.
Conduit Holdings Limited Annual Report and Accounts 2022
117
Financial statements
Notes to the consolidated financial statements
continued
e. Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, personnel, systems or external
events. During the reporting period, which primarily involved the ongoing establishment of operations, various
operational risks were identified, and steps were taken to manage or mitigate these risks.
The risk framework addresses the identification, assessment and management of operational risks. This process
involves the use of risk registers to identify inherent risk and residual risk after the application of controls. The
management of individual risks is the responsibility of management, with independent challenge and oversight
provided by the risk function. The results of compliance reviews and independent internal audits provide an additional
level of review and verification. The Audit Committee has selected a reputable provider to serve as outsourced
internal auditors.
f. Strategic risk
Conduit has identified several strategic risks, including:
\u2022
The risks that either the poor execution of the business plan or an inappropriate business plan in itself results in a
strategy that fails to reflect adequately the trading environment, resulting in an inability to optimise performance,
including reputational risk.
\u2022
The risks of the failure to maintain adequate capital, accessing capital at an inflated cost or the inability to access
capital and unanticipated changes in vendor, regulatory and/or rating agency models that could result in an
increase in capital requirements or a change in the type of capital required.
\u2022
The risks of succession planning, staff retention and key personnel risks.
Business plan risk
Conduit's business plan forms the basis of operations and provides strategic direction to management.
Actual versus planned results are monitored regularly.
Capital management risk
The total tangible capital is as follows:
2022
2021
As at 31 December
$m
$m
Shareholders' equity
814.4
981.2
Intangible assets
1.4
1.1
Total tangible capital
813.0
980.1
Risks associated with the effectiveness of Conduit\u2019s capital management are mitigated as follows:
\u2022
Regular monitoring of current and prospective regulatory and rating agency capital requirements.
\u2022
Oversight of capital requirements by the Board.
\u2022
Ability to purchase sufficient, cost-effective reinsurance.
\u2022
Maintaining contact with vendors, regulators and rating agencies in order to stay abreast of upcoming
developments.
\u2022
Participation in industry groups such as the Association of Bermuda Insurers and Reinsurers, Reinsurance
Association of America and the International Underwriting Association.
Conduit reviews the level and composition of capital on an ongoing basis with a view of:
\u2022
Maintaining sufficient capital for underwriting opportunities and to meet obligations to policyholders;
\u2022
Maximising the risk-adjusted return to shareholders within the context of the defined risk appetite;
\u2022
Maintaining an adequate financial strength rating; and
\u2022
Meeting all relevant capital requirements.
Capital is increased or returned as appropriate. The retention of earnings generated leads to an increase in capital.
Capital raising can include debt or equity and returns of capital may be made through dividends, share repurchases, a
redemption of debt or any combination thereof. Other capital management tools and products available to Conduit
may also be utilised. All capital actions require approval by the Board.
Conduit Holdings Limited Annual Report and Accounts 2022
118
Financial statements
Notes to the consolidated financial statements
continued
The primary source of capital used by Conduit is equity shareholders\u2019 funds. As a holding company, CHL relies on
dividends from its operating entity to provide the cash flow required for dividends to shareholders. The ability of the
operating entity to pay dividends and make capital distributions is subject to the legal and regulatory restrictions of the
jurisdiction in which it operates.
CRL is regulated by the BMA and is required to monitor the ECR under the BMA\u2019s regulatory framework, which has
been assessed as equivalent to the EU\u2019s Solvency II regime. CRL\u2019s regulatory capital requirement is calculated using
the BSCR standard formula and minimum margin of solvency requirements. CRL had sufficient capital at all times
throughout the year to meet the BMA\u2019s requirements.
Retention risk
Risks associated with succession planning, staff retention and key man risks are mitigated through a
combination of resource planning processes and controls, including:
\u2022
The identification of key personnel with appropriate succession plans at CHL;
\u2022
The identification of key team profit generators at CRL and function heads with targeted retention
packages;
\u2022
Documented recruitment procedures, position descriptions and employment contracts;
\u2022
Resource monitoring and the provision of appropriate compensation, including equity-based incentives which vests
over a defined time horizon, subject to achieving certain performance criteria; and
\u2022
Training schemes.
4. Segmental reporting
Management and the Board review Conduit\u2019s business and evaluates its performance primarily by three segments:
Property, Casualty and Specialty. These are considered to be the reportable segments for the purposes of
segmental reporting. Further classes of business are underwritten within each reportable segment. The nature of
these individual classes is discussed further in the \u201cRisk disclosures\u201d section.
Reportable segments
Operations and classes of business
Property
US and international property risk on an excess of loss and proportional contract basis.
Casualty
US and international casualty risk principally including directors and officers, financial
institutions, general, medical malpractice, professional and transactional.
Specialty
Diverse portfolio of business, principally including aviation, energy, marine, political violence
and terrorism and whole account.
Reportable segment performance is measured by the net underwriting profit or loss and the combined ratio. The chief
operating decision maker does not manage Conduit's assets by reportable segment, and, accordingly, investment
income and other non-underwriting related items are not allocated to each reportable segment. Refer to the risk
disclosures for more information.
All amounts reported are transactions with external parties and associates. There are no significant inter-segmental
transactions.
Conduit Holdings Limited Annual Report and Accounts 2022
119
Financial statements
Notes to the consolidated financial statements
continued
Property
Casualty
Specialty
Total
As at 31 December 2022
$m
$m
$m
$m
Gross premiums written by geographic region
US
174.7
171.9
8.7
355.3
Worldwide
93.5
29.0
81.2
203.7
Europe
16.3
33.3
10.2
59.8
Other
15.1
2.5
1.1
18.7
Total
299.6
236.7
101.2
637.5
Ceded reinsurance premiums
(46.3)
(1.3)
(9.0)
(56.6)
Net premiums written
253.3
235.4
92.2
580.9
Change in unearned premiums
(43.6)
(40.1)
(15.9)
(99.6)
Change in unearned premiums on premiums ceded
0.9
0.1
-
1.0
Net premiums earned
210.6
195.4
76.3
482.3
Net insurance losses and loss adjustment expenses
(140.0)
(129.0)
(76.9)
(345.9)
Net insurance acquisition expenses
(55.5)
(63.0)
(17.6)
(136.1)
Net underwriting profit (loss)
15.1
3.4
(18.2)
0.3
Other operating expenses
(34.3)
Net unallocated revenue / expenses
(55.7)
Total comprehensive loss
(89.7)
Net loss ratio
66.5%
66.0%
100.8%
71.7%
Net acquisition expense ratio
26.4%
32.2%
23.1%
28.2%
Other operating expense ratio
7.1%
Combined ratio
92.9%
98.2%
123.9%
107.0%
Conduit Holdings Limited Annual Report and Accounts 2022
120
Financial statements
Notes to the consolidated financial statements
continued
Property
Casualty
Specialty
Total
As at 31 December 2021
$m
$m
$m
$m
Gross premiums written by geographic region
US
105.4
118.7
3.9
228.0
Worldwide
62.3
7.1
62.3
131.7
Europe
6.0
2.8
-
8.8
Other
9.7
0.4
0.2
10.3
Total
183.4
129.0
66.4
378.8
Ceded reinsurance premiums
(26.4)
(1.2)
(5.0)
(32.6)
Net premiums written
157.0
127.8
61.4
346.2
Change in unearned premiums
(60.0)
(67.9)
(24.9)
(152.8)
Change in unearned premiums on premiums ceded
-
0.8
-
0.8
Net premiums earned
97.0
60.7
36.5
194.2
Net insurance losses and loss adjustment expenses
(70.9)
(41.1)
(30.1)
(142.1)
Net insurance acquisition expenses
(30.5)
(19.7)
(8.9)
(59.1)
Net underwriting loss
(4.4)
(0.1)
(2.5)
(7.0)
Other operating expenses
(30.6)
Net unallocated revenue / expenses
(4.4)
Total comprehensive loss
(42.0)
Net loss ratio
73.1%
67.7%
82.5%
73.2%
Net acquisition expense ratio
31.4%
32.5%
24.4%
30.4%
Other operating expense ratio
15.8%
Combined ratio
104.5%
100.2%
106.9%
119.4%
Included within the other geographic region, are premiums written with external parties in Bermuda for $0.6 million
(31 December 2021: $0.4 million).
5. Investment return
Net
Net
Net
realised
unrealised
Total
investment
gains /
gains /
investment
income
(losses)
(losses)
return
As at 31 December 2022
$m
$m
$m
$m
Fixed maturity securities
16.5
(2.8)
(67.8)
(54.1)
Cash and cash equivalents
1.3
-
-
1.3
Total
17.8
(2.8)
(67.8)
(52.8)
Net
Net
Net
realised
unrealised
Total
investment
gains /
gains /
investment
income
(losses)
(losses)
return
As at 31 December 2021
$m
$m
$m
$m
Fixed maturity securities
5.3
(1.0)
(7.6)
(3.3)
Cash and cash equivalents
0.2
-
-
0.2
Total
5.5
(1.0)
(7.6)
(3.1)
Included in net investment income is $1.1 million of investment management and custody fees for the year ended 31
December 2022 (31 December 2021: $0.7 million).
Conduit Holdings Limited Annual Report and Accounts 2022
121
Financial statements
Notes to the consolidated financial statements
continued
6. Net insurance acquisition expenses
2022
2021
Year ended 31 December
$m
$m
Insurance acquisition expenses
161.1
103.7
Change in deferred acquisition expenses
(24.8)
(44.6)
Insurance acquisition expenses ceded
(0.2)
-
Total
136.1
59.1
7. Employee benefits and other incentives
Aggregate remuneration and other incentives of Conduit\u2019s employees is as follows:
2022
2021
Year ended 31 December
$m
$m
Wages and salaries
11.4
7.5
Pension benefit
1.1
0.8
Bonus and other benefits
7.7
10.4
Total cash compensation
20.2
18.7
Equity-based incentives
2.1
0.3
Total employee benefits and other incentives
22.3
19.0
Equity-based incentives \u2013 MIP
Prior to the IPO, a MIP was created. The purpose of the MIP was to provide an incentive scheme for the founders and
initial employees for their services in building the foundations of Conduit. The incentive is based around shares in CML,
which will be automatically exchanged for ordinary shares of CHL for an aggregate value equivalent to up to 15% of the
excess of the market value of CHL over and above the Invested Equity, subject to the satisfaction of the vesting
conditions. All outstanding and future grants have an exercise period of four to seven years from the grant date. The fair
value is estimated using a stochastic Monte Carlo model.
CML issued 100,000 A1 shares and 100,000 A2 shares during the period ended 31 December 2020 at a
subscription price of \u00a31.72 and $2.26, respectively. Refer to note 18 for additional details.
The following table lists the assumptions used in the stochastic model for the MIP awards:
Year ended 31
Year ended 31
Assumptions
December 2022
December 2021
Dividend yield
0%
0%
Expected volatility1
range from
range from
17.2% \u2013 19.0%
17.2% \u2013 19.0%
Risk-free interest rate2
range from
range from
0.3% \u2013 0.6%
0.3% \u2013 0.6%
Expected life of instruments
range from 4 to 7
range from 4 to 7
years
years
1.
The expected volatility was calculated based on a comparator group of companies.
2.
The risk-free interest rate is based on the yield on a US government bond on the date of grant.
The shares were granted prior to the IPO and therefore discounts for business viability and lack of marketability were
also applied. There are significant risks associated with an IPO and the instruments are also illiquid until the tranche
vesting dates. Management therefore selected their best estimates at the time for these discounts. These assumptions
were highly judgemental and input from advisors was sought. Management also considered alternative assumptions and
concluded there was not a material impact on the estimated valuation selected. The calculation of the equity-based
incentive expense assumes no forfeitures
Conduit Holdings Limited Annual Report and Accounts 2022
122
Financial statements
Notes to the consolidated financial statements
continued
due to employee turnover, with subsequent adjustments to reflect actual experience. The assumptions and estimated
valuation selected resulted in 20% being expensed upfront for certain employees as this portion was not tied to service
conditions and was fully expensed in the period ended 31 December 2020.
Conditions of the MIP include:
\u2022
The incentives are to be equity-settled and have therefore been accounted for in accordance with IFRS 2.
\u2022
The value of the services received in exchange for the share-based incentives is measured by reference to the
estimated fair value of the incentives at their grant date, with the estimated fair value recognised in the
consolidated statement of comprehensive loss, together with a corresponding increase in other reserves within
shareholders\u2019 equity, on a straight-line basis over the vesting period, based on an estimate of the number of shares
that will ultimately vest.
\u2022
Vesting conditions, other than market conditions linked to the share price of CHL, are not taken into account
when estimating the fair value.
\u2022
At the end of each reporting period Conduit revises its estimates of the number of shares that are expected to vest
due to non-market conditions and recognises the impact of the revision to original estimates, if any, in the
consolidated statement of comprehensive loss, with a corresponding adjustment to shareholders\u2019 equity.
Equity-based incentives \u2013 DSBP
A percentage of each employee's bonus is automatically deferred into shares as nil cost options. The nil cost options
vest annually in separate equal tranches over a three year period from the date of grant and do not have associated
performance criteria attached to the awards. These awards accrue dividend equivalents for all dividends declared where
the record date falls between the grant date and date of exercise, and are paid at the time of exercise.
Number of
DSBP
awards
Outstanding as at 31 December 2021
-
Granted
764,575
Forfeited
(11,559)
Outstanding as at 31 December 2022
753,016
8. Other operating expenses
2022
2021
Year ended 31 December
$m
$m
Results of operating activities are stated after charging the following amounts:
Audit fees
0.9
0.8
Other auditor services
0.1
0.1
Total
1.0
0.9
During the year ended 31 December 2022, KPMG Audit Limited provided non-audit services in relation to Conduit's
2022 interim review. Fees for non-audit services in the year ended 31 December 2022 totalled $0.1 million (31
December 2021: $0.1 million).
9. Financing costs
2022
2021
Year ended 31 December
$m
$m
LOC and trust fees
0.7
0.4
Interest expense on lease liabilities
0.1
0.1
Total
0.8
0.5
Refer to note 17 for details of Conduit\u2019s financing arrangements.
Conduit Holdings Limited Annual Report and Accounts 2022
123
Financial statements
Notes to the consolidated financial statements
continued
10.
Tax
Bermuda
CHL, CSL, CML and CRL have received an undertaking from the Bermuda government exempting them from all
Bermuda local income, withholding and capital gains taxes until 31 March 2035. At the present time no such taxes are
levied in Bermuda.
United Kingdom
CRSL is subject to normal UK corporation tax on all of its taxable profits. For the year ended 31 December 2022 and
2021 an immaterial tax profit arose.
11. Cash and cash equivalents
2022
2021
As at 31 December
$m
$m
Cash at bank and in hand
21.5
24.4
Cash equivalents
91.4
43.1
Total
112.9
67.5
Cash equivalents include money market funds and other short-term highly liquid investments with three months or
less remaining until maturity at the time of purchase. The carrying amount of these assets approximates their fair
value. Refer to note 17 for cash and cash equivalents provided as collateral under Conduit\u2019s financing
arrangements.
12. Investments
Cost or
amortised
Unrealised
Unrealised
Estimated
cost
gains
losses
fair value
As at 31 December 2022
$m
$m
$m
$m
Fixed maturity securities, at FVTPL
Short-term investments
37.9
-
-
37.9
US treasuries
221.6
0.2
(11.6)
210.2
US agency debt
2.0
-
(0.2)
1.8
US municipals
16.4
-
(1.2)
15.2
Non-US government and agency
2.1
-
(0.1)
2.0
Asset-backed
171.6
-
(7.8)
163.8
US government agency mortgage-backed
116.3
0.1
(15.8)
100.6
Non-agency mortgage-backed
15.1
-
(2.3)
12.8
Agency commercial mortgage-backed
3.7
-
(0.5)
3.2
Non-agency commercial mortgage-backed
59.7
-
(7.0)
52.7
Corporate
450.7
0.1
(29.3)
421.5
Total
1,097.1
0.4
(75.8)
1,021.7
Conduit Holdings Limited Annual Report and Accounts 2022
124
Financial statements
Notes to the consolidated financial statements
continued
Cost or
amortised
Unrealised
Unrealised
Estimated
cost
gains
losses
fair value
As at 31 December 2021
$m
$m
$m
$m
Fixed maturity securities, at FVTPL
Short-term investments
8.9
-
-
8.9
US treasuries
172.9
-
(1.1)
171.8
US agency debt
2.0
-
2.0
US municipals
13.4
-
(0.2)
13.2
Non-US government and agency
2.2
-
-
2.2
Asset-backed
170.3
0.1
(0.7)
169.7
US government agency mortgage-backed
95.5
-
(0.9)
94.6
Non-agency mortgage-backed
19.4
-
(0.2)
19.2
Agency commercial mortgage-backed
3.2
-
-
3.2
Non-agency commercial mortgage-backed
59.0
-
(0.6)
58.4
Corporate
469.2
0.2
(4.2)
465.2
Total
1,016.0
0.3
(7.9)
1,008.4
As at 31 December 2022 other assets and other payables included $1.2 million and $1.2 million for investments
sold and purchased, respectively (31 December 2021: nil and $10.6 million, respectively).
Conduit determines the estimated fair value of each individual security utilising the highest-level inputs available. Prices
for the investment portfolio are provided via a third-party investment accounting firm whose pricing processes and the
controls thereon are subject to an annual audit on both the operation and the effectiveness of those controls. Various
recognised reputable pricing sources are used including pricing vendors. The pricing sources use bid prices where
available, otherwise indicative prices are quoted based on observable market trade data. The prices provided are
compared to the investment managers\u2019 pricing.
Conduit has not made any adjustments to any pricing provided by independent pricing services or its third-party
investment managers for the year ended 31 December 2022 and 2021. The fair value of securities in the investment
portfolio is estimated using the following techniques:
LEVEL (I) \u2013 Level (I) investments are securities with quoted prices in active markets. A financial instrument is regarded
as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker,
industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market
transactions on an arm\u2019s length basis.
LEVEL (II) \u2013 Level (II) investments are securities with quoted prices in active markets for similar assets or liabilities or
securities valued using other valuation techniques for which all significant inputs are based on observable market data.
Instruments included in Level (II) are valued via independent external sources using directly observable inputs to models
or other valuation methods. The valuation methods used are typically industry accepted standards and include broker-
dealer quotes and pricing models including present values and future cash flows with inputs such as yield curves, credit
spreads, interest rates, prepayment speeds and default rates.
LEVEL (III) \u2013 Level (III) investments are securities for which valuation techniques are not based on
observable market data and require significant management judgement.
Conduit Holdings Limited Annual Report and Accounts 2022
125
Financial statements
Notes to the consolidated financial statements
continued
Conduit determines whether transfers have occurred between levels of the fair value hierarchy by re-assessing the
categorisation at the end of each reporting period. Transfers from Level (I) to (II) securities amounted to $76.2 million
and transfers from Level (II) to (I) securities amounted to $37.8 million during the year ended 31 December 2022 using
end of current period positions and estimated fair values. There were no investments included in Level (III). There were
no transfers between Level (I) and (II), and no investments were included in Level (III) during the year ended 31
December 2021.
The fair value hierarchy of Conduit's investment portfolio is as follows:
Level I
Level II
Total
As at 31 December 2022
$m
$m
$m
Fixed maturity securities, at FVTPL
Short-term investments
37.9
-
37.9
US treasuries
210.2
-
210.2
US agency debt
-
1.8
1.8
US municipals
-
15.2
15.2
Non-US government and agency
-
2.0
2.0
Asset-backed
-
163.8
163.8
US government agency mortgage-backed
-
100.6
100.6
Non-agency mortgage-backed
-
12.8
12.8
Agency commercial mortgage-backed
-
3.2
3.2
Non-agency commercial mortgage-backed
-
52.7
52.7
Corporate
51.3
370.2
421.5
Total
299.4
722.3
1,021.7
Level I
Level II
Total
As at 31 December 2021
$m
$m
$m
Fixed maturity securities, at FVTPL
Short-term investments
3.1
5.8
8.9
US treasuries
171.8
-
171.8
US agency debt
-
2.0
2.0
US municipals
-
13.2
13.2
Non-US government and agency
-
2.2
2.2
Asset-backed
-
169.7
169.7
US government agency mortgage-backed
-
94.6
94.6
Non-agency mortgage-backed
-
19.2
19.2
Agency commercial mortgage-backed
-
3.2
3.2
Non-agency commercial mortgage-backed
-
58.4
58.4
Corporate
117.1
348.1
465.2
Total
292.0
716.4
1,008.4
Refer to note 17 for investments provided as collateral under Conduit\u2019s financing arrangements.
Conduit Holdings Limited Annual Report and Accounts 2022
126
Financial statements
Notes to the consolidated financial statements
continued
13. Interests in structured entities
Unconsolidated structured entities in which Conduit has an interest
As part of Conduit\u2019s investment activities, it invests in unconsolidated structured entities. Conduit does not sponsor any
of the unconsolidated structured entities. The business relations of Conduit with the structured entities set out below do
not give rise to consolidation because the criteria for control pursuant to IFRS 10, as contained in our consolidation
principles, are not met.
A summary of interests in unconsolidated structured entities is as follows:
2022
2021
As at 31 December
$m
$m
Fixed maturity securities, at FVTPL
Asset-backed
163.8
169.7
US government agency mortgage-backed
100.6
94.6
Non-agency mortgage-backed
12.8
19.2
Agency commercial mortgage-backed
3.2
3.2
Non-agency commercial mortgage-backed
52.7
58.4
Total
333.1
345.1
The fixed maturity structured entities are used to meet specific investment needs of borrowers and investors which
cannot be met from standardised financial instruments available in the capital markets, providing liquidity and
diversification. While individual securities may differ in structure, the principles of the instruments are similar and it
is appropriate to aggregate the investments into the categories detailed above.
The risk that Conduit faces in respect of the investments in structured entities is similar to the risk it faces in respect of
other financial investments held on the consolidated balance sheet. Fair value is determined by market supply and
demand, which is driven by investor evaluation of the credit risk of the structure and changes in the term structure of
interest rates which can change the expectation of cash flows associated with the instrument and, therefore, its value
in the market.
The maximum exposure to loss in respect of these structured entities would be the carrying value of the instruments
that Conduit holds. Generally, default rates would have to increase substantially before Conduit would suffer a loss. This
assessment is made prior to investing and regularly through the holding period for the security.
Refer to note 17 for investments provided as collateral under Conduit\u2019s financing arrangements.
