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"entity": "scheme:21380085AE62D1BXSF19",
"period": "2023-01-01T00:00:00/2024-01-01T00:00:00",
"unit": "iso4217:USD"
}
},
"f191": {
"value": "313200000.0",
"decimals": -5,
"dimensions": {
"concept": "ifrs-full:CashAndCashEquivalents",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2025-01-01T00:00:00",
"unit": "iso4217:USD"
}
},
"f192": {
"value": "199800000.0",
"decimals": -5,
"dimensions": {
"concept": "ifrs-full:CashAndCashEquivalents",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00",
"unit": "iso4217:USD"
}
},
"f193": {
"value": "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 2024 include the Company's subsidiaries. The
principal activity of Conduit is to provide reinsurance products and services to its clients
worldwide.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f194": {
"value": "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 2024 include the Company's subsidiaries. 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 21.
2.
Summary of material accounting policies
The basis of preparation, use of judgements and estimates, consolidation principles and
material 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, and the DTR issued by the Financial Conduct
Authority, and are 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.
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 2024, the Board
have considered a number of factors, including the current balance sheet position and
Conduit\u2019s strategic and financial plan, taking account of possible changes in trading
performance and funding retention, stress testing and scenario analysis. 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 Board has a reasonable expectation that Conduit has
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, Conduit continues to adopt the going concern basis in preparing the
consolidated financial statements.
Changes in accounting policies and new standards
There were no new standards that became effective in the year ended 31 December 2024
that have had a material impact on Conduit.
Future accounting changes
No standards or interpretations have been issued that are expected to have a material
effect on Conduit\u2019s financial position, presentation or disclosure. IFRS 18, Presentation and
Disclosure in Financial Statements, will replace IAS 1, Presentation of Financial Statements,
and applies to reporting periods beginning on or after 1 January 2027. IFRS 18 will
require entities to classify all income and expenses on the consolidated statement of
comprehensive income into operating, investing and financing activities, disclose in a single
note management-defined performance measures, and provide enhanced guidance on how
to group information in the financial statements. Conduit is in the process of assessing the
impact that the new standard will have on its presentation and disclosure requirements,
but does not currently expect any material changes.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 the liability for
incurred claims and associated ceded reinsurance recoveries, as discussed in note 3 and
note 14.
Less significant estimates are made in determining the estimated fair value of certain
financial instruments, as discussed in note 3 and note 12.
In addition, some management judgement is exercised in determining the total premium
cash flows expected to be received from reinsurance contracts that are used to determine
the amount of reinsurance revenue recognised in the period.
While not significant, estimates are also used in the estimated fair value of the MIP as
discussed in note 7.
Consolidation principles
These consolidated financial statements comprise the financial statements of CHL and its
subsidiaries as at and for the year ended 31 December 2024. 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 consistent with Conduit\u2019s
accounting policies.
Foreign currency
The functional currency, which is the currency of the primary economic environment in
which Conduit operates, is US dollars. Items included in the financial statements of each
entity 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 income 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
IFRS 17 sets out the classification, measurement and presentation and disclosure
requirements for reinsurance contracts. It requires reinsurance contracts to be measured
using current estimates and assumptions that reflect the timing of cash flows and
recognition of profits as insurance services are delivered. The standard provides two main
measurement models which are the General Measurement Model (GMM) and the Premium
Allocation Approach (PAA).
The PAA simplifies the measurement of reinsurance contracts for remaining coverage, or
pre-claims, in comparison to the GMM. The GMM is used for the measurement of the liability
for incurred claims.PAA eligibility
Under IFRS 17, Conduit\u2019s reinsurance contracts issued and ceded reinsurance
contracts held are all eligible to be measured by applying the PAA, due to meeting
the following criteria:
\u2022
Loss-occurring reinsurance contracts with coverage period of one year or less are
automatically eligible; and
\u2022
Modelling of risk-attaching contracts or contracts with a coverage period greater than
one year produces a measurement for the group of reinsurance contracts that does
not differ materially from that which would be produced applying the GMM.