Conduit Holdings Limited Annual Report and Accounts 2022
127
Financial statements
Notes to the consolidated financial statements
continued
14. Losses and loss adjustment expenses
Losses and loss adjustment expenses
Gross losses
Net losses
and loss
and loss
adjustment
Reinsurance
adjustment
expenses
recoveries
expenses
$m
$m
$m
As at 31 December 2020
-
-
-
Incurred losses:
Current year
191.0
(48.9)
142.1
Exchange adjustments
(0.3)
-
(0.3)
Incurred losses and loss adjustment expenses
190.7
(48.9)
141.8
Paid losses:
Current year
19.1
-
19.1
Paid losses and loss adjustment expenses
19.1
-
19.1
As at 31 December 2021
171.6
(48.9)
122.7
Incurred losses:
Current year
390.9
(39.1)
351.8
Prior year
(4.8)
(1.1)
(5.9)
Exchange adjustments
(0.9)
-
(0.9)
Incurred losses and loss adjustment expenses
385.2
(40.2)
345.0
Paid losses:
Current year
42.4
-
42.4
Prior year
55.1
(12.5)
42.6
Paid losses and loss adjustment expenses
97.5
(12.5)
85.0
As at 31 December 2022
459.3
(76.6)
382.7
Conduit did not book any additional case reserves for the year ended 31 December 2022 and 2021. Net losses
and loss adjustment expenses as at 31 December 2022 had an estimated duration of 3.1 years (31 December
2021: 2.7 years).
Further information on the calculation of loss reserves and associated risks are provided in the risk disclosures
section. The risks associated with reinsurance contracts are complex and the impact of an unreported event
could lead to a significant increase in Conduit\u2019s loss reserves. Conduit believes that the loss reserves established
are adequate, however a 20% increase in estimated losses would have a $91.9 million adverse impact on profit
(31 December 2021: $34.3 million).
The 2022 losses were driven by another year of higher-than-average catastrophe losses combined with a number of
large losses impacting the industry. Conduit's most significant loss events for the current year stemmed from Hurricane
Ian's landfall in Florida as a category 4 hurricane, and the ongoing war in Ukraine impacting both property and specialty
segments via classes such as aviation, war on land, and marine war. Conduit recorded $45.4 million and $25.0 million
respectively for these events, net of outwards reinsurance.
The prior year benefited from reserve releases in the property segment, as reserves established for prior year
catastrophe events were refined due to updated information and also a lack of reported claims. General IBNR releases in
the specialty segment also contributed to the favourable development of the prior year.
The estimation of the ultimate loss and loss adjustment expense liability is a complex process which incorporates a
significant amount of judgement. It is reasonably possible that uncertainties inherent in the reserving process, delays in
insureds or ceding companies reporting losses to Conduit, together with the potential for unforeseen adverse
developments, could lead to a material change in estimated losses and loss adjustment expenses.
Conduit Holdings Limited Annual Report and Accounts 2022
128
Financial statements
Notes to the consolidated financial statements
continued
The breakdown of net losses and loss adjustment expenses is shown below:
Gross losses
Net losses
and loss
and loss
adjustment
Reinsurance
adjustment
expenses
recoveries
expenses
As at 31 December 2022
$m
$m
$m
Outstanding losses
98.1
(22.8)
75.3
Losses incurred but not reported
361.2
(53.8)
307.4
Total
459.3
(76.6)
382.7
Gross losses
Net losses
and loss
and loss
adjustment
Reinsurance
adjustment
expenses
recoveries
expenses
As at 31 December 2021
$m
$m
$m
Outstanding losses
26.0
-
26.0
Losses incurred but not reported
145.6
(48.9)
96.7
Total
171.6
(48.9)
122.7
15. Right-of-use lease assets
Right-of-use lease assets primarily relate to leased properties for Conduit's offices in Bermuda and office equipment.
Conduit has not received any rent concessions as a result of COVID-19.
Right-of-use assets
$m
Balance and net book value as at 1 January 2021
-
Additions
3.0
Depreciation
(0.1)
Balance and net book value as at 31 December 2021
2.9
Depreciation
(0.7)
Balance and net book value as at 31 December 2022
2.2
Lease liabilities
2022
2021
As at 31 December
$m
$m
Less than one year
0.6
0.6
Between one and five years
2.0
2.6
Total undiscounted lease liabilities
2.6
3.2
The discounted lease liability as at 31 December 2022 was $2.4 million (31 December 2021: $2.9 million).
Conduit does not face significant liquidity risk with respect to its lease liabilities.
Conduit Holdings Limited Annual Report and Accounts 2022
129
Financial statements
Notes to the consolidated financial statements
continued
Amounts recognised in the consolidated financial statements
2022
2021
Year ended 31 December
$m
$m
Consolidated statement of comprehensive loss
Interest expense on lease liabilities
0.1
0.1
Depreciation of right-of-use assets
0.7
0.1
Total
0.8
0.2
Consolidated statement of cash flows
Lease payments
0.6
0.1
16. Intangible assets
Intangible assets are comprised of computer software capitalised on the basis of the costs incurred to acquire and
bring into use the specific software. Computer software is a technological asset and subject to obsolescence, therefore
management expects to utilise the asset over its remaining useful life of 11 years.
Cost
$m
Net book value as at 31 December 2020
0.2
Additions
0.9
Net book value as at 31 December 2021
1.1
Additions
0.3
Net book value as at 31 December 2022
1.4
17.
Financing arrangements Letters
of credit and trust accounts
CRL is a non-admitted reinsurer in the US and Canada. Terms and conditions of certain reinsurance contracts with
US and Canadian cedants require CRL to provide collateral for outstanding insurance contract liabilities, including
unearned premiums and losses and loss adjustment expenses. The collateral can be provided by LOCs or by assets
in trust accounts. Refer to note 9 for details of interest expense associated with these LOCs included in financing
costs. Additional information about Conduit's exposure to interest rate and liquidity risk is included in the \"Risk
disclosures\" section.
Standby letter of credit facility
During July 2021, CRL, as the borrower, entered into a $125.0 million standby letter of credit facility led by Lloyds Bank
Corporate Markets PLC. CHL will guarantee the obligations of CRL with respect to the standby letter of credit facility.
Terms of the standby letter of credit facility contain standard qualitative representations and require certain standard
financial covenants be adhered to, including: a maximum consolidated debt to capital ratio of CHL of 35.0%; a
minimum consolidated tangible net worth of CHL; and a minimum A.M. Best rating of \"B++\" for CRL. CRL had the
option to increase the aggregate amount of the commitment under the facility up to $150.0 million. This was exercised
on 22 December 2022, with a new option put in place to increase the facility up to $175.0 million. As at 31 December
2022, $92.0 million
(31 December 2021: $18.9 million) was outstanding under the standby letter of credit facility and is secured
by cash and cash equivalents and investments of $110.7 million (31 December 2021: $27.8 million).
Uncommitted letter of credit facility
During September 2021, CRL entered into a $75.0 million uncommitted letter of credit facility with Citibank Europe
PLC. Terms of the uncommitted letter of credit facility include standard qualitative representations. As at 31 December
2022, $37.0 million (31 December 2021: $3.9 million) was outstanding under the uncommitted letter of credit facility
and is secured by cash and cash equivalents and investments of $49.7 million (31 December 2021: $6.6 million).
Conduit Holdings Limited Annual Report and Accounts 2022
130
Financial statements
Notes to the consolidated financial statements
continued
Trust accounts
Several trust account arrangements have been established in favour of policyholders and ceding companies to provide
collateral or comply with the security requirements of certain contracts. As at 31 December 2022, $127.4 million (31
December 2021: $29.9 million) of cash and cash equivalents and investments were restricted in favour of third parties.
Additional letter of credit and trust funding requirements
For the year ended 31 December 2022, $87.8 million (31 December 2021: $58.8 million) of collateral requests and
collateral amendments in respect of that financial year were received subsequent to the year end date. These collateral
requests will be completed in the normal course of business and will be funded during the subsequent year using cash
and cash equivalents and/or investments.
18. Share capital
Authorised share capital
Number
$m
Authorised common shares of $0.01 each
10,000,000,000
100.0
Authorised A1 shares of \u00a30.01 each
100,000
-
Authorised A2 shares of $0.01 each
100,000
-
As at 31 December 2022 and 2021
10,000,200,000
100.0
Common
shares
A1 shares
A2 shares
Total
Total
Allotted, called-up and fully paid
number
number
number
number
$m
Issued
165,239,997
100,000
100,000
165,439,997
1.7
As at 31 December 2022 and 2021
165,239,997
100,000
100,000
165,439,997
1.7
The number of common shares in issue with voting rights (allocated capital less own shares held) as at 31 December
2022 was 160,141,174 (31 December 2021: 165,207,174).
CHL holds 18,000 A1 and A2 shares at 31 December 2022 and 2021. The A1 and A2 shares have no voting rights
attached. Subject to vesting conditions, discussed in note 7, the A1 and A2 shares will be automatically exchanged for
ordinary shares of CHL.
Own shares
Number held
Number held
Total number
Total
Own shares
in treasury
$m
in trust
$m
of own shares
$m
As at 31
December 2020
-
-
-
-
-
-
Repurchased
(32,823)
(0.2)
-
-
(32,823)
(0.2)
As at 31
December 2021
(32,823)
(0.2)
-
-
(32,823)
(0.2)
Repurchased
(725,000)
(3.4)
-
-
(725,000)
(3.4)
Purchased by EBT
-
-
(4,341,000)
(16.5)
(4,341,000)
(16.5)
As at 31
December 2022
(757,823)
(3.6)
(4,341,000)
(16.5)
(5,098,823)
(20.1)
Shares repurchased by CHL and the EBT will be held as own shares to meet future obligations under CHL\u2019s variable
incentive schemes. See note 22 for information on shares held by the EBT.
Dividends
Record date
Payment date
Per share $
$m
Interim 2021
20
August 2021
10
September 2021
0.18
29.7
Final 2021
25 March 2022
22 April 2022
0.18
29.7
Interim 2022
19
August 2022
9
September 2022
0.18
29.6
See note 23 for information with respect to dividends declared subsequent to 31 December 2022.
Conduit Holdings Limited Annual Report and Accounts 2022
131
Financial statements
Notes to the consolidated financial statements
continued
19. Other reserves
Other reserves consist of the following:
Other
Share
Total other
reserves
premium
reserves
$m
$m
$m
As at 31
December 2020
0.3
1,055.4
1,055.7
Equity-based incentives
0.3
-
0.3
As at 31
December 2021
0.6
1,055.4
1,056.0
Equity-based incentives
2.1
-
2.1
Transfer from share premium to contributed surplus
1,055.4
(1,055.4)
-
As at 31
December 2022
1,058.1
-
1,058.1
Other reserves include Conduit\u2019s equity-based incentive expense.
Share premium includes any premiums received on issue of share capital. The transaction costs that are attributable to
the issuance of new shares incurred in forming Conduit are treated as a deduction from share premium. The share
premium was transferred to contributed surplus during May 2022 after approval by Conduit's shareholders at the AGM.
20.
Contingencies and commitments
Legal proceedings and regulations
Conduit operates in the reinsurance industry and is subject to legal proceedings in the normal course of business.
While it is not practicable to estimate or determine the final results of all pending or threatened legal proceedings,
management does not believe that such proceedings (including litigation) will have a material effect on its results and
financial position.
21.
Loss per share
The following reflects the loss and share data used in the basic and diluted loss per share computations:
2022
2021
Year ended 31 December
$m
$m
Loss for the period
(89.7)
(42.0)
Number
Number
Basic weighted average number of shares
163,441,264
165,239,907
Dilutive effect of equity-based incentives
167,093
-
Diluted weighted average number of shares
163,608,357
165,239,907
Per share $
Per share $
Basic and diluted loss per share
(0.55)
(0.25)
Equity-based incentive awards are only treated as dilutive when their conversion to common shares would decrease
earnings per share or increase loss per share from continuing operations. Incremental shares from ordinary restricted
share options where relevant performance criteria have not been met are not included in the calculation of dilutive
shares.
Conduit Holdings Limited Annual Report and Accounts 2022
132
Financial statements
Notes to the consolidated financial statements
continued
22. Related party disclosures
These consolidated financial statements include CHL and the entities listed below:
Subsidiary undertakings
Domicile
Principal Business
CHL
Bermuda
Holding company, Ultimate parent
CRL
Bermuda
General insurance business
CRSL
England and Wales
Support services
CML1
Bermuda
Support services
CSL
Bermuda
Support services
EBT
Jersey
Employee benefit trust
1.
CML is part-owned by members of management. Management\u2019s share ownership in CML exists solely for the purposes of the Group\u2019s management share
incentive scheme for attracting and retaining talent. Management\u2019s shares in CML have no voting power or control in respect of CHL's ownership of CRL via
CML's ownership of CRL.
Unless otherwise stated, Conduit owns 100% of the share capital and voting rights in the subsidiaries listed.
Employee benefit trust
The EBT was established with the sole purpose of administering Conduit's equity-based incentive schemes. The
trustee operates the trust for the benefit of Conduit's employees, all in accordance with an established trust deed. While
Conduit does not have legal ownership of the EBT, the trust is consolidated in Conduit's accounts due to the ability that
Conduit has to influence the actions of the trust.
Funding for the trust is provided by CHL through a non-interest bearing loan facility. The facility may only be used by
the trustee for the purpose of achieving the objectives of the EBT. During the year ended 31 December 2022,
advances of $16.5 million (31 December 2021: nil) were made to the trust.
CHL common shares purchased by the EBT will be held for the benefit of employees under CHL's variable incentive
schemes. During the year ended 31 December 2022 the trust purchased common shares of 4,341,000 (31 December
2021: nil).
Key management compensation
Remuneration for key management, Conduit\u2019s Executive and Non-Executive Directors, was as follows:
2022
2021
Year ended 31 December
$m
$m
Cash compensation
4.7
6.3
Equity-based incentives
1.4
0.3
Directors fees and expenses
0.8
0.6
Total
6.9
7.2
Non-Executive Directors do not receive any benefits in addition to their agreed fees and expenses and do not
participate in any of Conduit\u2019s incentive, performance, or pension plans.
IncubEx, Inc.
Effective 9 April 2021, CHL executed a stock purchase agreement with IncubEx, a product and business
development firm with a focus on designing and developing new financial products in global environmental,
reinsurance and related commodity markets. CHL purchased 624 shares of IncubEx\u2019s Series A-3 preferred stock,
with a par value of $0.0001 per share, for an aggregate purchase price of $50,000, or $80.08 per share.
The current Executive Chairman of CHL is also a founder and current Chairman of IncubEx. The terms and conditions
of the stock purchase agreement are equivalent to those that would prevail in an arm\u2019s length transaction. The
investment in IncubEx is included in other assets in the consolidated balance sheet and is recorded at cost, which
approximates fair value.
Conduit Holdings Limited Annual Report and Accounts 2022
133
Financial statements
Notes to the consolidated financial statements
continued
23.
Subsequent events
Dividends
On 22 February 2023, Conduit\u2019s Board of Directors declared a final dividend for 2022 of $0.18 (approximately \u00a30.15)
per common share, which will result in an aggregate payment of $28.8 million. The dividend will be paid in pounds
sterling on 21 April 2023 to shareholders of record on 24 March 2023 (the \u201cRecord Date\u201d) using the pound sterling /
US dollar spot exchange rate at 12 noon on the Record Date.
Uncommitted letter of credit facility
During January 2023, Conduit Re increased its $75.0 million uncommitted letter of credit facility with Citibank
Europe PLC to $100.0 million.
", "dimensions": { "concept": "ifrs-full:DisclosureOfNotesAndOtherExplanatoryInformationExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f25129": { "value": "2022-12-31", "dimensions": { "concept": "ifrs-full:DateOfEndOfReportingPeriod2013", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f25137": { "value": "General informationCHL was incorporated under the laws of Bermuda on 6 October 2020 and, on 7 December 2020, all of its commonshares of par value $0.01 per share were admitted to the standard listing segment of the Official List of the UK FinancialConduct Authority and admitted to trading on the LSE\u2019s main market for listed securities. CHL\u2019s registered office isClarendon House, 2 Church Street, Hamilton HM 11, Bermuda. CHL's consolidated financial statements as at, and forthe year ended 31 December 2022 include the Company's subsidiaries (together referred to as the \u201cGroup\u201d). Theprincipal activity of Conduit is to provide reinsurance products and services to its clients worldwide.A full listing of Conduit's related parties can be found in note 22.", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f25143": { "value": "Bermuda", "dimensions": { "concept": "ifrs-full:DomicileOfEntity", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f25144": { "value": "Bermuda", "dimensions": { "concept": "ifrs-full:CountryOfIncorporation", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f25152": { "value": "Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda", "dimensions": { "concept": "ifrs-full:AddressOfRegisteredOfficeOfEntity", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f25157": { "value": "Theprincipal activity of Conduit is to provide reinsurance products and services to its clients worldwide.", "dimensions": { "concept": "ifrs-full:DescriptionOfNatureOfEntitysOperationsAndPrincipalActivities", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f25162": { "value": "worldwide", "dimensions": { "concept": "ifrs-full:PrincipalPlaceOfBusiness", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f25170": { "value": "2. Summary of significant accounting policiesThe basis of preparation, use of judgements and estimates, consolidation principles and significant accounting policiesadopted in the preparation of these consolidated financial statements are set out below. Excluding percentages, shareand per share data or where otherwise stated, all amounts in tables and narrative disclosures are in millions of USdollars.Basis of preparationThese consolidated financial statements are prepared on a going concern basis in accordance with IFRS as issued bythe IASB, prepared on a historical cost basis, except for items measured at fair value as disclosed in the relevantaccounting policies. In accordance with the requirements of IAS 1, the financial statements\u2019 assets and liabilities havebeen presented in order of liquidity, which provides information that is more reliable and relevant for a financialinstitution.Where IFRS is silent, as it is in respect of certain aspects relating to the measurement of reinsurance contracts, theIFRS framework allows reference to another comprehensive body of accounting principles. In such instances, Conduit\u2019smanagement determines appropriate measurement bases, to provide the most useful information to users of theseconsolidated financial statements, using their judgement and considering US GAAP. In the course of preparing theseconsolidated financial statements, no judgements have been made in the process of applying Conduit\u2019s accountingpolicies, other than those involving estimations as noted in the \u2018Use of judgements and estimates\u2019 section, that havehad a significant effect on amounts recognised in these consolidated financial statements.Going concernThe consolidated financial statements of Conduit have been prepared on a going concern basis. In assessing Conduit'sgoing concern position as at 31 December 2022, the Directors have considered a number of factors, including thecurrent balance sheet position, Conduit\u2019s strategic and financial plan, taking account of possible changes in tradingperformance and funding retention, stress testing and scenario analysis, and the COVID-19 pandemic. Conduit onlycommenced underwriting activities during the twelve months ended 31 December 2021 and, with COVID-19 exclusionsincluded in policy wordings, does not believe it has any exposure to reinsurance losses from COVID-19. The assessmenttherefore concluded that Conduit has sufficient capital and liquidity for the next 12 months. Conduit\u2019s capital ratios and itscapital resources are comfortably in excess of regulatory solvency requirements, and internal stress testing indicatesConduit can withstand severe economic and competitive stresses.As a result of the assessment, the Directors have a reasonable expectation that Conduit and Conduit Re haveadequate resources to continue in operational existence for the foreseeable future and therefore believe thatConduit is well placed to manage its business risks successfully. Accordingly, they continue to adopt the goingconcern basis in preparing the consolidated financial statements.Changes in accounting standardsWhile a number of amended IFRS standards have become effective during the year ended 31 December 2022,none of these standards have had a material impact on Conduit.Future accounting changesOf the upcoming accounting standard changes, we anticipate that IFRS 17 will have the most material impact on thefinancial statements\u2019 results, and presentation and disclosures. Conduit will apply IFRS 17 for the first time on 1January 2023. We have substantially completed the build-out of the necessary systems and processes to implementIFRS 17, and testing is in progress. As relevant to Conduit, a brief overview of each of these standards and theapplicable accounting policies and the impact, where we can reliably quantify it, is provided below:IFRS 17, Insurance ContractsIFRS 17, Insurance Contracts, issued in May 2017, specifies the financial reporting for insurance contracts. The newstandard replaces IFRS 4, Insurance Contracts, and is effective for accounting periods beginning on or after 1January 2023 and will significantly change the accounting for, valuation of, and presentation of insurance contracts.ClassificationContracts that transfer significant reinsurance risk at the inception of the contract are accounted for asreinsurance contracts. Contracts that do not transfer significant reinsurance risk are accounted for as investmentcontracts. The adoption of IFRS 17 will not change the classification of Conduit's reinsurance contracts.Before accounting for a reinsurance contract based on the guidance in IFRS 17, Conduit analyses whether thecontract contains components that must be separated. IFRS 17 distinguishes three categories of components thatmust be accounted for separately:\u2022Cash flows relating to embedded derivatives that are required to be separated.\u2022Cash flows relating to distinct investment components.\u2022Promises to transfer distinct goods or distinct non-insurance services.Conduit applies IFRS 17 to all remaining components of the contract. Where contracts contain multiple reinsurancecomponents that meet the requirements for separation, these are separated and accounted for as standalonecontracts.Some of Conduit's reinsurance contracts issued contain profit commission arrangements. Under these arrangements,there is a minimum guaranteed amount that the policyholder will always receive \u2013 either in the form of profit commissionor as claims or another contractual payment, irrespective of the insured event happening. These are typically considerednon-distinct investment components. The impact of the non-distinct investment components are excluded from theconsolidated statement of comprehensive loss.Level of aggregationConduit manages reinsurance contracts issued by class of business within an operating segment. Classes ofbusiness are then aggregated into portfolios of contracts that are subject to similar risks. Each portfolio is furtherdisaggregated into groups of contracts that are issued within a calendar year (annual cohorts) and are (i) contractsthat are onerous at initial recognition; (ii) contracts that at initial recognition have no significant possibility of becomingonerous subsequently; or (iii) a group of remaining contracts. These groups represent the level of aggregation atwhich reinsurance contracts are initially recognised and measured. Such groups are not subsequently reconsidered.Conduit assumes there are no contracts in the portfolio that are onerous at initial recognition, unless there are factsand circumstances which may indicate otherwise. Management considers the following in order to determine whetherthere are facts and circumstances that mean a group of contracts are onerous:\u2022Pricing information.\u2022Results of similar contracts it has recognised.\u2022External factors, e.g., a change in market experience or regulations.Measurement modelUnder IFRS 17, Conduit's reinsurance contracts issued and reinsurance contracts held are substantially all eligibleto be measured by applying the Premium Allocation Approach (\"PAA\"). The PAA simplifies the measurement ofreinsurance contracts in comparison with the General Model under IFRS 17.The measurement principles of the PAA differ from the \u2018earned premium approach\u2019 used under IFRS 4 in the followingkey areas:\u2022The liability for remaining coverage reflects premiums received less deferred acquisition expenses less amountsrecognised in revenue for reinsurance services provided.\u2022If contracts are assessed as being onerous, a loss component is recognised.\u2022The recognition of reinsurance acquisition cash flows includes an allocation of acquisition-related operatingexpenses incurred in the period. All acquisition related cash flows are deferred and amortised over the coverageperiod of the group of contracts.\u2022Measurement of the liability for incurred claims (previously losses and loss adjustment expenses) isdetermined on a discounted probability-weighted expected value basis and includes an explicit risk adjustmentfor non-financial risk.Significant judgements and estimatesConduit will estimate the liability for incurred claims as the fulfilment cash flows related to incurred claims. The fulfilmentcash flows incorporate, in an unbiased way, all reasonable and supportable information available without undue cost oreffort about the amount, timing and uncertainty of those future cash flows. They reflect current estimates from theperspective of the entity and include an explicit adjustment for non-financial risk (the risk adjustment). The liability forincurred claims is discounted using market-based yield curves.Conduit will generally determine yield curves by leveraging the bottom-up method of applying a liquidity premium to arisk-free yield curve to reflect the differences between the liquidity characteristics of the risk-free rate and the liquiditycharacteristics of the insurance liabilities.Conduit intends to determine the risk adjustment by leveraging indications developed by Conduit's actuaries,historical reinsurance loss experience and estimates of pricing adequacy trends, as well as a combination ofmanagement's judgement and experience. The risk adjustment is then translated to a confidence interval, whichwill be disclosed in the financial statements as a significant judgement and estimate.Presentation and disclosurePresentation and disclosure will change significantly. The balance sheet will continue to contain related assets andliabilities for reinsurance business, albeit in a different, more condensed form. The most significant change will be in thepresentation of the consolidated statement of comprehensive loss where premiums and claims related line items will bereplaced by reinsurance revenue and reinsurance service expenses. Certain commissions on reinsurance contractsissued which were previously presented as acquisition expenses will now be presented as a deduction to revenue underIFRS 17. Commissions and reinstatement premiums on reinsurance contracts that are dependent on claims will betreated as claims cash flows and presented as part of reinsurance service expenses. All insurance contract assets andliabilities will be monetary items with any revaluation adjustments being recognised in the consolidated statement ofcomprehensive loss.Under IFRS 17, changes in the carrying amounts of groups of contracts arising from the effects of the time value ofmoney are presented as reinsurance finance income or expenses. Conduit has elected not to disaggregate reinsurancefinance income or expenses and will present the total amount in the consolidated statement of comprehensive loss.TransitionConduit will adopt the full retrospective approach for all changes in accounting policies due to theimplementation of IFRS 17.IFRS 9, Financial InstrumentsIFRS 9, Financial Instruments: Classification and Measurement, is effective for annual periods beginning on or after 1January 2018. The amendments to IFRS 4, Insurance Contracts, issued in 2016, provided a temporary exemption fromapplying IFRS 9 for companies whose predominant activity is to issue insurance contracts. The carrying value ofConduit\u2019s liabilities connected with insurance activities comprised over 90% of the total liabilities. The activities of Conduitare therefore predominantly connected with insurance which satisfies the criteria set out in IFRS 4 for the temporaryexemption from IFRS 9. The exemption lasts until theimplementation date of IFRS 17 and addresses the accounting consequences of applying IFRS 9 to insurers prior tothe adoption of IFRS 17.Classification and measurementIFRS 9 introduces new classification and measurement requirements for financial instruments. IFRS 9 requires allfinancial assets to be assessed based on a combination of Conduit's business model for the management of the assetsand the instruments' cash flow characteristics. Conduit currently anticipates that all investments will be classified as atFVTPL, because they are managed on a fair value basis. Conduit's fixed maturity securities portfolio is currentlyclassified as FVTPL. As a result, the adoption of IFRS 9 is not expected to result in any changes to the measurement ofConduit\u2019s investments, which will continue to be at FVTPL. Conduit will apply any changes resulting from IFRS 9retrospectively.Presentation and disclosureTo reflect the differences between IAS 39 and IFRS 9, IFRS 7 Financial Instruments: Disclosures was alsoamended. Conduit will apply the amended disclosure requirements at the same time as applying IFRS 9.Estimated impact of the adoption of IFRS 17 and IFRS 9Conduit has assessed the estimated impact that the initial application of IFRS 17 and IFRS 9 will have on itsconsolidated financial statements. Based on the assessments undertaken to date, we estimate that the cumulativeIFRS 17 impact will be an increase to shareholders\u2019 equity as at 1 January 2022 of between $6.0 million and $9.0million, which represents between 0.6% and 0.9% of Conduit\u2019s reported shareholders\u2019 equity as at 31 December 2021.No financial impact is expected from the initial application of IFRS 9.The increase to shareholders\u2019 equity from IFRS 17 is predominantly driven by the discounting of loss reserves whichwere previously undiscounted, the deferral of certain acquisition related operating expenses and the revaluation ofinsurance balances that are now considered monetary items under IFRS 17. The impacts of discounting and thedeferral of acquisition related operating expenses are timing differences as both will be unwound over the settlement ofclaims liabilities and insurance contract coverage periods respectively.Conduit is still performing assessments of the impact of IFRS 17 for the financial year ended 31 December 2022,however we expect the impact of discounting, given the rising rate environment, to be significant.The assessment above is preliminary as the transition work has not yet been fully finalised or subject to external audit.Therefore, the reported impact of the adoption of IFRS 17 in the 2023 consolidated financial statements may deviatefrom that noted above, although any such deviation is unlikely to be material.Use of judgements and estimatesThe preparation of financial statements in conformity with IFRS requires Conduit to make judgements and estimatesthat affect the reported and disclosed amounts at the balance sheet date, revenues and expenses during the reportingperiod and the associated financial statement disclosures. All estimates are based on management\u2019s knowledge ofcurrent facts and circumstances, assumptions based on that knowledge and their prediction of future events. Actualresults may differ significantly from the estimates made.The most significant estimates made by management are in relation to losses and loss adjustment expenses, both grossand net of ceded reinsurance, as discussed within the \"Risk disclosures\" section and in note 14.Less significant estimates are made in determining the estimated fair value of certain financial instruments, asdiscussed in note 12.In addition, some management judgement is exercised in determining the ultimate premiums expected from which toestablish the recognition of gross premiums written.While not significant, estimates are also used in the estimated fair value of the MIP as discussed in note 7 and thevaluation of intangible assets as discussed in note 16.Consolidation principlesThese consolidated financial statements comprise the financial statements of Conduit and its subsidiaries as at and forthe year ended 31 December 2022. Subsidiaries are those entities that are controlled by Conduit and are fullyconsolidated from the date on which Conduit obtains control and continue to be consolidated until the date when suchcontrol ceases. Control is achieved when Conduit is exposed, or has rights, to variable returns from its involvement withthe subsidiary and has the ability to affect those returns through its power over the subsidiary.Intragroup balances and transactions are eliminated in preparing the consolidated financial statements.Subsidiaries\u2019 accounting policies are generally consistent with Conduit\u2019s accounting policies.Foreign currencyThe functional currency, which is the currency of the primary economic environment in which the entity operates, for allGroup entities is US dollars. Items included in the financial statements of each of the Group\u2019s entities are measuredusing the functional currency. These consolidated financial statements are presented in US dollars.Foreign currency transactions are recorded in the functional currency for each entity using the exchange ratesprevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies arerevalued at period end exchange rates. The resulting foreign exchange differences on revaluation are recorded in theconsolidated statement of comprehensive loss within net foreign exchange gains (losses). Non-monetary assets andliabilities denominated in a foreign currency are carried at historic rates. Non-monetary assets and liabilities carried atestimated fair value and denominated in a foreign currency are translated at the exchange rate at the date the fairvalue was determined.Reinsurance contractsClassificationContracts that transfer significant reinsurance risk at the inception of the contract are accounted for asreinsurance contracts. Contracts that do not transfer significant reinsurance risk are accounted for as investmentcontracts. Reinsurance risk is transferred when a reinsurer agrees to compensate a policyholder if a specifieduncertain future event adversely affects the policyholder.PremiumsConduit writes both excess of loss and proportional (also known as quota share or pro-rata)reinsurance contracts.Excess of loss contractsFor the majority of excess of loss contracts, premiums written are recorded based on the minimum and deposit or flatpremium, as defined in the contract. Subsequent adjustments to the minimum and deposit premium are recognised inthe period in which they are determined. For excess of loss contracts where no deposit is specified in the contract,premiums written are recognised based on estimates of ultimate premiums provided by the ceding company. Initialestimates of premiums written are recognised in the period in which the contract incepts, or the period in which thecontract is bound, if later. Subsequent adjustments, based on reports of actual premium by ceding companies, orrevisions in estimates, are recorded in the period in which they are determined. For multi-year policies that are payablein annual instalments generally only the initial annual instalment is included as premiums written at policy inceptiondue to the ability of the reinsured to commute or cancel the policy. The remaining annual instalments are included aspremiums written at each successive anniversary date within the multi-year term.Premiums written are generally earned evenly over the term of the underlying risk period of the reinsurance contract,except where the period of risk differs significantly from the contract period. In these circumstances, premiums arerecognised over the period of risk in proportion to the amount of reinsurance protection provided. The portion of thepremium related to the unexpired portion of the risk period is reflected in unearned premiums. Where contract termsrequire the reinstatement of coverage after a ceding company\u2019s loss, the estimated mandatory reinstatement premiumsare recorded as premiums written and earned when a specific loss event occurs. Reinstatement premiums are notrecorded for losses included within the provision for IBNR that do not relate to a specific loss event.Proportional contractsPremiums written for proportional contracts are recognised based on estimates of ultimate premiums provided by theceding company, supplemented by management's estimates of premiums based on its experience with the cedingcompany, familiarity with each market, the timing of the reported information and its understanding of thecharacteristics of each class of business. Initial estimates of premiums written are recognised in the period in whichthe contract incepts, or the period in which the contract is bound, if later. Contracts written on a \u2018risks attaching\u2019 basiscover claims which attach to the underlying reinsurance policy written during the term of the respective policy.Premiums earned on such policies generally extend beyond the original term of the contract. Subsequent adjustments,based on reports of actual premium by the ceding company, or revisions in estimates, are recorded in the period inwhich they are determined.Premiums receivableReinsurance premiums receivable from cedants are recorded net of commissions, brokerage, premium taxes and otherlevies on premiums, unless the contract specifies otherwise. A significant portion of amounts included as premiumsreceivable are not currently due based on the terms of the underlying contracts. These balances are regularly reviewedfor impairment, with any impairment loss recognised as an expense in the period in which it is determined. Based oncurrently available information, management believes that the premium estimates included in premiums receivable will becollectable and therefore no provision for doubtful accounts has been recorded.Acquisition expensesAcquisition expenses represent commissions, brokerage, profit commissions and other variable costs that relate directlyto the successful securing of new contracts and renewing existing contracts. Generally, acquisition expenses aredeferred over the period in which the related premiums are earned to the extent they are recoverable out of expectedfuture revenue margins. All other acquisition expenses are recognised as an expense when incurred.Ceded reinsurance premiumsCeded reinsurance is purchased in the normal course of business to increase capital capacity, limit the impact ofindividual risk losses and loss events impacting multiple cedants (such as natural-catastrophes), or both. Conduit maypurchase ceded reinsurance on both an excess of loss and proportional basis, and may in future supplement this with theuse of catastrophe bonds or other capital market products. Ceded reinsurance premiums, being the cost of reinsurancecontracts entered into, are accounted for in the period in which the contract incepts or is bound if that date is later. Cededreinsurance premiums are generally earned in the same manner as the inwards contracts, depending on the terms of thecontract. The provision for the reinsurers\u2019 share of unearned premiums represents the part of ceded reinsurancepremiums which are estimated to be earned in future periods. Deferred ceded acquisition expenses are recognised as aliability using the same principles.Net losses and loss adjustment expensesNet losses and loss adjustment expenses in the consolidated statement of comprehensive loss include changes inthe provision for outstanding losses and ACRs, changes in the provision for IBNR, plus related expenses and lossespaid in the period. Amounts are net of any changes in the provision for reinsurance recoverable and related expensesfor the period. Net losses and loss adjustment expenses are recognised in total comprehensive income as they areincurred.Losses and loss adjustment expenses in the consolidated balance sheet represent the estimated ultimate cost of settlingall reinsurance claims arising from events which have occurred up to the end of the reporting period, including a provisionfor IBNR. Conduit does not currently discount its liabilities for unpaid losses. Outstanding losses are initially set on thebasis of reported losses received from cedants. ACRs are determined where management\u2019s best estimate of thereported loss is greater than that reported. Estimated IBNR reserves may also consist of a provision for additionaldevelopment in excess of losses reported by cedants, as well as a provision for losses which have occurred but have notyet been reported by cedants. IBNR reserves are estimated initially using expected loss and loss adjustment expenseratios which are selected based on information derived by underwriters and actuaries during the initial pricing of thebusiness. These estimates are reviewed regularly and, as experience develops and new information is received, thereserves are adjusted as necessary. As actual loss information is reported, and Conduit develops its own lossexperience, management will use various actuarial methods as well as a combinationof management\u2019s judgement and experience, historical reinsurance industry loss experience and estimates of pricingadequacy trends to estimate IBNR reserves. Any adjustments to initial expectations are reflected in the consolidatedstatement of comprehensive loss in the period in which they are determined.The estimation of the ultimate loss and loss adjustment expense liability is a complex process which incorporates asignificant amount of judgement. It is reasonably possible that uncertainties in the reserving process, delays in cedantsreporting losses to Conduit, together with the potential for unforeseen adverse developments, could lead to a materialchange in estimated net losses and loss adjustment expenses.Any amounts recoverable from reinsurers are estimated using the same methodology as for the underlying losses.Management monitors the creditworthiness of its reinsurers on an ongoing basis and assesses any reinsurance assetsfor impairment, with any impairment loss recognised as an expense in the period in which it is determined.Liability adequacy testsAt each balance sheet date, Conduit performs a liability adequacy test to determine if there is an overall excess ofexpected claims over unearned premiums for the period of unexpired risk by using current best estimates of futurecash outflows generated by its reinsurance contracts, plus any investment income thereon. If, as a result of thesetests, the carrying amount of Conduit\u2019s reinsurance liabilities is found to be inadequate, the deficiency is charged tothe consolidated statement of comprehensive loss for the period, initially by writing off deferred acquisition costs andsubsequently by establishing a provision.Financial instrumentsCash and cash equivalentsCash and cash equivalents include cash in hand, deposits held on call with banks, money market funds, and othershort-term highly liquid investments with a maturity of three months or less at the date of purchase. Carrying amountsapproximate fair value due to the short-term nature and high liquidity of the instruments.InvestmentsConduit\u2019s fixed maturity securities portfolio is classified as FVTPL and carried at estimated fair value in the consolidatedbalance sheet. The classification of financial assets is determined at the time of initial purchase. A financial asset isclassified at FVTPL if it is managed and evaluated on a fair value basis or if acquired principally for the purpose of sellingin the short term, or if it forms part of a portfolio of financial assets in which there is evidence of short-term profit taking.Presentation of these securities in the FVTPL category is consistent with how management monitors and evaluates theperformance of these securities.Regular way purchases and sales of investments are recognised at estimated fair value on the trade date, and aresubsequently carried at estimated fair value. Balances pending settlement are reflected in the consolidated balancesheet in other assets or other payables. The estimated fair value of Conduit\u2019s fixed maturity securities portfolio isdetermined based on bid prices from recognised exchanges, broker-dealers, recognised indices or pricing vendors.Changes in estimated fair value of investments classified as FVTPL are recognised in the consolidated statement ofcomprehensive loss within net unrealised gains and losses on investments.Investments are derecognised when Conduit has transferred substantially all the risks and rewards of ownership.On derecognition of an investment held at FVTPL, previously recorded unrealised gains and losses are recycledfrom net unrealised gains and losses on investments to net realised gains and losses on investments.Interest income, amortisation and accretion of premiums and discounts on fixed maturity securities are calculatedusing the effective interest rate method and recognised in net investment income. The carrying value of accruedinterest income approximates estimated fair value due to its short-term nature and high liquidity.Intangible assetsAcquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring into use thespecific software. An intangible asset with a finite useful life is amortised on a straight-line basisover the useful life. The useful life is reviewed annually to determine if any changes are required to theamortisation period.LeasesConduit recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset isinitially measured at cost, which comprises the initial measurement of the corresponding lease liability adjusted for anylease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate ofany costs to be incurred at the expiration of the lease agreement.Right-of-use assets are subsequently measured at cost less accumulated depreciation and any impairment losses.Straight-line depreciation is calculated from the commencement date of the lease to the earlier of either the end dateof the lease term or the useful life of the underlying asset.The lease liability is initially measured at the present value of the future lease payments at the lease commencementdate. Lease payments are discounted using the interest rate implicit in the lease or, if that rate cannot be readilydetermined, Conduit's incremental borrowing rate. Lease payments included in the measurement of the lease liabilityinclude fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable leasepayments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.The lease liability is subsequently measured by increasing the lease carrying amount to reflect the interest due on thelease liability using the effective interest rate method and reducing the carrying amount to reflect the lease paymentsmade. Conduit re-measures the lease liability and the related right-of-use asset whenever there is a change in futurelease payments arising from a change in index or rate, if Conduit changes its assessment of whether it will exercise apurchase, extension or termination option or if there is a revised in-substance fixed lease payment.Right-of-use assets and lease liabilities are presented as separate financial statement line items in theconsolidated balance sheet.Employee benefitsEquity-based incentivesConduit currently operates a MIP under which shares are subscribed for or nil cost options are granted. The fairvalue of the instruments granted is estimated on the date of grant. The estimated fair value is recognised as anexpense pro-rata over the vesting period of the instrument, adjusted for the impact of any non-market vestingconditions. No adjustment to vesting assumptions is made in respect of market vesting conditions.During 2022 Conduit established a DSBP. A percentage of each employee's bonus is automatically deferred into sharesas nil cost options. These nil cost awards vest annually in separate equal tranches over a three-year period from thedate of grant and do not have associated performance criteria attached to the awards. These awards accrue dividendequivalents for all dividends declared where the record date falls between the grant date and date of exercise, and arepaid at the time of exercise.At each balance sheet date, Conduit revises its estimate of the number of instruments that are expected to becomeexercisable. It recognises the impact of the revision of original estimates, if any, as equity-based incentive expense inthe consolidated statement of comprehensive loss, and a corresponding adjustment is made to other reserves inshareholders\u2019 equity over the remaining vesting period.On exercise, the differences between the expense charged to the consolidated statement of comprehensive loss andthe actual cost to Conduit, if any, is transferred to other reserves in shareholders\u2019 equity.PensionsConduit\u2019s pension plans are based on defined contributions or equivalent cash in lieu, subject to applicable law andlocal market standards. On payment of contributions to the plans or cash in lieu there is no further obligation toConduit. Contributions or payments of cash in lieu are recognised as employee benefits in the consolidated statementof comprehensive loss in the period when the services are rendered.TaxIncome tax on the profit or loss for the period comprises current and deferred tax. Current tax is the expected taxpayable on the taxable income for the year using tax rates enacted or substantively enacted at the year-end reportingdate and any adjustments to tax payable in respect of prior periods.Deferred tax is provided, using the liability method, on temporary differences arising between the tax bases of assetsand liabilities and their carrying amounts in the financial statements. The amount of deferred tax provided is based onthe expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax ratesenacted or substantively enacted at the reporting date. Deferred tax assets are recognised in the consolidated balancesheet to the extent that it is probable that future taxable profit will be available against which the temporary differencescan be utilised.Own sharesOwn shares include shares repurchased under share repurchase authorisations and held in treasury, plus sharesrepurchased and held in trust, for the purposes of employee equity-based incentive schemes. Own shares arededucted from shareholders\u2019 equity. No gain or loss is recognised on the purchase, sale, cancellation or issue of ownshares and any consideration paid or received is recognised directly in equity.Share capital and issuance costsShares are classified as shareholders' equity if there is no obligation to transfer cash or other financial assets.Transaction costs that are attributable to the issuance of new shares are treated as a deduction from equity.", "dimensions": { "concept": "ifrs-full:DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f25183": { "value": "Basis of preparationThese consolidated financial statements are prepared on a going concern basis in accordance with IFRS as issued bythe IASB, prepared on a historical cost basis, except for items measured at fair value as disclosed in the relevantaccounting policies. In accordance with the requirements of IAS 1, the financial statements\u2019 assets and liabilities havebeen presented in order of liquidity, which provides information that is more reliable and relevant for a financialinstitution.Where IFRS is silent, as it is in respect of certain aspects relating to the measurement of reinsurance contracts, theIFRS framework allows reference to another comprehensive body of accounting principles. In such instances, Conduit\u2019smanagement determines appropriate measurement bases, to provide the most useful information to users of theseconsolidated financial statements, using their judgement and considering US GAAP. In the course of preparing theseconsolidated financial statements, no judgements have been made in the process of applying Conduit\u2019s accountingpolicies, other than those involving estimations as noted in the \u2018Use of judgements and estimates\u2019 section, that havehad a significant effect on amounts recognised in these consolidated financial statements.", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f25214": { "value": "Going concernThe consolidated financial statements of Conduit have been prepared on a going concern basis. In assessing Conduit'sgoing concern position as at 31 December 2022, the Directors have considered a number of factors, including thecurrent balance sheet position, Conduit\u2019s strategic and financial plan, taking account of possible changes in tradingperformance and funding retention, stress testing and scenario analysis, and the COVID-19 pandemic. Conduit onlycommenced underwriting activities during the twelve months ended 31 December 2021 and, with COVID-19 exclusionsincluded in policy wordings, does not believe it has any exposure to reinsurance losses from COVID-19. The assessmenttherefore concluded that Conduit has sufficient capital and liquidity for the next 12 months. Conduit\u2019s capital ratios and itscapital resources are comfortably in excess of regulatory solvency requirements, and internal stress testing indicatesConduit can withstand severe economic and competitive stresses.As a result of the assessment, the Directors have a reasonable expectation that Conduit and Conduit Re haveadequate resources to continue in operational existence for the foreseeable future and therefore believe thatConduit is well placed to manage its business risks successfully. Accordingly, they continue to adopt the goingconcern basis in preparing the consolidated financial statements.", "dimensions": { "concept": "ifrs-full:DisclosureOfGoingConcernExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f25247": { "value": "Changes in accounting standardsWhile a number of amended IFRS standards have become effective during the year ended 31 December 2022,none of these standards have had a material impact on Conduit.Future accounting changesOf the upcoming accounting standard changes, we anticipate that IFRS 17 will have the most material impact on thefinancial statements\u2019 results, and presentation and disclosures. Conduit will apply IFRS 17 for the first time on 1January 2023. We have substantially completed the build-out of the necessary systems and processes to implementIFRS 17, and testing is in progress. As relevant to Conduit, a brief overview of each of these standards and theapplicable accounting policies and the impact, where we can reliably quantify it, is provided below:IFRS 17, Insurance ContractsIFRS 17, Insurance Contracts, issued in May 2017, specifies the financial reporting for insurance contracts. The newstandard replaces IFRS 4, Insurance Contracts, and is effective for accounting periods beginning on or after 1January 2023 and will significantly change the accounting for, valuation of, and presentation of insurance contracts.ClassificationContracts that transfer significant reinsurance risk at the inception of the contract are accounted for asreinsurance contracts. Contracts that do not transfer significant reinsurance risk are accounted for as investmentcontracts. The adoption of IFRS 17 will not change the classification of Conduit's reinsurance contracts.Before accounting for a reinsurance contract based on the guidance in IFRS 17, Conduit analyses whether thecontract contains components that must be separated. IFRS 17 distinguishes three categories of components thatmust be accounted for separately:\u2022Cash flows relating to embedded derivatives that are required to be separated.\u2022Cash flows relating to distinct investment components.\u2022Promises to transfer distinct goods or distinct non-insurance services.Conduit applies IFRS 17 to all remaining components of the contract. Where contracts contain multiple reinsurancecomponents that meet the requirements for separation, these are separated and accounted for as standalonecontracts.Some of Conduit's reinsurance contracts issued contain profit commission arrangements. Under these arrangements,there is a minimum guaranteed amount that the policyholder will always receive \u2013 either in the form of profit commissionor as claims or another contractual payment, irrespective of the insured event happening. These are typically considerednon-distinct investment components. The impact of the non-distinct investment components are excluded from theconsolidated statement of comprehensive loss.Level of aggregationConduit manages reinsurance contracts issued by class of business within an operating segment. Classes ofbusiness are then aggregated into portfolios of contracts that are subject to similar risks. Each portfolio is furtherdisaggregated into groups of contracts that are issued within a calendar year (annual cohorts) and are (i) contractsthat are onerous at initial recognition; (ii) contracts that at initial recognition have no significant possibility of becomingonerous subsequently; or (iii) a group of remaining contracts. These groups represent the level of aggregation atwhich reinsurance contracts are initially recognised and measured. Such groups are not subsequently reconsidered.Conduit assumes there are no contracts in the portfolio that are onerous at initial recognition, unless there are factsand circumstances which may indicate otherwise. Management considers the following in order to determine whetherthere are facts and circumstances that mean a group of contracts are onerous:\u2022Pricing information.\u2022Results of similar contracts it has recognised.\u2022External factors, e.g., a change in market experience or regulations.Measurement modelUnder IFRS 17, Conduit's reinsurance contracts issued and reinsurance contracts held are substantially all eligibleto be measured by applying the Premium Allocation Approach (\"PAA\"). The PAA simplifies the measurement ofreinsurance contracts in comparison with the General Model under IFRS 17.The measurement principles of the PAA differ from the \u2018earned premium approach\u2019 used under IFRS 4 in the followingkey areas:\u2022The liability for remaining coverage reflects premiums received less deferred acquisition expenses less amountsrecognised in revenue for reinsurance services provided.\u2022If contracts are assessed as being onerous, a loss component is recognised.\u2022The recognition of reinsurance acquisition cash flows includes an allocation of acquisition-related operatingexpenses incurred in the period. All acquisition related cash flows are deferred and amortised over the coverageperiod of the group of contracts.