Classification
Contracts that transfer significant reinsurance risk at the inception of the contract are
accounted for as reinsurance contracts. Contracts purchased and held by Conduit under
which it transfers significant reinsurance risk to a counterparty are accounted for as
ceded 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.
Conduit\u2019s accounting policies apply to both reinsurance contracts issued and ceded
reinsurance contracts held unless explicitly referenced as applying to contracts issued
or ceded only. Conduit writes both excess of loss and proportional (also known as quota
share or pro-rata) reinsurance contracts. The type of contract impacts the recognition
of reinsurance revenue. Contract types are discussed on page 115.
Separating components from reinsurance contracts
IFRS 17 distinguishes three components that, if embedded in a reinsurance contract,
should be bifurcated, and accounted for separately. These are:
\u2022
Cash flows relating to embedded derivatives that are required to be separated;
\u2022
Cash flows relating to distinct investment components; and
\u2022
Promises to transfer distinct goods or distinct non-insurance services.
IFRS 17 then applies to all remaining components of the contract. Conduit does not
have any contracts containing non-insurance components that require separation.
Where contracts contain multiple reinsurance components that meet the requirements
for separation, these are separated and accounted for as standalone contracts.
Some reinsurance contracts issued contain profit-sharing arrangements, such as profit
commissions and no claims bonuses. Under these arrangements, there is a minimum
guaranteed amount that the policyholder will always receive either in the form of profit
commission, or as reimbursement for claims, or another contractual payment, irrespective
of the insured event happening. These are typically considered non-distinct investment
components. Non-distinct investment components are not separated from the reinsurance
contract as they are closely interrelated to the measurement of the reinsurance contract.
However, the impact of the non-distinct investment components are excluded from the
consolidated statement of comprehensive income by adjusting reinsurance revenue and
reinsurance service expenses by the minimum amount due. There is no impact to the
reinsurance service result as there is an equal reduction to both revenue and expenses.
Level of aggregation
Conduit manages reinsurance contracts issued by class of business within an operating
segment. Classes of business are aggregated into portfolios of contracts that are subject
to similar risks. Contracts within each portfolio are grouped into groups of contracts that
are issued within a calendar year, the annual cohort, and are (i) contracts that are onerous
at initial recognition; (ii) contracts that at initial recognition have no significant possibility
of subsequently becoming onerous; 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.
Onerous contracts
Under the PAA, it is assumed there are no contracts in the portfolio that are onerous at
initial recognition, unless there are facts and circumstances that may indicate otherwise.
Management primarily considers the following 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; and
\u2022
External factors, such as a change in market experience or regulations.If a group of contracts becomes onerous, Conduit increases the carrying amount of the
liability for remaining coverage to the amount of the fulfilment cash flows with the amount
of such an increase recognised immediately in reinsurance service expenses. Subsequently,
Conduit amortises the amount of the loss component by decreasing reinsurance service
expenses. The loss component amortisation is based on the passage of time over
the remaining coverage period of contracts within an onerous group. If facts and
circumstances indicate that the expected profitability of the onerous group during
the remaining coverage has changed, then Conduit remeasures the loss component
by reassessing the fulfilment cash flows as required until the loss component is reduced
to zero.
Where a loss component is expected to be partially or fully recovered by ceded reinsurance
contracts, the amount of recovery is recognised in ceded reinsurance recoveries.
Recognition
Conduit recognises groups of reinsurance contracts it issues from the earliest of:
\u2022
The beginning of the coverage period of the group of contracts;
\u2022
The date when the first payment from the cedant is due or when the first payment
is received if there is no due date; or
\u2022
For a group of onerous contracts, the date when facts and circumstances indicate
that the group is onerous.
For ceded reinsurance contracts Conduit recognises the group of contracts:
\u2022
If the reinsurance contracts provide proportionate coverage, at the later of the
beginning of the coverage period of the group, or the initial recognition of the
underlying covered reinsurance contracts issued; or
\u2022
For non-proportionate coverage, the beginning of the coverage period of the group
of contracts, unless an onerous group of underlying reinsurance contracts have been
recognised and the ceded reinsurance contract has been signed before that date.