\u2022Measurement of the liability for incurred claims (previously losses and loss adjustment expenses) isdetermined on a discounted probability-weighted expected value basis and includes an explicit risk adjustmentfor non-financial risk.Significant judgements and estimatesConduit will estimate the liability for incurred claims as the fulfilment cash flows related to incurred claims. The fulfilmentcash flows incorporate, in an unbiased way, all reasonable and supportable information available without undue cost oreffort about the amount, timing and uncertainty of those future cash flows. They reflect current estimates from theperspective of the entity and include an explicit adjustment for non-financial risk (the risk adjustment). The liability forincurred claims is discounted using market-based yield curves.Conduit will generally determine yield curves by leveraging the bottom-up method of applying a liquidity premium to arisk-free yield curve to reflect the differences between the liquidity characteristics of the risk-free rate and the liquiditycharacteristics of the insurance liabilities.Conduit intends to determine the risk adjustment by leveraging indications developed by Conduit's actuaries,historical reinsurance loss experience and estimates of pricing adequacy trends, as well as a combination ofmanagement's judgement and experience. The risk adjustment is then translated to a confidence interval, whichwill be disclosed in the financial statements as a significant judgement and estimate.Presentation and disclosurePresentation and disclosure will change significantly. The balance sheet will continue to contain related assets andliabilities for reinsurance business, albeit in a different, more condensed form. The most significant change will be in thepresentation of the consolidated statement of comprehensive loss where premiums and claims related line items will bereplaced by reinsurance revenue and reinsurance service expenses. Certain commissions on reinsurance contractsissued which were previously presented as acquisition expenses will now be presented as a deduction to revenue underIFRS 17. Commissions and reinstatement premiums on reinsurance contracts that are dependent on claims will betreated as claims cash flows and presented as part of reinsurance service expenses. All insurance contract assets andliabilities will be monetary items with any revaluation adjustments being recognised in the consolidated statement ofcomprehensive loss.Under IFRS 17, changes in the carrying amounts of groups of contracts arising from the effects of the time value ofmoney are presented as reinsurance finance income or expenses. Conduit has elected not to disaggregate reinsurancefinance income or expenses and will present the total amount in the consolidated statement of comprehensive loss.TransitionConduit will adopt the full retrospective approach for all changes in accounting policies due to theimplementation of IFRS 17.IFRS 9, Financial InstrumentsIFRS 9, Financial Instruments: Classification and Measurement, is effective for annual periods beginning on or after 1January 2018. The amendments to IFRS 4, Insurance Contracts, issued in 2016, provided a temporary exemption fromapplying IFRS 9 for companies whose predominant activity is to issue insurance contracts. The carrying value ofConduit\u2019s liabilities connected with insurance activities comprised over 90% of the total liabilities. The activities of Conduitare therefore predominantly connected with insurance which satisfies the criteria set out in IFRS 4 for the temporaryexemption from IFRS 9. The exemption lasts until theimplementation date of IFRS 17 and addresses the accounting consequences of applying IFRS 9 to insurers prior tothe adoption of IFRS 17.Classification and measurementIFRS 9 introduces new classification and measurement requirements for financial instruments. IFRS 9 requires allfinancial assets to be assessed based on a combination of Conduit's business model for the management of the assetsand the instruments' cash flow characteristics. Conduit currently anticipates that all investments will be classified as atFVTPL, because they are managed on a fair value basis. Conduit's fixed maturity securities portfolio is currentlyclassified as FVTPL. As a result, the adoption of IFRS 9 is not expected to result in any changes to the measurement ofConduit\u2019s investments, which will continue to be at FVTPL. Conduit will apply any changes resulting from IFRS 9retrospectively.Presentation and disclosureTo reflect the differences between IAS 39 and IFRS 9, IFRS 7 Financial Instruments: Disclosures was alsoamended. Conduit will apply the amended disclosure requirements at the same time as applying IFRS 9.Estimated impact of the adoption of IFRS 17 and IFRS 9Conduit has assessed the estimated impact that the initial application of IFRS 17 and IFRS 9 will have on itsconsolidated financial statements. Based on the assessments undertaken to date, we estimate that the cumulativeIFRS 17 impact will be an increase to shareholders\u2019 equity as at 1 January 2022 of between $6.0 million and $9.0million, which represents between 0.6% and 0.9% of Conduit\u2019s reported shareholders\u2019 equity as at 31 December 2021.No financial impact is expected from the initial application of IFRS 9.The increase to shareholders\u2019 equity from IFRS 17 is predominantly driven by the discounting of loss reserves whichwere previously undiscounted, the deferral of certain acquisition related operating expenses and the revaluation ofinsurance balances that are now considered monetary items under IFRS 17. The impacts of discounting and thedeferral of acquisition related operating expenses are timing differences as both will be unwound over the settlement ofclaims liabilities and insurance contract coverage periods respectively.Conduit is still performing assessments of the impact of IFRS 17 for the financial year ended 31 December 2022,however we expect the impact of discounting, given the rising rate environment, to be significant.The assessment above is preliminary as the transition work has not yet been fully finalised or subject to external audit.Therefore, the reported impact of the adoption of IFRS 17 in the 2023 consolidated financial statements may deviatefrom that noted above, although any such deviation is unlikely to be material.", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesAccountingEstimatesAndErrorsExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f25651": { "value": "Use of judgements and estimatesThe preparation of financial statements in conformity with IFRS requires Conduit to make judgements and estimatesthat affect the reported and disclosed amounts at the balance sheet date, revenues and expenses during the reportingperiod and the associated financial statement disclosures. All estimates are based on management\u2019s knowledge ofcurrent facts and circumstances, assumptions based on that knowledge and their prediction of future events. Actualresults may differ significantly from the estimates made.The most significant estimates made by management are in relation to losses and loss adjustment expenses, both grossand net of ceded reinsurance, as discussed within the \"Risk disclosures\" section and in note 14.Less significant estimates are made in determining the estimated fair value of certain financial instruments, asdiscussed in note 12.In addition, some management judgement is exercised in determining the ultimate premiums expected from which toestablish the recognition of gross premiums written.While not significant, estimates are also used in the estimated fair value of the MIP as discussed in note 7 and thevaluation of intangible assets as discussed in note 16.", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f25712": { "value": "Consolidation principlesThese consolidated financial statements comprise the financial statements of Conduit and its subsidiaries as at and forthe year ended 31 December 2022. Subsidiaries are those entities that are controlled by Conduit and are fullyconsolidated from the date on which Conduit obtains control and continue to be consolidated until the date when suchcontrol ceases. Control is achieved when Conduit is exposed, or has rights, to variable returns from its involvement withthe subsidiary and has the ability to affect those returns through its power over the subsidiary.Intragroup balances and transactions are eliminated in preparing the consolidated financial statements.Subsidiaries\u2019 accounting policies are generally consistent with Conduit\u2019s accounting policies.", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f25734": { "value": "Foreign currencyThe functional currency, which is the currency of the primary economic environment in which the entity operates, for allGroup entities is US dollars. Items included in the financial statements of each of the Group\u2019s entities are measuredusing the functional currency. These consolidated financial statements are presented in US dollars.Foreign currency transactions are recorded in the functional currency for each entity using the exchange ratesprevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies arerevalued at period end exchange rates. The resulting foreign exchange differences on revaluation are recorded in theconsolidated statement of comprehensive loss within net foreign exchange gains (losses). Non-monetary assets andliabilities denominated in a foreign currency are carried at historic rates. Non-monetary assets and liabilities carried atestimated fair value and denominated in a foreign currency are translated at the exchange rate at the date the fairvalue was determined.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f25761": { "value": "Reinsurance contractsClassificationContracts that transfer significant reinsurance risk at the inception of the contract are accounted for asreinsurance contracts. Contracts that do not transfer significant reinsurance risk are accounted for as investmentcontracts. Reinsurance risk is transferred when a reinsurer agrees to compensate a policyholder if a specifieduncertain future event adversely affects the policyholder.PremiumsConduit writes both excess of loss and proportional (also known as quota share or pro-rata)reinsurance contracts.Excess of loss contractsFor the majority of excess of loss contracts, premiums written are recorded based on the minimum and deposit or flatpremium, as defined in the contract. Subsequent adjustments to the minimum and deposit premium are recognised inthe period in which they are determined. For excess of loss contracts where no deposit is specified in the contract,premiums written are recognised based on estimates of ultimate premiums provided by the ceding company. Initialestimates of premiums written are recognised in the period in which the contract incepts, or the period in which thecontract is bound, if later. Subsequent adjustments, based on reports of actual premium by ceding companies, orrevisions in estimates, are recorded in the period in which they are determined. For multi-year policies that are payablein annual instalments generally only the initial annual instalment is included as premiums written at policy inceptiondue to the ability of the reinsured to commute or cancel the policy. The remaining annual instalments are included aspremiums written at each successive anniversary date within the multi-year term.Premiums written are generally earned evenly over the term of the underlying risk period of the reinsurance contract,except where the period of risk differs significantly from the contract period. In these circumstances, premiums arerecognised over the period of risk in proportion to the amount of reinsurance protection provided. The portion of thepremium related to the unexpired portion of the risk period is reflected in unearned premiums. Where contract termsrequire the reinstatement of coverage after a ceding company\u2019s loss, the estimated mandatory reinstatement premiumsare recorded as premiums written and earned when a specific loss event occurs. Reinstatement premiums are notrecorded for losses included within the provision for IBNR that do not relate to a specific loss event.Proportional contractsPremiums written for proportional contracts are recognised based on estimates of ultimate premiums provided by theceding company, supplemented by management's estimates of premiums based on its experience with the cedingcompany, familiarity with each market, the timing of the reported information and its understanding of thecharacteristics of each class of business. Initial estimates of premiums written are recognised in the period in whichthe contract incepts, or the period in which the contract is bound, if later. Contracts written on a \u2018risks attaching\u2019 basiscover claims which attach to the underlying reinsurance policy written during the term of the respective policy.Premiums earned on such policies generally extend beyond the original term of the contract. Subsequent adjustments,based on reports of actual premium by the ceding company, or revisions in estimates, are recorded in the period inwhich they are determined.Premiums receivableReinsurance premiums receivable from cedants are recorded net of commissions, brokerage, premium taxes and otherlevies on premiums, unless the contract specifies otherwise. A significant portion of amounts included as premiumsreceivable are not currently due based on the terms of the underlying contracts. These balances are regularly reviewedfor impairment, with any impairment loss recognised as an expense in the period in which it is determined. Based oncurrently available information, management believes that the premium estimates included in premiums receivable will becollectable and therefore no provision for doubtful accounts has been recorded.Acquisition expensesAcquisition expenses represent commissions, brokerage, profit commissions and other variable costs that relate directlyto the successful securing of new contracts and renewing existing contracts. Generally, acquisition expenses aredeferred over the period in which the related premiums are earned to the extent they are recoverable out of expectedfuture revenue margins. All other acquisition expenses are recognised as an expense when incurred.Ceded reinsurance premiumsCeded reinsurance is purchased in the normal course of business to increase capital capacity, limit the impact ofindividual risk losses and loss events impacting multiple cedants (such as natural-catastrophes), or both. Conduit maypurchase ceded reinsurance on both an excess of loss and proportional basis, and may in future supplement this with theuse of catastrophe bonds or other capital market products. Ceded reinsurance premiums, being the cost of reinsurancecontracts entered into, are accounted for in the period in which the contract incepts or is bound if that date is later. Cededreinsurance premiums are generally earned in the same manner as the inwards contracts, depending on the terms of thecontract. The provision for the reinsurers\u2019 share of unearned premiums represents the part of ceded reinsurancepremiums which are estimated to be earned in future periods. Deferred ceded acquisition expenses are recognised as aliability using the same principles.Net losses and loss adjustment expensesNet losses and loss adjustment expenses in the consolidated statement of comprehensive loss include changes inthe provision for outstanding losses and ACRs, changes in the provision for IBNR, plus related expenses and lossespaid in the period. Amounts are net of any changes in the provision for reinsurance recoverable and related expensesfor the period. Net losses and loss adjustment expenses are recognised in total comprehensive income as they areincurred.Losses and loss adjustment expenses in the consolidated balance sheet represent the estimated ultimate cost of settlingall reinsurance claims arising from events which have occurred up to the end of the reporting period, including a provisionfor IBNR. Conduit does not currently discount its liabilities for unpaid losses. Outstanding losses are initially set on thebasis of reported losses received from cedants. ACRs are determined where management\u2019s best estimate of thereported loss is greater than that reported. Estimated IBNR reserves may also consist of a provision for additionaldevelopment in excess of losses reported by cedants, as well as a provision for losses which have occurred but have notyet been reported by cedants. IBNR reserves are estimated initially using expected loss and loss adjustment expenseratios which are selected based on information derived by underwriters and actuaries during the initial pricing of thebusiness. These estimates are reviewed regularly and, as experience develops and new information is received, thereserves are adjusted as necessary. As actual loss information is reported, and Conduit develops its own lossexperience, management will use various actuarial methods as well as a combinationof management\u2019s judgement and experience, historical reinsurance industry loss experience and estimates of pricingadequacy trends to estimate IBNR reserves. Any adjustments to initial expectations are reflected in the consolidatedstatement of comprehensive loss in the period in which they are determined.The estimation of the ultimate loss and loss adjustment expense liability is a complex process which incorporates asignificant amount of judgement. It is reasonably possible that uncertainties in the reserving process, delays in cedantsreporting losses to Conduit, together with the potential for unforeseen adverse developments, could lead to a materialchange in estimated net losses and loss adjustment expenses.Any amounts recoverable from reinsurers are estimated using the same methodology as for the underlying losses.Management monitors the creditworthiness of its reinsurers on an ongoing basis and assesses any reinsurance assetsfor impairment, with any impairment loss recognised as an expense in the period in which it is determined.Liability adequacy testsAt each balance sheet date, Conduit performs a liability adequacy test to determine if there is an overall excess ofexpected claims over unearned premiums for the period of unexpired risk by using current best estimates of futurecash outflows generated by its reinsurance contracts, plus any investment income thereon. If, as a result of thesetests, the carrying amount of Conduit\u2019s reinsurance liabilities is found to be inadequate, the deficiency is charged tothe consolidated statement of comprehensive loss for the period, initially by writing off deferred acquisition costs andsubsequently by establishing a provision.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForReinsuranceExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f26029": { "value": "Financial instrumentsCash and cash equivalentsCash and cash equivalents include cash in hand, deposits held on call with banks, money market funds, and othershort-term highly liquid investments with a maturity of three months or less at the date of purchase. Carrying amountsapproximate fair value due to the short-term nature and high liquidity of the instruments.InvestmentsConduit\u2019s fixed maturity securities portfolio is classified as FVTPL and carried at estimated fair value in the consolidatedbalance sheet. The classification of financial assets is determined at the time of initial purchase. A financial asset isclassified at FVTPL if it is managed and evaluated on a fair value basis or if acquired principally for the purpose of sellingin the short term, or if it forms part of a portfolio of financial assets in which there is evidence of short-term profit taking.Presentation of these securities in the FVTPL category is consistent with how management monitors and evaluates theperformance of these securities.Regular way purchases and sales of investments are recognised at estimated fair value on the trade date, and aresubsequently carried at estimated fair value. Balances pending settlement are reflected in the consolidated balancesheet in other assets or other payables. The estimated fair value of Conduit\u2019s fixed maturity securities portfolio isdetermined based on bid prices from recognised exchanges, broker-dealers, recognised indices or pricing vendors.Changes in estimated fair value of investments classified as FVTPL are recognised in the consolidated statement ofcomprehensive loss within net unrealised gains and losses on investments.Investments are derecognised when Conduit has transferred substantially all the risks and rewards of ownership.On derecognition of an investment held at FVTPL, previously recorded unrealised gains and losses are recycledfrom net unrealised gains and losses on investments to net realised gains and losses on investments.Interest income, amortisation and accretion of premiums and discounts on fixed maturity securities are calculatedusing the effective interest rate method and recognised in net investment income. The carrying value of accruedinterest income approximates estimated fair value due to its short-term nature and high liquidity.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f26033": { "value": "Cash and cash equivalentsCash and cash equivalents include cash in hand, deposits held on call with banks, money market funds, and othershort-term highly liquid investments with a maturity of three months or less at the date of purchase. Carrying amountsapproximate fair value due to the short-term nature and high liquidity of the instruments.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f26044": { "value": "InvestmentsConduit\u2019s fixed maturity securities portfolio is classified as FVTPL and carried at estimated fair value in the consolidatedbalance sheet. The classification of financial assets is determined at the time of initial purchase. A financial asset isclassified at FVTPL if it is managed and evaluated on a fair value basis or if acquired principally for the purpose of sellingin the short term, or if it forms part of a portfolio of financial assets in which there is evidence of short-term profit taking.Presentation of these securities in the FVTPL category is consistent with how management monitors and evaluates theperformance of these securities.Regular way purchases and sales of investments are recognised at estimated fair value on the trade date, and aresubsequently carried at estimated fair value. Balances pending settlement are reflected in the consolidated balancesheet in other assets or other payables. The estimated fair value of Conduit\u2019s fixed maturity securities portfolio isdetermined based on bid prices from recognised exchanges, broker-dealers, recognised indices or pricing vendors.Changes in estimated fair value of investments classified as FVTPL are recognised in the consolidated statement ofcomprehensive loss within net unrealised gains and losses on investments.Investments are derecognised when Conduit has transferred substantially all the risks and rewards of ownership.On derecognition of an investment held at FVTPL, previously recorded unrealised gains and losses are recycledfrom net unrealised gains and losses on investments to net realised gains and losses on investments.Interest income, amortisation and accretion of premiums and discounts on fixed maturity securities are calculatedusing the effective interest rate method and recognised in net investment income. The carrying value of accruedinterest income approximates estimated fair value due to its short-term nature and high liquidity.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForHeldtomaturityInvestmentsExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f26075": { "value": "Investments are derecognised when Conduit has transferred substantially all the risks and rewards of ownership.On derecognition of an investment held at FVTPL, previously recorded unrealised gains and losses are recycledfrom net unrealised gains and losses on investments to net realised gains and losses on investments.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerecognitionOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f26093": { "value": "Intangible assetsAcquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring into use thespecific software. An intangible asset with a finite useful life is amortised on a straight-line basisover the useful life. The useful life is reviewed annually to determine if any changes are required to theamortisation period.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f26134": { "value": "LeasesConduit recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset isinitially measured at cost, which comprises the initial measurement of the corresponding lease liability adjusted for anylease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate ofany costs to be incurred at the expiration of the lease agreement.Right-of-use assets are subsequently measured at cost less accumulated depreciation and any impairment losses.Straight-line depreciation is calculated from the commencement date of the lease to the earlier of either the end dateof the lease term or the useful life of the underlying asset.The lease liability is initially measured at the present value of the future lease payments at the lease commencementdate. Lease payments are discounted using the interest rate implicit in the lease or, if that rate cannot be readilydetermined, Conduit's incremental borrowing rate. Lease payments included in the measurement of the lease liabilityinclude fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable leasepayments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.The lease liability is subsequently measured by increasing the lease carrying amount to reflect the interest due on thelease liability using the effective interest rate method and reducing the carrying amount to reflect the lease paymentsmade. Conduit re-measures the lease liability and the related right-of-use asset whenever there is a change in futurelease payments arising from a change in index or rate, if Conduit changes its assessment of whether it will exercise apurchase, extension or termination option or if there is a revised in-substance fixed lease payment.Right-of-use assets and lease liabilities are presented as separate financial statement line items in theconsolidated balance sheet.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f26183": { "value": "Employee benefitsEquity-based incentivesConduit currently operates a MIP under which shares are subscribed for or nil cost options are granted. The fairvalue of the instruments granted is estimated on the date of grant. The estimated fair value is recognised as anexpense pro-rata over the vesting period of the instrument, adjusted for the impact of any non-market vestingconditions. No adjustment to vesting assumptions is made in respect of market vesting conditions.During 2022 Conduit established a DSBP. A percentage of each employee's bonus is automatically deferred into sharesas nil cost options. These nil cost awards vest annually in separate equal tranches over a three-year period from thedate of grant and do not have associated performance criteria attached to the awards. These awards accrue dividendequivalents for all dividends declared where the record date falls between the grant date and date of exercise, and arepaid at the time of exercise.At each balance sheet date, Conduit revises its estimate of the number of instruments that are expected to becomeexercisable. It recognises the impact of the revision of original estimates, if any, as equity-based incentive expense inthe consolidated statement of comprehensive loss, and a corresponding adjustment is made to other reserves inshareholders\u2019 equity over the remaining vesting period.On exercise, the differences between the expense charged to the consolidated statement of comprehensive loss andthe actual cost to Conduit, if any, is transferred to other reserves in shareholders\u2019 equity.PensionsConduit\u2019s pension plans are based on defined contributions or equivalent cash in lieu, subject to applicable law andlocal market standards. On payment of contributions to the plans or cash in lieu there is no further obligation toConduit. Contributions or payments of cash in lieu are recognised as employee benefits in the consolidated statementof comprehensive loss in the period when the services are rendered.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f26266": { "value": "Income tax on the profit or loss for the period comprises current and deferred tax. Current tax is the expected taxpayable on the taxable income for the year using tax rates enacted or substantively enacted at the year-end reportingdate and any adjustments to tax payable in respect of prior periods.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f26274": { "value": "Deferred tax is provided, using the liability method, on temporary differences arising between the tax bases of assetsand liabilities and their carrying amounts in the financial statements. The amount of deferred tax provided is based onthe expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax ratesenacted or substantively enacted at the reporting date. Deferred tax assets are recognised in the consolidated balancesheet to the extent that it is probable that future taxable profit will be available against which the temporary differencescan be utilised.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f26288": { "value": "Own sharesOwn shares include shares repurchased under share repurchase authorisations and held in treasury, plus sharesrepurchased and held in trust, for the purposes of employee equity-based incentive schemes. Own shares arededucted from shareholders\u2019 equity. No gain or loss is recognised on the purchase, sale, cancellation or issue of ownshares and any consideration paid or received is recognised directly in equity.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTreasurySharesExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f26301": { "value": "Share capital and issuance costsShares are classified as shareholders' equity if there is no obligation to transfer cash or other financial assets.Transaction costs that are attributable to the issuance of new shares are treated as a deduction from equity.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIssuedCapitalExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f26312": { "value": "
Risk disclosures
Introduction
Conduit is exposed to risks from several sources, classified into six primary risk categories. The primary risk categories
are: (a) reinsurance risk; (b) market risk; (c) liquidity risk; (d) credit risk; (e) operational risk; and
(f) strategic risk. These are discussed in detail on the following pages. The primary risk to Conduit is
reinsurance risk.
The Board is responsible for determining the nature and extent of the principal risks Conduit is willing to take in
achieving its strategic objectives and should maintain sound risk management and internal control systems. To this
end, the Board has established various committees to support the execution of its responsibilities and has reviewed
the committee structures at CRL. The Board, and committees thereof, define the risk preferences and appetites within
which management is authorised to operate.
The risk function is responsible for supporting the Board, and the CRL Board, with the day-to-day oversight of the risks
that Conduit seeks or is exposed to in pursuit of its strategic objectives, and the satisfaction of certain regulatory risk
management expectations relevant to CRL. The framework under which risks are managed contemplates risk appetite
and tolerance constraints, prescribed by the Board and which are reviewed at least annually, with consideration of the
financial and operational capacity of Conduit. The use of financial capacity in this context relates to calculated or
modelled capital requirements, based on residual unmitigated risk exposures. Current capital requirements are
determined by reference to rating agency and regulatory capital requirements, with an internal capital model to be
developed in due course.
Day-to-day management of risk is the responsibility of management, operating within the defined appetite and
tolerances of the Board, or the CRL board, approved delegations of authority. The risk framework prescribes a
standardised approach to the management of risk, oversight and challenge by the risk function and independent
assurance provided by the internal audit function. The risk framework also addresses the reporting of risks, emerging
risks, risk events and compliance with risk appetite and tolerance statements to executive management and the Board,
and relevant Board committees, of CRL and CHL. To ensure transparency and accountability of the business all
independent Non-Executive Directors, four independent Non-Executive Directors from the Board have been appointed
to the Board of CRL. Furthermore, the Board is invited to attend operating entity board level meetings and see all
minutes and records of such operating entity Board and committee meetings.
COVID-19
The COVID-19 pandemic has caused significant disruption in global financial markets and to worldwide economies. The
COVID-19 pandemic is an ongoing situation making it exceptionally difficult to predict what
the ultimate impact for the reinsurance industry will be. Conduit only commenced underwriting operations during the
twelve months ended 31 December 2021 and, for any reinsurance business underwritten during that period, had
COVID-19 related exclusions in its reinsurance contracts and policy wordings. As a result, Conduit does not believe it
has any exposure to reinsurance losses associated with the COVID-19 pandemic during the period. The impacts of the
COVID-19 pandemic on Conduit are discussed throughout these consolidated financial statements.
Climate change
Conduit is exposed to risks associated with climate change but also potential opportunities arising from that risk. Risks
from climate change can include physical risk and those associated with a changing economy. Physical risks are those
relating to the physical impacts of climate change, which can be from increased frequency and/or severity of climate-
related events, or structural, due to longer-term shifts in climate patterns. Economic risks are those relating to the
transition to a lower carbon economy and include risks such as policy and legal risk, technology risk, market risk and
reputational risk. The potential financial impact from these risks is mitigated by Conduit\u2019s strategic and risk management
policies.
Global tax reform
Conduit continues to monitor and assess the implications arising from the Organisation for Economic Co-operation and
Development\u2019s inclusive framework agreement that aims to implement a global minimum tax rate of 15%, along with the
potential impacts of other global tax reforms that are relevant to Conduit\u2019s business operations.
a. Reinsurance risk
Conduit underwrites both short-tail and long-tail reinsurance contracts on a worldwide basis. These reinsurance
contracts transfer insurance risk, including risks exposed to both natural and man-made catastrophes, and risk and
liability losses. The risk in connection with underwriting reinsurance contracts is, in the event of a covered loss, whether
the premiums will be sufficient to meet the associated loss payments and expenses. The underwriters evaluate and
estimate the level of premiums sufficient to cover expected losses, expenses and profitability through a combination of
sophisticated risk modelling tools, past experience and knowledge of loss events, current industry trends and broader
economic indicators. In order to ensure appropriate reinsurance risk selection and limits on the concentration and
diversification of the aggregate portfolio, Conduit has established risk management and internal control systems to
evaluate and assess the expected losses of each individual contract, class of business, geographic region and the
aggregate portfolio. These controls, include, but are not limited to:
\u2022
Conduit has a five-year strategic plan that defines the over-riding business goals that management and the Board
aim to achieve.
\u2022
A detailed business plan is produced annually and considers current market conditions and the risk-adjusted
profitability of the underwriting portfolio.
\u2022
Conduit's internal capital requirements consider the probability and magnitude of reinsurance losses varying
adversely from the expected losses considered during the underwriting and subsequent reserving processes.
\u2022
Forecasts are produced periodically to assess the progress toward the business plan and the strategic
plan.
\u2022
Each underwriter has a clearly defined limit of underwriting authority.
\u2022
Each contract underwritten is subject to a pre-bind peer review.
\u2022
An underwriting roundtable meeting, typically held daily, where deal flow, pricing and opportunities are
discussed.
\u2022
Pricing models are used in all areas of the underwriting process.
\u2022
Risk appetite and tolerance statements have been established and the CRO reports quarterly on
adherence.
\u2022
A number of modelling tools are used to model catastrophes and expected losses.
\u2022
Outwards reinsurance is purchased to mitigate both frequency and severity of losses, and to protect Conduit\u2019s
capital base.
Catastrophe management
Certain of Conduit\u2019s classes of business provide coverage for natural-catastrophes (e.g., earthquakes, floods, hurricanes
and wildfires) and are subject to seasonal variation and the impacts of climate change. Conduit\u2019s business has exposure
to large catastrophe losses in North America, Europe and Japan as a result of
windstorms. The level of windstorm activity, and landfall thereof, during the North American, European and Japanese
wind seasons may materially impact loss experience. The North American and Japanese wind seasons are typically
June to November and the European wind season November to March. Conduit also has exposure to other natural-
catastrophes, such as earthquakes, tsunamis, droughts, floods, hail and tornadoes, which can occur throughout the
year. In addition, Conduit is exposed to risk losses throughout the year from perils such as fire, explosion, war,
terrorism, political risk and other events, including loss arising from legal liabilities rather than physical damage.
Conduit has defined its appetite and tolerances for risk accumulations and uses models to determine the expected
frequency and severity of aggregating exposures. As with all such models, there is a risk that modelled expectations
may not reflect actual outcomes and the scope of the models are such that not all exposures are captured.
Conduit has set tolerances around various scenarios. Of these, at the commonly reported 100-year and 250-year return
periods, Conduit\u2019s most significant exposures to any single peril and region combination are to Florida windstorm and
California earthquake perils, respectively. The table below shows the estimated net exposures to these peak zone perils
on a first occurrence basis. Net positions are calculated by applying relevant reinstatement premiums and outwards
reinsurance to the respective modelled gross exposures.
As at 31 December 2022
As at 31 December 2021
% of
% of
tangible
tangible
Net
capital
Net
capital
Return period
Peril
$m
%
$m
%
100-year
Florida windstorm
18.5
2.3
9.6
1.0
250-year
California earthquake
74.8
9.2
61.8
6.3
There can be no guarantee that the modelled assumptions and techniques deployed in calculating these figures are
accurate. There could also be an unmodelled loss which exceeds these figures. The models also contain loss
scenarios which could cause a larger loss to capital than the modelled expectation from the above return periods.
Operating segments
The underwriting business is comprised of three principal divisions: property, casualty and specialty. These divisions
are also considered to be Conduit's operating segments. Details of each operating segment and gross premiums
written by geographic region and operating segment are as follows:
Property
Casualty
Specialty
Total
Total
Year ended 31 December 2022
$m
$m
$m
$m
%
US
174.7
171.9
8.7
355.3
55.7
Worldwide
93.5
29.0
81.2
203.7
32.0
Europe
16.3
33.3
10.2
59.8
9.4
Other
15.1
2.5
1.1
18.7
2.9
Gross premiums written
299.6
236.7
101.2
637.5
100.0
Property
Casualty
Specialty
Total
Total
Year ended 31 December 2021
$m
$m
$m
$m
%
US
105.4
118.7
3.9
228.0
60.2
Worldwide
62.3
7.1
62.3
131.7
34.8
Europe
6.0
2.8
-
8.8
2.3
Other
9.7
0.4
0.2
10.3
2.7
Gross premiums written
183.4
129.0
66.4
378.8
100.0
Property reinsurance
Conduit is exposed to large natural-catastrophe losses, such as windstorm and earthquake losses, primarily from
assuming risks associated with property treaties. Exposure to natural-catastrophe events is controlled and measured by
managing to predefined limits within stochastic modelling and deterministic accumulations across classes per geographic
zone and peril. The accuracy of these analyses is limited by the quality of data and the effectiveness of the modelling. It
is possible that a catastrophic event significantly exceeds the expected modelled event loss.
Natural-catastrophe risk is written across both the US and internationally on an excess of loss and capped quota
share basis. Reinsurance structures are offered strategically, most notably in respect of peril, geography and
probability of activation or exhaustion.
Property per risk treaties are offered with the strategy to minimise natural-catastrophe exposure, focusing on fire risk.
This is considered by both natural-catastrophe specific metrics, treaty conditions and excess of loss structure.
Ceded reinsurance may be purchased to mitigate exposures to large natural-catastrophe losses. Ceded reinsurance is
typically purchased on an excess of loss basis, however industry loss warranties, catastrophe bonds, or proportional
treaty arrangements may also be entered into.
Casualty reinsurance
Conduit underwrites a balanced portfolio of casualty classes of business, comprised of both excess of loss and
proportional contracts, on a worldwide basis.
Casualty claims tend to take longer to be reported and ultimately settled than physical damage risks. Conduit typically
maintains net reserves for losses and loss adjustment expenses for casualty classes of business over a longer period of
time than for the property and specialty classes of business where the costs of claims are generally known and settled
within a shorter time frame.
Conduit will purchase ceded reinsurance to protect against any \u2018clash\u2019 between losses arising in its casualty
portfolio.
The sub-classes of casualty business include directors and officer\u2019s liability, financial institutions liability, general
liability for multiple sub-classes and, on an excess and umbrella basis, medical malpractice, professional liability
and transactional liability. Conduit has limited appetite for, and generally avoids, workers compensation, standalone
auto and cyber treaties.
Directors and officers liability
Directors and officers liability policies offer protection for company managers and directors and officers against
claims that may arise in the normal course of operations. Coverage includes legal expenses and liability to
shareholders, bondholders, creditors or others owing to actions or omissions by a director or officer of a private or
public corporation, or not-for-profit organisation.
Financial institutions liability
Financial institutions coverage may cover risks such as computer and commercial crime, professional indemnity
and civil liability.
General liability
General liability commonly provides cover for losses arising from the legal liability of an original insured and statutory
liability in the case of employers\u2019 liability which result in bodily injury or disease to third parties or physical damage to
third-party property. The Group offers a wide range of general liability reinsurance products including contractors
general liability, excess general liability, umbrella, energy and environmental.
Medical malpractice
Medical malpractice reinsurance generally covers professional liability and errors and omissions specifically in the
healthcare industry, protecting physicians and other healthcare professionals against claims of negligent acts or injury
of patients under their care. Medical malpractice reinsurance does not cover intentional or criminal acts.
Professional liability
Professional liability generally provides coverage for third-party losses resulting from legal liability or civil liability or
negligence, errors or omissions or wrongful acts arising from the provision of, or failure to provide, professional services
by an original insured. Sub-classes of this business would include lawyers, accountants, architects and engineers, errors
and omissions, plus miscellaneous professional liability.
Transactional liability
Transactional liability reinsurance is used by parties to various business transactions, such as mergers, acquisitions
and divestitures, to transfer certain transaction-related risks to the reinsurance market. There can be a broad range of
risks covered, including warranty, litigation, pension and tax uncertainties and employment matters.
Specialty reinsurance
Conduit's specialty classes of business are written on both an excess of loss and proportional basis and can provide
reinsurance coverage against physical damage (short-tail) or against legal liability (long-tail) losses. Although specialty
classes of business are exposed to natural-catastrophe risk, it is generally to a lesser extent than property classes of
business. They are more likely to be affected by specific large loss events such as accidents, collisions, fires and similar
man-made catastrophe events. Specialty classes of business are highly diverse in nature and require specific market
expertise and experience. The specialty classes of business include aviation, energy, marine, renewables, political
violence and terrorism and are offered on both a specific and a whole account basis.
Conduit purchases ceded reinsurance protection to reduce exposure to both large risk losses and an accumulation
of smaller losses. Ceded reinsurance is typically purchased on an excess of loss basis, but, from time to time,
proportional arrangements may be entered into.
Aviation
The aviation class of business provides cover to the insurers of the world\u2019s major airlines and aircraft manufacturers
and includes cover for the aircraft themselves as well as losses arising from passenger and third-party liability claims
against airlines and/or manufacturers.
Energy
The energy class of business provides reinsurance cover for a global spread of accounts that can include primary
risks such as downstream energy, upstream energy, energy liability, construction energy and Gulf of Mexico offshore
energy programmes. Policies typically cover property for physical damage (including natural-catastrophe) and
machinery breakdown perils plus consequential business interruption exposure, often with loss limits set at a level
commensurate with a modelled estimated maximum loss scenario.
Marine
Marine cargo is an international account and covers the reinsurance of commodities or goods in transit. Typically, transit
cover is provided on an all-risks basis for marine perils for the full value of the goods concerned. Static cover is also
provided for losses to cargo, from both elemental and non-elemental causes. In addition, the cargo account can include
for example, fine art, vault risks, artwork on exhibition and marine war and terrorism business relating to cargo in the
ordinary course of transit.
Marine liability is mostly the reinsurance of the International Group of Protection and Indemnity Clubs. Marine
builders\u2019 risk covers the building of ocean-going vessels in specialised yards worldwide and their testing and
commissioning.
The marine hull class generally consists of worldwide coverage spanning physical damage, hull and machinery
breakdown, loss of hire and mortgagees\u2019 interests for a range of maritime vessels from cargo and passenger ships to
private pleasure craft. Products typically cover both risk and catastrophe exposures.
Political violence and terrorism
Political violence and terrorism coverage is provided for US and worldwide property risks, but typically excluding
nuclear, chemical, biological and cyber coverage in most territories.
Whole account
Coverage is generally provided on a worldwide basis and covers a broad spectrum of the cedants risks under a single
policy. The classes of business covered under a whole account reinsurance policy can include traditional property and
casualty classes of business including commercial and personal automobile, general liability, workers\u2019 compensation,
employers\u2019 liability, excess casualty and umbrella, as well as selected professional liability coverage.
Ceded reinsurance
Ceded reinsurance is purchased in the normal course of business to increase capital capacity, limit the impact of
individual risk losses and loss events impacting multiple cedants (such as natural-catastrophes), or both. Ceded
reinsurance may also be purchased from time to time to optimise the risk-adjusted return of Conduit's aggregate
underwriting portfolio. Conduit may purchase ceded reinsurance on both an excess of loss and proportional basis, and
may in future supplement this with the use of catastrophe bonds or other capital market products. The mix of ceded
reinsurance coverage is dependent on specific loss mitigation requirements, market conditions and available capacity. In
certain market conditions, Conduit may deem
it more economic to hold capital than purchase ceded reinsurance. Ceded reinsurance does not relieve Conduit of its
obligations to policyholders. Conduit is exposed to reinsurance risk where ceded reinsurance contracts put in place to
reduce gross reinsurance risk do not perform as anticipated, result in coverage disputes or prove inadequate in terms
of the limits purchased. Failure of a ceded reinsurer to pay a valid claim is considered a credit risk which is detailed in
the credit risk section below. Ceded reinsurance coverage is not intended to be available to meet all potential loss
circumstances. Conduit will retain certain losses, as the cover purchased is unlikely to transfer the totality of Conduit\u2019s
exposure. Any loss amount which exceeds the ceded reinsurance coverage purchased would be retained by Conduit.
Some ceded reinsurance policies have limited reinstatements, therefore the number of claims which may be recovered
on second, and subsequent loss circumstances is limited.
Under Conduit\u2019s ceded reinsurance security policy, ceded reinsurers are assessed and approved based on their
financial strength ratings, amongst other factors. These decisions are regularly reviewed as an integral part of the
business planning and performance monitoring process. The management Counterparty Security Committee examines
and approves all Conduit\u2019s ceded reinsurers to ensure that they possess suitable security.
Net losses and loss adjustment expenses
A significant and critical judgement and estimate made by management is the estimation of net losses and loss
adjustment expenses. Management estimates net losses and loss adjustment expenses, and the associated reserves
to cover its estimated liability for both reported and unreported claims on events that have occurred up to the latest
valuation date. Management uses methodologies that calculate a point estimate for the ultimate losses, representing
management\u2019s best estimate of ultimate net losses and loss adjustment expenses. Conduit establishes its reserve for
losses and loss adjustment expenses by taking outstanding losses, adding an estimate for IBNR and, if deemed
necessary, ACRs which represent Conduit's estimate for losses related to specific contracts that the management
believes may not be adequately estimated by the client as of that date.
Loss reserves are not permitted until the occurrence of an event which may give rise to a claim. As a result, only loss
reserves applicable to losses that have occurred up to the reporting date are established, with no allowance for the
provision of a contingency reserve to account for expected future losses or for the emergence of new types of latent
claims. Claims arising from future events can be expected to require the establishment of substantial reserves from
time to time. All of Conduit\u2019s reserves are currently reported on an undiscounted basis.
The reserving process is dependent on management's judgement and is subject to meaningful uncertainty due to both
qualitative and quantitative factors, including, but not limited to: the nature of the business written, whether it is short-tail
or long-tail, whether it is excess of loss or proportional, the magnitude and timing of loss events, the geographic areas
impacted by loss events, time lags in the reporting process from the original claimant, limited claims data, policy
coverage interpretations, case law, regulatory directives, demand surge and inflation, potential uncertainties related to
reinsurance and ceding company reserving practices, and other factors inherent in the estimation process for net losses
and loss adjustment expenses.
The judgements and estimates used in establishing loss reserve calculations may be revised as additional experience
or other data becomes available. Loss reserves are also reviewed as new or improved methodologies are developed
and as laws or regulations change. Furthermore, as a business operating within a broker market, management must
rely on loss information reported to brokers by other insurers and their loss adjusters, who must estimate their own
losses at the policy level, often based on incomplete and changing information. The information management receives
varies by cedant and may include paid losses, estimated case reserves and an estimated provision for IBNR reserves.
Additionally, reserving practices and the quality of data reporting may vary among ceding companies, which adds
further uncertainty to management\u2019s estimates of the ultimate losses.
Conduit\u2019s internal actuaries review the reserving assumptions and methodologies on a quarterly basis and develop an
actuarial best estimate of Conduit\u2019s net losses and loss adjustment expenses using the processes outlined above. The
management Reserving Committee reviews the estimate for net losses and loss adjustment expenses on a quarterly
basis. The reserves are subject to a semi-annual independent review by Conduit\u2019s external actuaries. The results of the
internal and independent reserve reviews are presented to the Audit Committee.
Short-tail versus long-tail
Claims relating to short-tail risks are generally reported more promptly than those relating to long-tail risks. The
timeliness of reporting can be affected by such factors as the nature of the event causing the loss, the location of the
loss and whether the losses are from policies in force with primary insurers or reinsurers.
Excess of loss versus proportional
For excess of loss contracts, management is aided by the fact that each policy has a defined limit of liability arising from
one event. Once that limit has been reached, there is no further exposure to additional losses from that policy for the
same event. For proportional business, an initial estimated loss and loss expense ratio is generally used. This is based
upon information provided by the ceding company and/or their broker and management\u2019s historical experience of that
treaty, if any, and the estimate is adjusted as actual experience becomes known.
b. Market risk
Conduit is at risk of loss due to movements in market factors. The main market risks Conduit was exposed to include:
\u2022
Reinsurance risk;
\u2022
Investment risk;
\u2022
Currency risk.