Modification and derecognition
Conduit derecognises reinsurance contracts when:
\u2022
The rights and obligations relating to the contract are extinguished (meaning
discharged, cancelled or expired); or
\u2022
The contract is modified such that the modification results in a change in the
measurement model or the applicable standard for measuring a component of
the contract, substantially changes the contract boundary, or requires the modified
contract to be included in a different group. In such cases, Conduit derecognises
the initial contract and recognises the modified contract as a new contract. When
a modification is not treated as a derecognition, Conduit recognises amounts paid
or received for the modification with the contract as an adjustment to the relevant
liability for remaining coverage.
Contract boundaries
The measurement of a group of reinsurance contracts includes all future cash flows
expected to arise within the boundary of each contract in the group. Cash flows are within
the boundary of a reinsurance contract if they arise from substantive rights and obligations
that exist during the reporting period in which Conduit can compel the cedant to pay
the premiums, or in which Conduit has a substantive obligation to provide the cedant with
services. A substantive obligation to provide services ends when Conduit has the practical
ability to reassess the risks of the cedant and, as a result, can set a price of level of benefits
that fully reflects those risks. Where Conduit issues multi-year contracts and does not have
the ability to re-price on each policy anniversary the contract is considered one contract
and therefore future cash flows from each of the annual periods are considered on
initial recognition.
For ceded reinsurance contracts the cash flows are within the boundary of the contract
if Conduit has a substantive right to receive services or if Conduit is compelled to pay
premiums to the reinsurer. The substantive right to receive services from the reinsurer
ends when:
\u2022
The reinsurer has the practical ability to reassess the risks transferred to it and can
set a price of level of benefits that fully reflects those risks; or
\u2022
The reinsurer has a substantive right to terminate the coverage.Conduit assesses the contract boundary at initial recognition and at each subsequent
reporting date to include the effects of changes in circumstances on Conduit\u2019s substantive
rights and obligations. The assessment of the contract boundary, which defines the future
cash flows that are included in the measurement of the contract, requires judgement and
consideration of Conduit's substantive rights and obligations. Conduit issues risk-attaching
reinsurance contracts which provide reinsurance coverage to underlying contracts
issued within the terms of the contract. While the contracts can have an annual term the
contract boundary is assessed with consideration of the coverage period of the underlying
contracts. Contracts that cover claims from underlying contracts within the contract
period, loss-occurring contracts, are typically annual term. Where contracts contain
multi-year terms, Conduit exercises judgement on whether provisions within the contract
allow cancellation or re-pricing at each anniversary of the contract.
Measurement \u2013 Liability for remaining coverage
On initial recognition of each group of contracts, the carrying amount of the liability for
remaining coverage is measured as the premiums received on initial recognition, if any,
minus any reinsurance acquisition expense cash flows allocated to the group of contracts
and any amounts arising from the derecognition of the prepaid reinsurance acquisition
expense cash flows asset. Conduit has chosen not to expense reinsurance acquisition
expense cash flows on contracts with coverage of one year or less when they are incurred
in order to apply a consistent treatment of reinsurance acquisition expense cash flows
for all contracts, regardless of the length of coverage.
Subsequently, at the end of each reporting period, the liability for remaining coverage is:
\u2022
Increased by any premiums received in the period;
\u2022
Decreased for reinsurance acquisition expense cash flows paid in the period;
\u2022
Decreased for the amounts of expected premium cash flows recognised as reinsurance
revenue for the services provided in the period;
\u2022
Increased for the amortisation of reinsurance acquisition expense cash flows in the
period recognised as reinsurance service expenses; and
\u2022
Decreased for any non-distinct investment component paid or transferred to the
liability for incurred claims.
Conduit has elected not to adjust the liability for remaining coverage for the time value
of money as its reinsurance contracts do not contain a significant financing component.