Reinsurance risk
Conduit is exposed to reinsurance market risk from several sources, including the following:
\u2022
The advent or continuation of a soft market, which may result in a stabilisation or decline in premium rates
and/or terms and conditions for certain classes, or across all classes.
\u2022
The actions and reactions of key competitors, which may directly result in volatility in premium volumes and rates,
fee levels and other input costs.
\u2022
Market events, including unusual inflation in rates, may result in a limit in the availability of cover, causing political
intervention or national remedies.
\u2022
Failure to maintain broker and cedant relationships, leading to a limited or substandard choice of risks
inconsistent with Conduit\u2019s risk appetite.
\u2022
Changes in regulation including capital, governance or licensing requirements, and laws.
\u2022
Changes in the geopolitical environment.
The most important method to mitigate reinsurance market risk is to maintain strict underwriting standards.
Conduit manages reinsurance market risk in numerous ways, including the following:
\u2022
Reviews and amends underwriting plans and outlook as necessary.
\u2022
Reduces exposure to, or withdraws from, market sectors where conditions have reached
unattractive levels.
\u2022
Purchases appropriate, cost-effective reinsurance cover to mitigate exposures.
\u2022
Closely monitors changes in rates, terms and conditions, and inflation.
Ensures through rigorous underwriting criteria that surplus capital does not drive short-term risk
appetite.
\u2022
Typically holds a daily underwriting briefing meeting for CRL to discuss deal flow, pricing and
opportunities.
\u2022
Holds a quarterly management Underwriting Oversight Committee meeting that considers matters that include
underwriting performance for CRL.
\u2022
Holds an annual strategy review meeting.
\u2022
Holds a quarterly management Underwriting Committee meeting that considers matters including
underwriting performance for CRL.
\u2022
Holds a quarterly management Risk, Capital and Compliance Committee meeting to review relevant risk and capital
considerations for CRL.
\u2022
Holds regular meetings with regulators and rating agencies.
Reinsurance contract liabilities are currently not directly sensitive to the level of market interest rates, as they are
undiscounted and contractually non-interest bearing.
Investment risk
Movements in investments resulting from changes in interest and inflation rates, credit spreads, and currency exchange
rates, among other factors, may lead to an adverse impact on the value of Conduit\u2019s investment portfolio. Conduit seeks
to invest in issuers with stronger ESG practices on balance, as it believes that this will also help reduce risk in the
portfolio.
The Investment Committee of CRL is responsible for all investment-related decisions and investment guidelines. The
investment guidelines set the parameters within which Conduit\u2019s external managers must operate. Important parameters
of these guidelines include permissible asset classes, duration1 ranges, credit quality, permitted currency, maturity,
industry sectors, geographical, sovereign and issuer exposures. Guideline compliance is monitored on a monthly basis.
The portfolio of fixed maturity securities is currently managed by three external managers. Their performance is
monitored on an ongoing basis. Conduit projects the level of funds required to meet near-term obligations and cash flow
needs following extreme events in order to ensure adequate liquidity is maintained. Conduit also prioritises liquid asset
classes with higher credit quality and shorter duration so that Conduit can meet reinsurance and other near-term
obligations. Conduit has split the portfolio into a short-tail mandate, to better match the property and specialty classes of
business, and a long-tail mandate, to better match the casualty classes of business and some aspects
of the specialty classes of business. The short-tail mandate will be slightly shorter duration than the long-tail
mandate.
Conduit reviews the composition, duration and asset allocation of its investment portfolio on a regular basis to respond
to changes in interest rates and other market conditions. If certain asset classes are anticipated to produce a higher
return within management\u2019s risk tolerance, an adjustment in asset allocation may be made. Conversely, if the risk profile
is expected to move outside of tolerance levels, adjustments may be made to reduce the risks in the portfolio.
Conduit models various periods of significant stress in order to better understand the investment portfolio\u2019s risks and
exposures. The scenarios represent what could, and most likely will, occur \u2013 albeit not in the exact form of the
scenarios, which are based on historic periods of volatility. Conduit also monitors the portfolio impact of more severe
scenarios consisting of extreme shocks.
Conduit focuses on the most significant risks in its investment portfolio which are interest rate risk, credit risk and
liquidity risk, and has built, or is building, stress testing and risk analytics around these risks to ensure they are within
tolerances and preferences.
1.
Duration is the weighted average maturity of a security's cash flows, where the present values of the cash flows serve as the weights. The effect of convexity, or
sensitivity, of the portfolio's response to changes in interest rates is also factored in to the calculation.
Strategic asset allocation reviews will be undertaken periodically to assess Conduit\u2019s overall investment strategy and to
consider alternative asset allocations to achieve the best risk-adjusted return within Conduit's risk appetite. Any resulting
recommendations would be approved by the appropriate management committee(s) and reported to the Board. The
Investment Committee met quarterly to ensure that the strategic and tactical investment actions were consistent with
investment risk preferences, appetite, risk and return objectives and tolerances. The investment risk tolerances have
been incorporated into the ERM framework.
The investment mix by mandate and sector of Conduit's portfolio of fixed maturity securities is as follows:
Estimated
Estimated
Estimated
fair value
fair value
fair value
short-tail
long-tail
total
As at 31 December 2022
$m
$m
$m
Short-term investments
33.2
4.7
37.9
US treasuries
103.6
106.6
210.2
US agency debt
-
1.8
1.8
US municipals
10.0
5.2
15.2
Non-US government and agency
2.0
-
2.0
Asset-backed
102.6
61.2
163.8
US government agency mortgage-backed
52.7
47.9
100.6
Non-agency mortgage-backed
9.8
3.0
12.8
Agency commercial mortgage-backed
3.2
-
3.2
Non-agency commercial mortgage-backed
21.9
30.8
52.7
Corporate
263.6
157.9
421.5
Total
602.6
419.1
1,021.7
Estimated
Estimated
Estimated
fair value
fair value
fair value
short-tail
long-tail
total
As at 31 December 2021
$m
$m
$m
Short-term investments
8.9
-
8.9
US treasuries
52.4
119.4
171.8
US agency debt
-
2.0
2.0
US municipals
11.0
2.2
13.2
Non-US government and agency
2.2
-
2.2
Asset-backed
97.3
72.4
169.7
US government agency mortgage-backed
53.2
41.4
94.6
Non-agency mortgage-backed
13.6
5.6
19.2
Agency commercial mortgage-backed
3.2
-
3.2
Non-agency commercial mortgage-backed
24.3
34.1
58.4
Corporate
302.6
162.6
465.2
Total
568.7
439.7
1,008.4
Corporate and non-US government and agency bonds by country are as follows:
Non-US
Other
government
Financials
industries
and agency
Total
As at 31 December 2022
$m
$m
$m
$m
US
140.6
187.7
-
328.3
UK
21.7
5.5
-
27.2
Canada
23.2
0.5
-
23.7
Other countries
35.4
6.9
2.0
44.3
Total
220.9
200.6
2.0
423.5
Non-US
Other
government
Financials
industries
and agency
Total
As at 31 December 2021
$m
$m
$m
$m
US
153.5
214.8
-
368.3
UK
22.1
7.4
-
29.5
Canada
23.3
0.6
-
23.9
Other countries
37.6
5.9
2.2
45.7
Total
236.5
228.7
2.2
467.4
The sector allocation of corporate bonds is as follows:
2022
2021
As at 31 December
$m
%
$m
%
Financials
220.9
52.4
236.5
50.9
Industrials
180.3
42.8
209.5
45.0
Utilities
20.3
4.8
19.2
4.1
Total
421.5
100.0
465.2
100.0
Conduit\u2019s investment portfolio is comprised of fixed maturity securities and cash and cash equivalents. Fair values can
be impacted by movements in interest rates, credit ratings, exchange rates, the current economic environment and
outlook. The estimated fair value of the portfolio of fixed maturity securities is generally inversely correlated to
movements in market interest rates. If market interest rates fall, the estimated fair value of Conduit\u2019s portfolio of fixed
maturity securities would tend to rise and vice versa. The sensitivity of the price of fixed maturity securities to movements
in interest rates is indicated by their duration. The greater a security\u2019s duration, the greater its price volatility to
movements in interest rates. The sensitivity of Conduit\u2019s portfolio of fixed maturity securities to interest rate movements
is detailed below, assuming linear movements in interest rates.
2022
2021
As at 31 December
$m
%
$m
%
Immediate shift in yield (basis points)
100
(23.0)
(2.2)
(27.7)
(2.7)
75
(17.2)
(1.7)
(20.8)
(2.1)
50
(11.5)
(1.1)
(13.9)
(1.4)
25
(5.7)
(0.6)
(6.9)
(0.7)
0
-
-
-
-
-25
6.6
0.6
5.7
0.6
-50
13.2
1.3
11.5
1.1
-75
19.7
1.9
17.2
1.7
-100
26.3
2.6
22.9
2.3
Conduit mitigates interest rate risk on the investment portfolio by establishing and monitoring duration ranges in its
investment guidelines. The duration of the portfolio is matched to the modelled expected duration of the reinsurance
reserves, within a permitted range. The permitted duration range for the portfolio is between 1.5 and 5 years. The
overall duration for the fixed maturity securities, managed cash and cash equivalents is 2.2 years as at 31
December 2022 (31 December 2021: 2.4 years).
In addition to duration management, Conduit monitors VaR to measure potential losses in the estimated fair values of its
cash and invested assets and to understand and monitor risk. The VaR calculation is performed using
variance/covariance risk modelling. Securities are valued individually using standard market pricing models. These
security valuations serve as the input to many risk analytics. The principal VaR measure that is produced is an annual
VaR at the 99th percentile confidence level. Under normal conditions, the portfolio is not expected to lose more than the
VaR metric listed below, 99% of the time over a one-year time horizon. The appropriateness of this measure is
considered by the Investment Committee periodically.
Conduit\u2019s annual VaR calculation is as follows:
2022
2021
% of
% of
shareholders'
shareholders'
As at 31 December
$m
equity
$m
equity
99th percentile confidence level
62.0
7.6
30.2
3.1
Currency risk
Conduit is susceptible to fluctuations in rates of foreign exchange, principally between the US dollar and pound
sterling and the US dollar and the euro. Even though risks are assumed on a worldwide basis, they are
predominantly denominated in US dollars. Conduit is exposed to currency risk to the extent its assets are
denominated in different currencies to its liabilities. Conduit is also exposed to translation risk on non-monetary
assets such as unearned premiums and deferred acquisition costs. Foreign currency gains and losses are recorded
in the period they occur in the consolidated statement of comprehensive loss.
Conduit hedges monetary non-US dollar liabilities primarily with non-US dollar assets but may also use derivatives,
such as currency forwards, to mitigate foreign currency exposures. The main foreign currency exposure relates to its
reinsurance obligations, cash holdings, premiums receivable and dividend payable, if applicable.
The following table summarises the carrying value of total assets and total liabilities categorised by
Conduit\u2019s main currencies:
USD
GBP
EUR
Other
Total
As at 31 December 2022
$m
$m
$m
$m
$m
Total assets
1,515.9
26.1
24.2
2.2
1,568.4
Total liabilities
(691.3)
(9.1)
(44.9)
(8.7)
(754.0)
Net assets (liabilities)
824.6
17.0
(20.7)
(6.5)
814.4
USD
GBP
EUR
Other
Total
As at 31 December 2021
$m
$m
$m
$m
$m
Total assets
1,318.0
6.4
9.3
1.1
1,334.8
Total liabilities
(331.8)
(2.8)
(17.1)
(1.9)
(353.6)
Net assets (liabilities)
986.2
3.6
(7.8)
(0.8)
981.2
The impact on profit from a proportional foreign exchange movement of 10.0% against the US dollar at year end
spot rates would be a decrease or increase of $0.3 million (31 December 2021: $0.2 million).
c. Liquidity risk
Liquidity risk is the risk that cash may not be available to pay obligations when they are due without incurring
unreasonable costs. Conduit's main exposure to liquidity risk is with respect to its reinsurance and investment activities.
Conduit is exposed if proceeds from the sale of financial assets are not sufficient to fund obligations arising from
reinsurance contacts and/or other liabilities. Conduit can be exposed to fund daily calls on its available investment
assets, principally to settle reinsurance claims and/or to fund trust accounts following a large catastrophe loss, or other
collateral requirements.
Liquidity risk exposures related to reinsurance activities are as follows:
\u2022
Large catastrophic events, or multiple medium-sized events in quick succession, requiring the payment of high value
claims within a short time frame or to fund trust accounts established to collateralise claims payment liabilities.
\u2022
Failure of cedants to meet their contractual obligations with respect to the timely payment of premiums.
\u2022
Failure of Conduit\u2019s ceded reinsurers to meet their contractual obligations to pay claims within a timely
manner.
Liquidity risk exposures related to investment activities are as follows:
\u2022
Adverse market movements and/or a duration mismatch to obligations, resulting in investments needing to be
disposed of at a significant realised loss.
\u2022
An inability to liquidate investments due to market conditions.
Conduit's investment strategy is to hold high quality, liquid securities sufficient to meet reinsurance liabilities and other
near-term liquidity requirements. Portfolios are specifically designed to ensure funds are readily available in an extreme
event.
The maturity dates of Conduit's portfolio of fixed maturity securities are as follows:
Short-tail
Long-tail
Total
As at 31 December 2022
$m
$m
$m
Fixed maturity securities at FVTPL
Less than one year
167.9
46.0
213.9
Between one and two years
149.5
37.0
186.5
Between two and three years
54.2
12.5
66.7
Between three and four years
15.8
48.8
64.6
Between four and five years
4.9
21.0
25.9
Over five years
20.1
110.9
131.0
Asset-backed and mortgage-backed
190.2
142.9
333.1
Total
602.6
419.1
1,021.7
Short-tail
Long-tail
Total
As at 31 December 2021
$m
$m
$m
Fixed maturity securities at FVTPL
Less than one year
43.8
1.5
45.3
Between one and two years
145.7
70.6
216.3
Between two and three years
144.5
39.1
183.6
Between three and four years
21.3
9.5
30.8
Between four and five years
11.0
57.2
68.2
Over five years
10.8
108.3
119.1
Asset-backed and mortgage-backed
191.6
153.5
345.1
Total
568.7
439.7
1,008.4
The estimated maturity profile of the reinsurance contracts and financial liabilities of Conduit is as follows:
Years until liability becomes due \u2013 undiscounted
Carrying
Less than
One to
Three to
value
one
three
five
Over five
Total
As at 31 December 2022
$m
$m
$m
$m
$m
$m
Losses and loss adjustment expenses
459.3
161.5
156.6
72.5
68.7
459.3
Other reinsurance payables
15.0
15.0
-
-
-
15.0
Amounts payable to reinsurers
16.2
16.2
-
-
-
16.2
Other payables
8.7
8.7
-
-
-
8.7
Lease liabilities
2.4
0.6
1.3
0.7
-
2.6
Total
501.6
202.0
157.9
73.2
68.7
501.8
Years until liability becomes due \u2013 undiscounted
Carrying
Less than
One to
Three to
value
one
three
five
Over five
Total
As at 31 December 2021
$m
$m
$m
$m
$m
$m
Losses and loss adjustment expenses
171.6
65.0
62.7
23.1
20.8
171.6
Amounts payable to reinsurers
7.3
7.3
-
-
-
7.3
Other payables
19.0
19.0
-
-
-
19.0
Lease liabilities
2.9
0.6
1.3
1.3
-
3.2
Total
200.8
91.9
64.0
24.4
20.8
201.1
Actual maturities of the above may differ from contractual maturities because certain borrowers have the right to call or
prepay certain obligations with or without call or prepayment penalties. The estimation of the ultimate liability for net
losses and loss adjustment expenses is complex and incorporates a significant amount of judgement. The timing of
payment of net losses and loss adjustment expenses is also uncertain and cannot be predicted as simply as for other
financial liabilities. Actuarial and statistical techniques, past experience and management\u2019s judgement have been used
to determine a likely settlement pattern.
As at 31 December 2022, cash and cash equivalents were $112.9 million (31 December 2021: $67.5 million). Conduit
manages its liquidity risks via its investment strategy to hold high quality, liquid securities, sufficient to meet its
reinsurance liabilities and other near-term liquidity requirements. In addition, Conduit has established asset allocation
and maturity parameters within the investment guidelines such that the majority of the investments are in high quality
assets which could be converted into cash promptly and at minimal expense. Conduit monitors market changes and
outlook and reallocates assets as it deems necessary.
As at 31 December 2022, Conduit considers it has more than adequate liquidity to pay its obligations as they fall due
even if difficult investment market conditions were to prevail for a period of time.
d. Credit risk
Credit risk is the risk that a counterparty may fail to pay, or repay, a debt or obligation. Conduit is exposed to credit risk
on its fixed maturity investment portfolio, its premiums receivable from cedants, and on any amounts recoverable from
reinsurers. While Conduit has not experienced any such collection issues, the COVID-19 pandemic increased the risk of
defaults across many industries. The global recovery from the COVID-19 pandemic continues and the risk that
counterparties fail to meet their financial obligations as they fall due has decreased.
Credit risk on Conduit\u2019s portfolio of fixed maturity securities is mitigated through the investment policy to invest in
instruments of high credit quality issuers and to limit the amounts of credit exposure with respect to particular ratings
categories and any one issuer. Securities rated below an S&P or equivalent rating of BBB+ may comprise no more
than 10.0% of the portfolio. Conduit also limits exposure to individual issuers, with declining limits for less highly rated
issuers. Conduit therefore does not expect any significant credit concentration risk on its investment portfolio, except
for fixed maturity securities issued by the US government and its agencies.
Conduit is potentially exposed to counterparty credit risk in relation to the premiums receivable from reinsurance
brokers and cedants and on any amounts recoverable from Conduit\u2019s ceded reinsurers. Given the dislocation in the
market, the COVID-19 pandemic may adversely impact the ability to collect amounts due to Conduit. Credit risk on
inwards premiums receivable from cedants is managed by conducting business with reputable broking organisations,
with whom Conduit has established relationships, and by rigorous cash collection procedures. Conduit also has a
broker approval process in place. Credit risk from ceded reinsurance recoverables is primarily managed by the review
and approval of reinsurer security, with ongoing monitoring in place.
The table below presents an analyses of Conduit\u2019s major exposures to counterparty credit risk, based on their
rating. Premiums receivable are not rated, however there is limited default risk associated with these amounts.
Cash and cash
Reinsurance
equivalents
recoverable
and fixed
Inward
and other
maturity
premiums
reinsurance
securities
receivables
receivables
As at 31 December 2022
$m
$m
$m
AAA
651.4
-
-
AA+, AA, AA-
74.5
-
-
A+, A, A-
279.7
-
59.5
BBB+, BBB, BBB-
129.0
-
-
Other
-
260.5
29.9
Total
1,134.6
260.5
89.4
Cash and cash
Reinsurance
equivalents
recoverable
and fixed
Inward
and other
maturity
premiums
reinsurance
securities
receivables
receivables
As at 31 December 2021
$m
$m
$m
AAA
542.4
-
-
AA+, AA, AA-
75.6
-
-
A+, A, A-
306.2
-
30.8
BBB+, BBB, BBB-
151.7
-
-
Other
-
155.0
18.4
Total
1,075.9
155.0
49.2
The reinsurance recoverable classified as other is fully collateralised.
As at 31 December 2022 the average credit quality of Conduit's cash and cash equivalents and portfolio
of fixed maturity securities was AA (31 December 2021: AA-). The COVID-19 pandemic has increased the risk of
defaults across many industries and Conduit continually monitors credit risk, especially during this time of volatility.
Given the investment portfolio positioning, this is not expected to have a meaningful impact from a credit perspective,
although credit spreads are likely to remain volatile in the near-term. Potential interest rate rises are similarly not
expected to impact inwards premiums receivable.
The following table shows premiums receivable that are not yet due and those that are past due but not
impaired:
2022
2021
As at 31 December
$m
$m
Not yet due
227.3
123.0
Less than 90 days past due
29.8
22.2
Other
3.4
9.8
Total
260.5
155.0
For the year ended 31 December 2022 and 2021 no provisions have been made for impaired or irrecoverable balances
and no amount was charged to the consolidated statement of comprehensive loss in respect of bad debts.
Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, personnel, systems or external
events. During the reporting period, which primarily involved the ongoing establishment of operations, various
operational risks were identified, and steps were taken to manage or mitigate these risks.
The risk framework addresses the identification, assessment and management of operational risks. This process
involves the use of risk registers to identify inherent risk and residual risk after the application of controls. The
management of individual risks is the responsibility of management, with independent challenge and oversight
provided by the risk function. The results of compliance reviews and independent internal audits provide an additional
level of review and verification. The Audit Committee has selected a reputable provider to serve as outsourced
internal auditors.
f. Strategic risk
Conduit has identified several strategic risks, including:
\u2022
The risks that either the poor execution of the business plan or an inappropriate business plan in itself results in a
strategy that fails to reflect adequately the trading environment, resulting in an inability to optimise performance,
including reputational risk.
\u2022
The risks of the failure to maintain adequate capital, accessing capital at an inflated cost or the inability to access
capital and unanticipated changes in vendor, regulatory and/or rating agency models that could result in an
increase in capital requirements or a change in the type of capital required.
\u2022
The risks of succession planning, staff retention and key personnel risks.
Business plan risk
Conduit's business plan forms the basis of operations and provides strategic direction to management.
Actual versus planned results are monitored regularly.
Capital management risk
The total tangible capital is as follows:
2022
2021
As at 31 December
$m
$m
Shareholders' equity
814.4
981.2
Intangible assets
1.4
1.1
Total tangible capital
813.0
980.1
Risks associated with the effectiveness of Conduit\u2019s capital management are mitigated as follows:
\u2022
Regular monitoring of current and prospective regulatory and rating agency capital requirements.
\u2022
Oversight of capital requirements by the Board.
\u2022
Ability to purchase sufficient, cost-effective reinsurance.
\u2022
Maintaining contact with vendors, regulators and rating agencies in order to stay abreast of upcoming
developments.
\u2022
Participation in industry groups such as the Association of Bermuda Insurers and Reinsurers, Reinsurance
Association of America and the International Underwriting Association.
Conduit reviews the level and composition of capital on an ongoing basis with a view of:
\u2022
Maintaining sufficient capital for underwriting opportunities and to meet obligations to policyholders;
\u2022
Maximising the risk-adjusted return to shareholders within the context of the defined risk appetite;
\u2022
Maintaining an adequate financial strength rating; and
\u2022
Meeting all relevant capital requirements.
Capital is increased or returned as appropriate. The retention of earnings generated leads to an increase in capital.
Capital raising can include debt or equity and returns of capital may be made through dividends, share repurchases, a
redemption of debt or any combination thereof. Other capital management tools and products available to Conduit
may also be utilised. All capital actions require approval by the Board.