Conduit measures the reinsurance asset for remaining coverage for its ceded reinsurance
contracts that it holds on the same basis as reinsurance contracts issued, adapted to reflect
the features that differ between contracts issued versus contracts held.
Reinsurance revenue recognised in the period is based on the total premium cash flows
expected to be received over the lifetime of the contract, net of any deductions that are
paid to the cedant. The amount of total expected revenue from a contract recognised
in the period is dependent on the type of reinsurance contract, as discussed below.
Excess of loss contracts
For the majority of excess of loss contracts, expected premium cash flows are assessed
based on the minimum and deposit or flat premium, as defined in the contract. Subsequent
adjustments to the minimum and deposit premium are assessed in the period in which
they are determined. For excess of loss contracts where no deposit is specified in the
contract, premium cash flows are assessed based on estimates of premiums provided
by the ceding company. Subsequent adjustments, based on reports of actual premium
by ceding companies, or revisions in estimates, are assessed in the period in which they
are determined. For multi-year policies that are payable in annual instalments, where
the reinsured has the sole ability to cancel, the total expected premium cash flows for all
annual periods are assessed at the inception of the contract. Where unilateral cancellation
by the reinsurer exists at each anniversary of the contract the annual periods are assessed
as separate contracts.
Reinsurance revenue for excess of loss contracts is generally recognised 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, reinsurance
revenue is recognised over the period of risk in proportion to the amount of reinsurance
protection provided. Where contract terms require the reinstatement of coverage after
a ceding company\u2019s loss, as the reinstatement is contingent on the loss, the estimated
mandatory reinstatement premiums are recorded within reinsurance service expenses.Proportional contracts
Premium cash flows for proportional contracts are assessed 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 premium cash flows are assessed 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. Reinsurance revenue 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 assessed in the
period in which they are determined.
Reinsurance acquisition expense cash flows
Reinsurance acquisition expense cash flows represent the cash flows that arise from
the cost of selling and underwriting a group of reinsurance contracts and include:
\u2022
Contract specific costs, such as brokerage;
\u2022
Operating expenses that are incurred in relation to the fulfilment of reinsurance
contracts; and
\u2022
An allocation of fixed and variable overheads.
Reinsurance 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 and recognised within reinsurance service expenses.
Commissions that are paid to cedants, such as ceding commissions, are not treated
as reinsurance acquisition expense cash flows as they do not relate to a service.
Such commissions are treated as a reduction in the expected premium recognised
as reinsurance revenue.
Ceded reinsurance expenses
Ceded reinsurance is purchased in the normal course of business to increase capital
capacity or to 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 a proportional basis, and may supplement this with the use
of ceded reinsurance cover linked to the issuance of catastrophe bonds or other capital
market products. Ceded reinsurance premiums are recognised as ceded reinsurance
expenses in the same manner as reinsurance contracts issued, depending on the terms of
the contract. Ceding commissions received are deducted from the premium paid that is
recognised in ceded reinsurance expenses. Other expenses incurred in the placing of ceded
reinsurance contracts that are in relation to a service by a third party, such as brokerage,
are recognised in ceded reinsurance expenses.
Measurement \u2013 Liability for incurred claims
The liability for incurred claims represents the estimated ultimate cost of settling all
reinsurance claims arising from events that have occurred up to the end of the reporting
period, including the operating costs that are expected to be incurred in the course of
settling such claims, reinstatement premiums on specific loss events, profit commissions
and similar expenses that are contingent on claims plus a provision for IBNR. The liability
for incurred claims is derived from the estimated fulfilment cash flows relating to expected
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 also include an explicit adjustment for
non-financial risk, the risk adjustment. Estimates of future cash flows for incurred claims
are discounted on initial recognition and then re-measured to current rates as at the
reporting date.
Cash flows for outstanding losses are estimated initially on the basis of reported losses
received from cedants. Cash flows for ACRs are determined where management\u2019s
expectation of the ultimate cost of the reported loss is greater than that reported.
Estimated cash flows for IBNR 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.
Cash flows for IBNR 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 cash flows 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 ofmanagement\u2019s judgement and experience, historical reinsurance