The primary source of capital used by Conduit is equity shareholders\u2019 funds. As a holding company, CHL relies on
dividends from its operating entity to provide the cash flow required for dividends to shareholders. The ability of the
operating entity to pay dividends and make capital distributions is subject to the legal and regulatory restrictions of the
jurisdiction in which it operates.
CRL is regulated by the BMA and is required to monitor the ECR under the BMA\u2019s regulatory framework, which has
been assessed as equivalent to the EU\u2019s Solvency II regime. CRL\u2019s regulatory capital requirement is calculated using
the BSCR standard formula and minimum margin of solvency requirements. CRL had sufficient capital at all times
throughout the year to meet the BMA\u2019s requirements.
Retention risk
Risks associated with succession planning, staff retention and key man risks are mitigated through a
combination of resource planning processes and controls, including:
\u2022
The identification of key personnel with appropriate succession plans at CHL;
\u2022
The identification of key team profit generators at CRL and function heads with targeted retention
packages;
\u2022
Documented recruitment procedures, position descriptions and employment contracts;
\u2022
Resource monitoring and the provision of appropriate compensation, including equity-based incentives which vests
over a defined time horizon, subject to achieving certain performance criteria; and
\u2022
Training schemes.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f27559": { "value": "Market riskConduit is at risk of loss due to movements in market factors. The main market risks Conduit was exposed to include:\u2022Reinsurance risk;\u2022Investment risk;\u2022Currency risk.Reinsurance riskConduit is exposed to reinsurance market risk from several sources, including the following:\u2022The advent or continuation of a soft market, which may result in a stabilisation or decline in premium ratesand/or terms and conditions for certain classes, or across all classes.\u2022The actions and reactions of key competitors, which may directly result in volatility in premium volumes and rates,fee levels and other input costs.\u2022Market events, including unusual inflation in rates, may result in a limit in the availability of cover, causing politicalintervention or national remedies.\u2022Failure to maintain broker and cedant relationships, leading to a limited or substandard choice of risksinconsistent with Conduit\u2019s risk appetite.\u2022Changes in regulation including capital, governance or licensing requirements, and laws.\u2022Changes in the geopolitical environment.The most important method to mitigate reinsurance market risk is to maintain strict underwriting standards.Conduit manages reinsurance market risk in numerous ways, including the following:\u2022Reviews and amends underwriting plans and outlook as necessary.\u2022Reduces exposure to, or withdraws from, market sectors where conditions have reachedunattractive levels.\u2022Purchases appropriate, cost-effective reinsurance cover to mitigate exposures.\u2022Closely monitors changes in rates, terms and conditions, and inflation.Ensures through rigorous underwriting criteria that surplus capital does not drive short-term riskappetite.\u2022Typically holds a daily underwriting briefing meeting for CRL to discuss deal flow, pricing andopportunities.\u2022Holds a quarterly management Underwriting Oversight Committee meeting that considers matters that includeunderwriting performance for CRL.\u2022Holds an annual strategy review meeting.\u2022Holds a quarterly management Underwriting Committee meeting that considers matters includingunderwriting performance for CRL.\u2022Holds a quarterly management Risk, Capital and Compliance Committee meeting to review relevant risk and capitalconsiderations for CRL.\u2022Holds regular meetings with regulators and rating agencies.Reinsurance contract liabilities are currently not directly sensitive to the level of market interest rates, as they areundiscounted and contractually non-interest bearing.Investment riskMovements in investments resulting from changes in interest and inflation rates, credit spreads, and currency exchangerates, among other factors, may lead to an adverse impact on the value of Conduit\u2019s investment portfolio. Conduit seeksto invest in issuers with stronger ESG practices on balance, as it believes that this will also help reduce risk in theportfolio.The Investment Committee of CRL is responsible for all investment-related decisions and investment guidelines. Theinvestment guidelines set the parameters within which Conduit\u2019s external managers must operate. Important parametersof these guidelines include permissible asset classes, duration1 ranges, credit quality, permitted currency, maturity,industry sectors, geographical, sovereign and issuer exposures. Guideline compliance is monitored on a monthly basis.The portfolio of fixed maturity securities is currently managed by three external managers. Their performance ismonitored on an ongoing basis. Conduit projects the level of funds required to meet near-term obligations and cash flowneeds following extreme events in order to ensure adequate liquidity is maintained. Conduit also prioritises liquid assetclasses with higher credit quality and shorter duration so that Conduit can meet reinsurance and other near-termobligations. Conduit has split the portfolio into a short-tail mandate, to better match the property and specialty classes ofbusiness, and a long-tail mandate, to better match the casualty classes of business and some aspectsof the specialty classes of business. The short-tail mandate will be slightly shorter duration than the long-tailmandate.Conduit reviews the composition, duration and asset allocation of its investment portfolio on a regular basis to respondto changes in interest rates and other market conditions. If certain asset classes are anticipated to produce a higherreturn within management\u2019s risk tolerance, an adjustment in asset allocation may be made. Conversely, if the risk profileis expected to move outside of tolerance levels, adjustments may be made to reduce the risks in the portfolio.Conduit models various periods of significant stress in order to better understand the investment portfolio\u2019s risks andexposures. The scenarios represent what could, and most likely will, occur \u2013 albeit not in the exact form of thescenarios, which are based on historic periods of volatility. Conduit also monitors the portfolio impact of more severescenarios consisting of extreme shocks.Conduit focuses on the most significant risks in its investment portfolio which are interest rate risk, credit risk andliquidity risk, and has built, or is building, stress testing and risk analytics around these risks to ensure they are withintolerances and preferences.1.Duration is the weighted average maturity of a security's cash flows, where the present values of the cash flows serve as the weights. The effect of convexity, orsensitivity, of the portfolio's response to changes in interest rates is also factored in to the calculation.Strategic asset allocation reviews will be undertaken periodically to assess Conduit\u2019s overall investment strategy and toconsider alternative asset allocations to achieve the best risk-adjusted return within Conduit's risk appetite. Any resultingrecommendations would be approved by the appropriate management committee(s) and reported to the Board. TheInvestment Committee met quarterly to ensure that the strategic and tactical investment actions were consistent withinvestment risk preferences, appetite, risk and return objectives and tolerances. The investment risk tolerances havebeen incorporated into the ERM framework.The investment mix by mandate and sector of Conduit's portfolio of fixed maturity securities is as follows:EstimatedEstimatedEstimatedfair valuefair valuefair valueshort-taillong-tailtotalAs at 31 December 2022$m$m$mShort-term investments33.24.737.9US treasuries103.6106.6210.2US agency debt-1.81.8US municipals10.05.215.2Non-US government and agency2.0-2.0Asset-backed102.661.2163.8US government agency mortgage-backed52.747.9100.6Non-agency mortgage-backed9.83.012.8Agency commercial mortgage-backed3.2-3.2Non-agency commercial mortgage-backed21.930.852.7Corporate263.6157.9421.5Total602.6419.11,021.7EstimatedEstimatedEstimatedfair valuefair valuefair valueshort-taillong-tailtotalAs at 31 December 2021$m$m$mShort-term investments8.9-8.9US treasuries52.4119.4171.8US agency debt-2.02.0US municipals11.02.213.2Non-US government and agency2.2-2.2Asset-backed97.372.4169.7US government agency mortgage-backed53.241.494.6Non-agency mortgage-backed13.65.619.2Agency commercial mortgage-backed3.2-3.2Non-agency commercial mortgage-backed24.334.158.4Corporate302.6162.6465.2Total568.7439.71,008.4Corporate and non-US government and agency bonds by country are as follows:Non-USOthergovernmentFinancialsindustriesand agencyTotalAs at 31 December 2022$m$m$m$mUS140.6187.7-328.3UK21.75.5-27.2Canada23.20.5-23.7Other countries35.46.92.044.3Total220.9200.62.0423.5Non-USOthergovernmentFinancialsindustriesand agencyTotalAs at 31 December 2021$m$m$m$mUS153.5214.8-368.3UK22.17.4-29.5Canada23.30.6-23.9Other countries37.65.92.245.7Total236.5228.72.2467.4The sector allocation of corporate bonds is as follows:20222021As at 31 December$m%$m%Financials220.952.4236.550.9Industrials180.342.8209.545.0Utilities20.34.819.24.1Total421.5100.0465.2100.0Conduit\u2019s investment portfolio is comprised of fixed maturity securities and cash and cash equivalents. Fair values canbe impacted by movements in interest rates, credit ratings, exchange rates, the current economic environment andoutlook. The estimated fair value of the portfolio of fixed maturity securities is generally inversely correlated tomovements in market interest rates. If market interest rates fall, the estimated fair value of Conduit\u2019s portfolio of fixedmaturity securities would tend to rise and vice versa. The sensitivity of the price of fixed maturity securities to movementsin interest rates is indicated by their duration. The greater a security\u2019s duration, the greater its price volatility tomovements in interest rates. The sensitivity of Conduit\u2019s portfolio of fixed maturity securities to interest rate movementsis detailed below, assuming linear movements in interest rates.20222021As at 31 December$m%$m%Immediate shift in yield (basis points)100(23.0)(2.2)(27.7)(2.7)75(17.2)(1.7)(20.8)(2.1)50(11.5)(1.1)(13.9)(1.4)25(5.7)(0.6)(6.9)(0.7)0-----256.60.65.70.6-5013.21.311.51.1-7519.71.917.21.7-10026.32.622.92.3Conduit mitigates interest rate risk on the investment portfolio by establishing and monitoring duration ranges in itsinvestment guidelines. The duration of the portfolio is matched to the modelled expected duration of the reinsurancereserves, within a permitted range. The permitted duration range for the portfolio is between 1.5 and 5 years. Theoverall duration for the fixed maturity securities, managed cash and cash equivalents is 2.2 years as at 31December 2022 (31 December 2021: 2.4 years).In addition to duration management, Conduit monitors VaR to measure potential losses in the estimated fair values of itscash and invested assets and to understand and monitor risk. The VaR calculation is performed usingvariance/covariance risk modelling. Securities are valued individually using standard market pricing models. Thesesecurity valuations serve as the input to many risk analytics. The principal VaR measure that is produced is an annualVaR at the 99th percentile confidence level. Under normal conditions, the portfolio is not expected to lose more than theVaR metric listed below, 99% of the time over a one-year time horizon. The appropriateness of this measure isconsidered by the Investment Committee periodically.Conduit\u2019s annual VaR calculation is as follows:20222021% of% ofshareholders'shareholders'As at 31 December$mequity$mequity99th percentile confidence level62.07.630.23.1Currency riskConduit is susceptible to fluctuations in rates of foreign exchange, principally between the US dollar and poundsterling and the US dollar and the euro. Even though risks are assumed on a worldwide basis, they arepredominantly denominated in US dollars. Conduit is exposed to currency risk to the extent its assets aredenominated in different currencies to its liabilities. Conduit is also exposed to translation risk on non-monetaryassets such as unearned premiums and deferred acquisition costs. Foreign currency gains and losses are recordedin the period they occur in the consolidated statement of comprehensive loss.Conduit hedges monetary non-US dollar liabilities primarily with non-US dollar assets but may also use derivatives,such as currency forwards, to mitigate foreign currency exposures. The main foreign currency exposure relates to itsreinsurance obligations, cash holdings, premiums receivable and dividend payable, if applicable.The following table summarises the carrying value of total assets and total liabilities categorised byConduit\u2019s main currencies:USDGBPEUROtherTotalAs at 31 December 2022$m$m$m$m$mTotal assets1,515.926.124.22.21,568.4Total liabilities(691.3)(9.1)(44.9)(8.7)(754.0)Net assets (liabilities)824.617.0(20.7)(6.5)814.4USDGBPEUROtherTotalAs at 31 December 2021$m$m$m$m$mTotal assets1,318.06.49.31.11,334.8Total liabilities(331.8)(2.8)(17.1)(1.9)(353.6)Net assets (liabilities)986.23.6(7.8)(0.8)981.2The impact on profit from a proportional foreign exchange movement of 10.0% against the US dollar at year endspot rates would be a decrease or increase of $0.3 million (31 December 2021: $0.2 million).", "dimensions": { "concept": "ifrs-full:DisclosureOfMarketRiskExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f29469": { "value": "Liquidity riskLiquidity risk is the risk that cash may not be available to pay obligations when they are due without incurringunreasonable costs. Conduit's main exposure to liquidity risk is with respect to its reinsurance and investment activities.Conduit is exposed if proceeds from the sale of financial assets are not sufficient to fund obligations arising fromreinsurance contacts and/or other liabilities. Conduit can be exposed to fund daily calls on its available investmentassets, principally to settle reinsurance claims and/or to fund trust accounts following a large catastrophe loss, or othercollateral requirements.Liquidity risk exposures related to reinsurance activities are as follows:\u2022Large catastrophic events, or multiple medium-sized events in quick succession, requiring the payment of high valueclaims within a short time frame or to fund trust accounts established to collateralise claims payment liabilities.\u2022Failure of cedants to meet their contractual obligations with respect to the timely payment of premiums.\u2022Failure of Conduit\u2019s ceded reinsurers to meet their contractual obligations to pay claims within a timelymanner.Liquidity risk exposures related to investment activities are as follows:\u2022Adverse market movements and/or a duration mismatch to obligations, resulting in investments needing to bedisposed of at a significant realised loss.\u2022An inability to liquidate investments due to market conditions.Conduit's investment strategy is to hold high quality, liquid securities sufficient to meet reinsurance liabilities and othernear-term liquidity requirements. Portfolios are specifically designed to ensure funds are readily available in an extremeevent.The maturity dates of Conduit's portfolio of fixed maturity securities are as follows:Short-tailLong-tailTotalAs at 31 December 2022$m$m$mFixed maturity securities at FVTPLLess than one year167.946.0213.9Between one and two years149.537.0186.5Between two and three years54.212.566.7Between three and four years15.848.864.6Between four and five years4.921.025.9Over five years20.1110.9131.0Asset-backed and mortgage-backed190.2142.9333.1Total602.6419.11,021.7Short-tailLong-tailTotalAs at 31 December 2021$m$m$mFixed maturity securities at FVTPLLess than one year43.81.545.3Between one and two years145.770.6216.3Between two and three years144.539.1183.6Between three and four years21.39.530.8Between four and five years11.057.268.2Over five years10.8108.3119.1Asset-backed and mortgage-backed191.6153.5345.1Total568.7439.71,008.4The estimated maturity profile of the reinsurance contracts and financial liabilities of Conduit is as follows:Years until liability becomes due \u2013 undiscountedCarryingLess thanOne toThree tovalueonethreefiveOver fiveTotalAs at 31 December 2022$m$m$m$m$m$mLosses and loss adjustment expenses459.3161.5156.672.568.7459.3Other reinsurance payables15.015.0---15.0Amounts payable to reinsurers16.216.2---16.2Other payables8.78.7---8.7Lease liabilities2.40.61.30.7-2.6Total501.6202.0157.973.268.7501.8Years until liability becomes due \u2013 undiscountedCarryingLess thanOne toThree tovalueonethreefiveOver fiveTotalAs at 31 December 2021$m$m$m$m$m$mLosses and loss adjustment expenses171.665.062.723.120.8171.6Amounts payable to reinsurers7.37.3---7.3Other payables19.019.0---19.0Lease liabilities2.90.61.31.3-3.2Total200.891.964.024.420.8201.1Actual maturities of the above may differ from contractual maturities because certain borrowers have the right to call orprepay certain obligations with or without call or prepayment penalties. The estimation of the ultimate liability for netlosses and loss adjustment expenses is complex and incorporates a significant amount of judgement. The timing ofpayment of net losses and loss adjustment expenses is also uncertain and cannot be predicted as simply as for otherfinancial liabilities. Actuarial and statistical techniques, past experience and management\u2019s judgement have been usedto determine a likely settlement pattern.As at 31 December 2022, cash and cash equivalents were $112.9 million (31 December 2021: $67.5 million). Conduitmanages its liquidity risks via its investment strategy to hold high quality, liquid securities, sufficient to meet itsreinsurance liabilities and other near-term liquidity requirements. In addition, Conduit has established asset allocationand maturity parameters within the investment guidelines such that the majority of the investments are in high qualityassets which could be converted into cash promptly and at minimal expense. Conduit monitors market changes andoutlook and reallocates assets as it deems necessary.As at 31 December 2022, Conduit considers it has more than adequate liquidity to pay its obligations as they fall dueeven if difficult investment market conditions were to prevail for a period of time.", "dimensions": { "concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f30435": { "value": "Credit risk
Credit risk is the risk that a counterparty may fail to pay, or repay, a debt or obligation. Conduit is exposed to credit risk
on its fixed maturity investment portfolio, its premiums receivable from cedants, and on any amounts recoverable from
reinsurers. While Conduit has not experienced any such collection issues, the COVID-19 pandemic increased the risk of
defaults across many industries. The global recovery from the COVID-19 pandemic continues and the risk that
counterparties fail to meet their financial obligations as they fall due has decreased.
Credit risk on Conduit\u2019s portfolio of fixed maturity securities is mitigated through the investment policy to invest in
instruments of high credit quality issuers and to limit the amounts of credit exposure with respect to particular ratings
categories and any one issuer. Securities rated below an S&P or equivalent rating of BBB+ may comprise no more
than 10.0% of the portfolio. Conduit also limits exposure to individual issuers, with declining limits for less highly rated
issuers. Conduit therefore does not expect any significant credit concentration risk on its investment portfolio, except
for fixed maturity securities issued by the US government and its agencies.
Conduit is potentially exposed to counterparty credit risk in relation to the premiums receivable from reinsurance
brokers and cedants and on any amounts recoverable from Conduit\u2019s ceded reinsurers. Given the dislocation in the
market, the COVID-19 pandemic may adversely impact the ability to collect amounts due to Conduit. Credit risk on
inwards premiums receivable from cedants is managed by conducting business with reputable broking organisations,
with whom Conduit has established relationships, and by rigorous cash collection procedures. Conduit also has a
broker approval process in place. Credit risk from ceded reinsurance recoverables is primarily managed by the review
and approval of reinsurer security, with ongoing monitoring in place.
The table below presents an analyses of Conduit\u2019s major exposures to counterparty credit risk, based on their
rating. Premiums receivable are not rated, however there is limited default risk associated with these amounts.
Cash and cash
Reinsurance
equivalents
recoverable
and fixed
Inward
and other
maturity
premiums
reinsurance
securities
receivables
receivables
As at 31 December 2022
$m
$m
$m
AAA
651.4
-
-
AA+, AA, AA-
74.5
-
-
A+, A, A-
279.7
-
59.5
BBB+, BBB, BBB-
129.0
-
-
Other
-
260.5
29.9
Total
1,134.6
260.5
89.4
Cash and cash
Reinsurance
equivalents
recoverable
and fixed
Inward
and other
maturity
premiums
reinsurance
securities
receivables
receivables
As at 31 December 2021
$m
$m
$m
AAA
542.4
-
-
AA+, AA, AA-
75.6
-
-
A+, A, A-
306.2
-
30.8
BBB+, BBB, BBB-
151.7
-
-
Other
-
155.0
18.4
Total
1,075.9
155.0
49.2
The reinsurance recoverable classified as other is fully collateralised.
As at 31 December 2022 the average credit quality of Conduit's cash and cash equivalents and portfolio
of fixed maturity securities was AA (31 December 2021: AA-). The COVID-19 pandemic has increased the risk of
defaults across many industries and Conduit continually monitors credit risk, especially during this time of volatility.
Given the investment portfolio positioning, this is not expected to have a meaningful impact from a credit perspective,
although credit spreads are likely to remain volatile in the near-term. Potential interest rate rises are similarly not
expected to impact inwards premiums receivable.
The following table shows premiums receivable that are not yet due and those that are past due but not
impaired:
2022
2021
As at 31 December
$m
$m
Not yet due
227.3
123.0
Less than 90 days past due
29.8
22.2
Other
3.4
9.8
Total
260.5
155.0
For the year ended 31 December 2022 and 2021 no provisions have been made for impaired or irrecoverable balances
and no amount was charged to the consolidated statement of comprehensive loss in respect of bad debts.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f31251": { "value": "4. Segmental reportingManagement and the Board review Conduit\u2019s business and evaluates its performance primarily by three segments:Property, Casualty and Specialty. These are considered to be the reportable segments for the purposes ofsegmental reporting. Further classes of business are underwritten within each reportable segment. The nature ofthese individual classes is discussed further in the \u201cRisk disclosures\u201d section.Reportable segmentsOperations and classes of businessPropertyUS and international property risk on an excess of loss and proportional contract basis.CasualtyUS and international casualty risk principally including directors and officers, financialinstitutions, general, medical malpractice, professional and transactional.SpecialtyDiverse portfolio of business, principally including aviation, energy, marine, political violenceand terrorism and whole account.Reportable segment performance is measured by the net underwriting profit or loss and the combined ratio. The chiefoperating decision maker does not manage Conduit's assets by reportable segment, and, accordingly, investmentincome and other non-underwriting related items are not allocated to each reportable segment. Refer to the riskdisclosures for more information.All amounts reported are transactions with external parties and associates. There are no significant inter-segmentaltransactions.PropertyCasualtySpecialtyTotalAs at 31 December 2022$m$m$m$mGross premiums written by geographic regionUS174.7171.98.7355.3Worldwide93.529.081.2203.7Europe16.333.310.259.8Other15.12.51.118.7Total299.6236.7101.2637.5Ceded reinsurance premiums(46.3)(1.3)(9.0)(56.6)Net premiums written253.3235.492.2580.9Change in unearned premiums(43.6)(40.1)(15.9)(99.6)Change in unearned premiums on premiums ceded0.90.1-1.0Net premiums earned210.6195.476.3482.3Net insurance losses and loss adjustment expenses(140.0)(129.0)(76.9)(345.9)Net insurance acquisition expenses(55.5)(63.0)(17.6)(136.1)Net underwriting profit (loss)15.13.4(18.2)0.3Other operating expenses(34.3)Net unallocated revenue / expenses(55.7)Total comprehensive loss(89.7)Net loss ratio66.5%66.0%100.8%71.7%Net acquisition expense ratio26.4%32.2%23.1%28.2%Other operating expense ratio7.1%Combined ratio92.9%98.2%123.9%107.0%PropertyCasualtySpecialtyTotalAs at 31 December 2021$m$m$m$mGross premiums written by geographic regionUS105.4118.73.9228.0Worldwide62.37.162.3131.7Europe6.02.8-8.8Other9.70.40.210.3Total183.4129.066.4378.8Ceded reinsurance premiums(26.4)(1.2)(5.0)(32.6)Net premiums written157.0127.861.4346.2Change in unearned premiums(60.0)(67.9)(24.9)(152.8)Change in unearned premiums on premiums ceded-0.8-0.8Net premiums earned97.060.736.5194.2Net insurance losses and loss adjustment expenses(70.9)(41.1)(30.1)(142.1)Net insurance acquisition expenses(30.5)(19.7)(8.9)(59.1)Net underwriting loss(4.4)(0.1)(2.5)(7.0)Other operating expenses(30.6)Net unallocated revenue / expenses(4.4)Total comprehensive loss(42.0)Net loss ratio73.1%67.7%82.5%73.2%Net acquisition expense ratio31.4%32.5%24.4%30.4%Other operating expense ratio15.8%Combined ratio104.5%100.2%106.9%119.4%Included within the other geographic region, are premiums written with external parties in Bermuda for $0.6 million(31 December 2021: $0.4 million).", "dimensions": { "concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f31252": { "value": "4. Segmental reportingManagement and the Board review Conduit\u2019s business and evaluates its performance primarily by three segments:Property, Casualty and Specialty. These are considered to be the reportable segments for the purposes ofsegmental reporting. Further classes of business are underwritten within each reportable segment. The nature ofthese individual classes is discussed further in the \u201cRisk disclosures\u201d section.Reportable segmentsOperations and classes of businessPropertyUS and international property risk on an excess of loss and proportional contract basis.CasualtyUS and international casualty risk principally including directors and officers, financialinstitutions, general, medical malpractice, professional and transactional.SpecialtyDiverse portfolio of business, principally including aviation, energy, marine, political violenceand terrorism and whole account.Reportable segment performance is measured by the net underwriting profit or loss and the combined ratio. The chiefoperating decision maker does not manage Conduit's assets by reportable segment, and, accordingly, investmentincome and other non-underwriting related items are not allocated to each reportable segment. Refer to the riskdisclosures for more information.All amounts reported are transactions with external parties and associates. There are no significant inter-segmentaltransactions.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSegmentReportingExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f32415": { "value": "5. Investment returnNetNetNetrealisedunrealisedTotalinvestmentgains /gains /investmentincome(losses)(losses)returnAs at 31 December 2022$m$m$m$mFixed maturity securities16.5(2.8)(67.8)(54.1)Cash and cash equivalents1.3--1.3Total17.8(2.8)(67.8)(52.8)NetNetNetrealisedunrealisedTotalinvestmentgains /gains /investmentincome(losses)(losses)returnAs at 31 December 2021$m$m$m$mFixed maturity securities5.3(1.0)(7.6)(3.3)Cash and cash equivalents0.2--0.2Total5.5(1.0)(7.6)(3.1)Included in net investment income is $1.1 million of investment management and custody fees for the year ended 31December 2022 (31 December 2021: $0.7 million).", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExpenseExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f32823": { "value": "7. Employee benefits and other incentivesAggregate remuneration and other incentives of Conduit\u2019s employees is as follows:20222021Year ended 31 December$m$mWages and salaries11.47.5Pension benefit1.10.8Bonus and other benefits7.710.4Total cash compensation20.218.7Equity-based incentives2.10.3Total employee benefits and other incentives22.319.0Equity-based incentives \u2013 MIPPrior to the IPO, a MIP was created. The purpose of the MIP was to provide an incentive scheme for the founders andinitial employees for their services in building the foundations of Conduit. The incentive is based around shares in CML,which will be automatically exchanged for ordinary shares of CHL for an aggregate value equivalent to up to 15% of theexcess of the market value of CHL over and above the Invested Equity, subject to the satisfaction of the vestingconditions. All outstanding and future grants have an exercise period of four to seven years from the grant date. The fairvalue is estimated using a stochastic Monte Carlo model.CML issued 100,000 A1 shares and 100,000 A2 shares during the period ended 31 December 2020 at asubscription price of \u00a31.72 and $2.26, respectively. Refer to note 18 for additional details.The following table lists the assumptions used in the stochastic model for the MIP awards:Year ended 31Year ended 31AssumptionsDecember 2022December 2021Dividend yield0%0%Expected volatility1range fromrange from17.2% \u2013 19.0%17.2% \u2013 19.0%Risk-free interest rate2range fromrange from0.3% \u2013 0.6%0.3% \u2013 0.6%Expected life of instrumentsrange from 4 to 7range from 4 to 7yearsyears1.The expected volatility was calculated based on a comparator group of companies.2.The risk-free interest rate is based on the yield on a US government bond on the date of grant.The shares were granted prior to the IPO and therefore discounts for business viability and lack of marketability werealso applied. There are significant risks associated with an IPO and the instruments are also illiquid until the tranchevesting dates. Management therefore selected their best estimates at the time for these discounts. These assumptionswere highly judgemental and input from advisors was sought. Management also considered alternative assumptions andconcluded there was not a material impact on the estimated valuation selected. The calculation of the equity-basedincentive expense assumes no forfeituresdue to employee turnover, with subsequent adjustments to reflect actual experience. The assumptions and estimatedvaluation selected resulted in 20% being expensed upfront for certain employees as this portion was not tied to serviceconditions and was fully expensed in the period ended 31 December 2020.Conditions of the MIP include:\u2022The incentives are to be equity-settled and have therefore been accounted for in accordance with IFRS 2.\u2022The value of the services received in exchange for the share-based incentives is measured by reference to theestimated fair value of the incentives at their grant date, with the estimated fair value recognised in theconsolidated statement of comprehensive loss, together with a corresponding increase in other reserves withinshareholders\u2019 equity, on a straight-line basis over the vesting period, based on an estimate of the number of sharesthat will ultimately vest.\u2022Vesting conditions, other than market conditions linked to the share price of CHL, are not taken into accountwhen estimating the fair value.\u2022At the end of each reporting period Conduit revises its estimates of the number of shares that are expected to vestdue to non-market conditions and recognises the impact of the revision to original estimates, if any, in theconsolidated statement of comprehensive loss, with a corresponding adjustment to shareholders\u2019 equity.Equity-based incentives \u2013 DSBPA percentage of each employee's bonus is automatically deferred into shares as nil cost options. The nil cost optionsvest annually in separate equal tranches over a three year period from the date of grant and do not have associatedperformance criteria attached to the awards. These awards accrue dividend equivalents for all dividends declared wherethe record date falls between the grant date and date of exercise, and are paid at the time of exercise.Number ofDSBPawardsOutstanding as at 31 December 2021-Granted764,575Forfeited(11,559)Outstanding as at 31 December 2022753,016", "dimensions": { "concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f33211": { "value": "8. Other operating expenses20222021Year ended 31 December$m$mResults of operating activities are stated after charging the following amounts:Audit fees0.90.8Other auditor services0.10.1Total1.00.9During the year ended 31 December 2022, KPMG Audit Limited provided non-audit services in relation to Conduit's2022 interim review. Fees for non-audit services in the year ended 31 December 2022 totalled $0.1 million (31December 2021: $0.1 million).", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f33295": { "value": "9. Financing costs20222021Year ended 31 December$m$mLOC and trust fees0.70.4Interest expense on lease liabilities0.10.1Total0.80.5Refer to note 17 for details of Conduit\u2019s financing arrangements.", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceCostExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f33395": { "value": "TaxBermudaCHL, CSL, CML and CRL have received an undertaking from the Bermuda government exempting them from allBermuda local income, withholding and capital gains taxes until 31 March 2035. At the present time no such taxes arelevied in Bermuda.United KingdomCRSL is subject to normal UK corporation tax on all of its taxable profits. For the year ended 31 December 2022 and2021 an immaterial tax profit arose.", "dimensions": { "concept": "ifrs-full:DisclosureOfTaxReceivablesAndPayablesExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f33417": { "value": "11. Cash and cash equivalents20222021As at 31 December$m$mCash at bank and in hand21.524.4Cash equivalents91.443.1Total112.967.5Cash equivalents include money market funds and other short-term highly liquid investments with three months orless remaining until maturity at the time of purchase. The carrying amount of these assets approximates their fairvalue. Refer to note 17 for cash and cash equivalents provided as collateral under Conduit\u2019s financingarrangements.", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f33496": { "value": "12. InvestmentsCost oramortisedUnrealisedUnrealisedEstimatedcostgainslossesfair valueAs at 31 December 2022$m$m$m$mFixed maturity securities, at FVTPLShort-term investments37.9--37.9US treasuries221.60.2(11.6)210.2US agency debt2.0-(0.2)1.8US municipals16.4-(1.2)15.2Non-US government and agency2.1-(0.1)2.0Asset-backed171.6-(7.8)163.8US government agency mortgage-backed116.30.1(15.8)100.6Non-agency mortgage-backed15.1-(2.3)12.8Agency commercial mortgage-backed3.7-(0.5)3.2Non-agency commercial mortgage-backed59.7-(7.0)52.7Corporate450.70.1(29.3)421.5Total1,097.10.4(75.8)1,021.7Cost oramortisedUnrealisedUnrealisedEstimatedcostgainslossesfair valueAs at 31 December 2021$m$m$m$mFixed maturity securities, at FVTPLShort-term investments8.9--8.9US treasuries172.9-(1.1)171.8US agency debt2.0-2.0US municipals13.4-(0.2)13.2Non-US government and agency2.2--2.2Asset-backed170.30.1(0.7)169.7US government agency mortgage-backed95.5-(0.9)94.6Non-agency mortgage-backed19.4-(0.2)19.2Agency commercial mortgage-backed3.2--3.2Non-agency commercial mortgage-backed59.0-(0.6)58.4Corporate469.20.2(4.2)465.2Total1,016.00.3(7.9)1,008.4As at 31 December 2022 other assets and other payables included $1.2 million and $1.2 million for investmentssold and purchased, respectively (31 December 2021: nil and $10.6 million, respectively).Conduit determines the estimated fair value of each individual security utilising the highest-level inputs available. Pricesfor the investment portfolio are provided via a third-party investment accounting firm whose pricing processes and thecontrols thereon are subject to an annual audit on both the operation and the effectiveness of those controls. Variousrecognised reputable pricing sources are used including pricing vendors. The pricing sources use bid prices whereavailable, otherwise indicative prices are quoted based on observable market trade data. The prices provided arecompared to the investment managers\u2019 pricing.Conduit has not made any adjustments to any pricing provided by independent pricing services or its third-partyinvestment managers for the year ended 31 December 2022 and 2021. The fair value of securities in the investmentportfolio is estimated using the following techniques:LEVEL (I) \u2013 Level (I) investments are securities with quoted prices in active markets. A financial instrument is regardedas quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker,industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring markettransactions on an arm\u2019s length basis.LEVEL (II) \u2013 Level (II) investments are securities with quoted prices in active markets for similar assets or liabilities orsecurities valued using other valuation techniques for which all significant inputs are based on observable market data.Instruments included in Level (II) are valued via independent external sources using directly observable inputs to modelsor other valuation methods. The valuation methods used are typically industry accepted standards and include broker-dealer quotes and pricing models including present values and future cash flows with inputs such as yield curves, creditspreads, interest rates, prepayment speeds and default rates.LEVEL (III) \u2013 Level (III) investments are securities for which valuation techniques are not based onobservable market data and require significant management judgement.Conduit determines whether transfers have occurred between levels of the fair value hierarchy by re-assessing thecategorisation at the end of each reporting period. Transfers from Level (I) to (II) securities amounted to $76.2 millionand transfers from Level (II) to (I) securities amounted to $37.8 million during the year ended 31 December 2022 usingend of current period positions and estimated fair values. There were no investments included in Level (III). There wereno transfers between Level (I) and (II), and no investments were included in Level (III) during the year ended 31December 2021.The fair value hierarchy of Conduit's investment portfolio is as follows:Level ILevel IITotalAs at 31 December 2022$m$m$mFixed maturity securities, at FVTPLShort-term investments37.9-37.9US treasuries210.2-210.2US agency debt-1.81.8US municipals-15.215.2Non-US government and agency-2.02.0Asset-backed-163.8163.8US government agency mortgage-backed-100.6100.6Non-agency mortgage-backed-12.812.8Agency commercial mortgage-backed-3.23.2Non-agency commercial mortgage-backed-52.752.7Corporate51.3370.2421.5Total299.4722.31,021.7Level ILevel IITotalAs at 31 December 2021$m$m$mFixed maturity securities, at FVTPLShort-term investments3.15.88.9US treasuries171.8-171.8US agency debt-2.02.0US municipals-13.213.2Non-US government and agency-2.22.2Asset-backed-169.7169.7US government agency mortgage-backed-94.694.6Non-agency mortgage-backed-19.219.2Agency commercial mortgage-backed-3.23.2Non-agency commercial mortgage-backed-58.458.4Corporate117.1348.1465.2Total292.0716.41,008.4Refer to note 17 for investments provided as collateral under Conduit\u2019s financing arrangements.", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f34638": { "value": "13. Interests in structured entitiesUnconsolidated structured entities in which Conduit has an interestAs part of Conduit\u2019s investment activities, it invests in unconsolidated structured entities. Conduit does not sponsor anyof the unconsolidated structured entities. The business relations of Conduit with the structured entities set out below donot give rise to consolidation because the criteria for control pursuant to IFRS 10, as contained in our consolidationprinciples, are not met.A summary of interests in unconsolidated structured entities is as follows:20222021As at 31 December$m$mFixed maturity securities, at FVTPLAsset-backed163.8169.7US government agency mortgage-backed100.694.6Non-agency mortgage-backed12.819.2Agency commercial mortgage-backed3.23.2Non-agency commercial mortgage-backed52.758.4Total333.1345.1The fixed maturity structured entities are used to meet specific investment needs of borrowers and investors whichcannot be met from standardised financial instruments available in the capital markets, providing liquidity anddiversification. While individual securities may differ in structure, the principles of the instruments are similar and itis appropriate to aggregate the investments into the categories detailed above.The risk that Conduit faces in respect of the investments in structured entities is similar to the risk it faces in respect ofother financial investments held on the consolidated balance sheet. Fair value is determined by market supply anddemand, which is driven by investor evaluation of the credit risk of the structure and changes in the term structure ofinterest rates which can change the expectation of cash flows associated with the instrument and, therefore, its valuein the market.The maximum exposure to loss in respect of these structured entities would be the carrying value of the instrumentsthat Conduit holds. Generally, default rates would have to increase substantially before Conduit would suffer a loss. Thisassessment is made prior to investing and regularly through the holding period for the security.Refer to note 17 for investments provided as collateral under Conduit\u2019s financing arrangements.", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestsInOtherEntitiesExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f35552": { "value": "15. Right-of-use lease assetsRight-of-use lease assets primarily relate to leased properties for Conduit's offices in Bermuda and office equipment.Conduit has not received any rent concessions as a result of COVID-19.Right-of-use assets$mBalance and net book value as at 1 January 2021-Additions3.0Depreciation(0.1)Balance and net book value as at 31 December 20212.9Depreciation(0.7)Balance and net book value as at 31 December 20222.2Lease liabilities20222021As at 31 December$m$mLess than one year0.60.6Between one and five years2.02.6Total undiscounted lease liabilities2.63.2The discounted lease liability as at 31 December 2022 was $2.4 million (31 December 2021: $2.9 million).Conduit does not face significant liquidity risk with respect to its lease liabilities.Amounts recognised in the consolidated financial statements20222021Year ended 31 December$m$mConsolidated statement of comprehensive lossInterest expense on lease liabilities0.10.1Depreciation of right-of-use assets0.70.1Total0.80.2Consolidated statement of cash flowsLease payments0.60.1", "dimensions": { "concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f35870": { "value": "16. Intangible assetsIntangible assets are comprised of computer software capitalised on the basis of the costs incurred to acquire andbring into use the specific software. Computer software is a technological asset and subject to obsolescence, thereforemanagement expects to utilise the asset over its remaining useful life of 11 years.Cost$mNet book value as at 31 December 20200.2Additions0.9Net book value as at 31 December 20211.1Additions0.3Net book value as at 31 December 20221.4", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f36056": { "value": "18. Share capitalAuthorised share capitalNumber$mAuthorised common shares of $0.01 each10,000,000,000100.0Authorised A1 shares of \u00a30.01 each100,000-Authorised A2 shares of $0.01 each100,000-As at 31 December 2022 and 202110,000,200,000100.0CommonsharesA1 sharesA2 sharesTotalTotalAllotted, called-up and fully paidnumbernumbernumbernumber$mIssued165,239,997100,000100,000165,439,9971.7As at 31 December 2022 and 2021165,239,997100,000100,000165,439,9971.7The number of common shares in issue with voting rights (allocated capital less own shares held) as at 31 December2022 was 160,141,174 (31 December 2021: 165,207,174).CHL holds 18,000 A1 and A2 shares at 31 December 2022 and 2021. The A1 and A2 shares have no voting rightsattached. Subject to vesting conditions, discussed in note 7, the A1 and A2 shares will be automatically exchanged forordinary shares of CHL.", "dimensions": { "concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f36316": { "value": "Own sharesNumber heldNumber heldTotal numberTotalOwn sharesin treasury$min trust$mof own shares$mAs at 31December 2020------Repurchased(32,823)(0.2)--(32,823)(0.2)As at 31December 2021(32,823)(0.2)--(32,823)(0.2)Repurchased(725,000)(3.4)--(725,000)(3.4)Purchased by EBT--(4,341,000)(16.5)(4,341,000)(16.5)As at 31December 2022(757,823)(3.6)(4,341,000)(16.5)(5,098,823)(20.1)Shares repurchased by CHL and the EBT will be held as own shares to meet future obligations under CHL\u2019s variableincentive schemes. See note 22 for information on shares held by the EBT.", "dimensions": { "concept": "ifrs-full:DisclosureOfTreasurySharesExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f36624": { "value": "DividendsRecord datePayment datePer share $$mInterim 202120August 202110September 20210.1829.7Final 202125 March 202222 April 20220.1829.7Interim 202219August 20229September 20220.1829.6See note 23 for information with respect to dividends declared subsequent to 31 December 2022.", "dimensions": { "concept": "ifrs-full:DisclosureOfDividendsExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f36760": { "value": "19. Other reservesOther reserves consist of the following:OtherShareTotal otherreservespremiumreserves$m$m$mAs at 31December 20200.31,055.41,055.7Equity-based incentives0.3-0.3As at 31December 20210.61,055.41,056.0Equity-based incentives2.1-2.1Transfer from share premium to contributed surplus1,055.4(1,055.4)-As at 31December 20221,058.1-1,058.1Other reserves include Conduit\u2019s equity-based incentive expense.Share premium includes any premiums received on issue of share capital. The transaction costs that are attributable tothe issuance of new shares incurred in forming Conduit are treated as a deduction from share premium. The sharepremium was transferred to contributed surplus during May 2022 after approval by Conduit's shareholders at the AGM.", "dimensions": { "concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f36975": { "value": "Contingencies and commitmentsLegal proceedings and regulationsConduit operates in the reinsurance industry and is subject to legal proceedings in the normal course of business.While it is not practicable to estimate or determine the final results of all pending or threatened legal proceedings,management does not believe that such proceedings (including litigation) will have a material effect on its results andfinancial position.", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f36991": { "value": "Loss per shareThe following reflects the loss and share data used in the basic and diluted loss per share computations:20222021Year ended 31 December$m$mLoss for the period(89.7)(42.0)NumberNumberBasic weighted average number of shares163,441,264165,239,907Dilutive effect of equity-based incentives167,093-Diluted weighted average number of shares163,608,357165,239,907Per share $Per share $Basic and diluted loss per share(0.55)(0.25)Equity-based incentive awards are only treated as dilutive when their conversion to common shares would decreaseearnings per share or increase loss per share from continuing operations. Incremental shares from ordinary restrictedshare options where relevant performance criteria have not been met are not included in the calculation of dilutiveshares.", "dimensions": { "concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f37152": { "value": "22. Related party disclosuresThese consolidated financial statements include CHL and the entities listed below:Subsidiary undertakingsDomicilePrincipal BusinessCHLBermudaHolding company, Ultimate parentCRLBermudaGeneral insurance businessCRSLEngland and WalesSupport servicesCML1BermudaSupport servicesCSLBermudaSupport servicesEBTJerseyEmployee benefit trust1.CML is part-owned by members of management. Management\u2019s share ownership in CML exists solely for the purposes of the Group\u2019s management shareincentive scheme for attracting and retaining talent. Management\u2019s shares in CML have no voting power or control in respect of CHL's ownership of CRL viaCML's ownership of CRL.Unless otherwise stated, Conduit owns 100% of the share capital and voting rights in the subsidiaries listed.Employee benefit trustThe EBT was established with the sole purpose of administering Conduit's equity-based incentive schemes. Thetrustee operates the trust for the benefit of Conduit's employees, all in accordance with an established trust deed. WhileConduit does not have legal ownership of the EBT, the trust is consolidated in Conduit's accounts due to the ability thatConduit has to influence the actions of the trust.Funding for the trust is provided by CHL through a non-interest bearing loan facility. The facility may only be used bythe trustee for the purpose of achieving the objectives of the EBT. During the year ended 31 December 2022,advances of $16.5 million (31 December 2021: nil) were made to the trust.CHL common shares purchased by the EBT will be held for the benefit of employees under CHL's variable incentiveschemes. During the year ended 31 December 2022 the trust purchased common shares of 4,341,000 (31 December2021: nil).Key management compensationRemuneration for key management, Conduit\u2019s Executive and Non-Executive Directors, was as follows:20222021Year ended 31 December$m$mCash compensation4.76.3Equity-based incentives1.40.3Directors fees and expenses0.80.6Total6.97.2Non-Executive Directors do not receive any benefits in addition to their agreed fees and expenses and do notparticipate in any of Conduit\u2019s incentive, performance, or pension plans.IncubEx, Inc.Effective 9 April 2021, CHL executed a stock purchase agreement with IncubEx, a product and businessdevelopment firm with a focus on designing and developing new financial products in global environmental,reinsurance and related commodity markets. CHL purchased 624 shares of IncubEx\u2019s Series A-3 preferred stock,with a par value of $0.0001 per share, for an aggregate purchase price of $50,000, or $80.08 per share.The current Executive Chairman of CHL is also a founder and current Chairman of IncubEx. The terms and conditionsof the stock purchase agreement are equivalent to those that would prevail in an arm\u2019s length transaction. Theinvestment in IncubEx is included in other assets in the consolidated balance sheet and is recorded at cost, whichapproximates fair value.", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "f37407": { "value": "Subsequent eventsDividendsOn 22 February 2023, Conduit\u2019s Board of Directors declared a final dividend for 2022 of $0.18 (approximately \u00a30.15)per common share, which will result in an aggregate payment of $28.8 million. The dividend will be paid in poundssterling on 21 April 2023 to shareholders of record on 24 March 2023 (the \u201cRecord Date\u201d) using the pound sterling /US dollar spot exchange rate at 12 noon on the Record Date.Uncommitted letter of credit facilityDuring January 2023, Conduit Re increased its $75.0 million uncommitted letter of credit facility with CitibankEurope PLC to $100.0 million.", "dimensions": { "concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory", "language": "en", "entity": "scheme:21380085AE62D1BXSF19", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } } } }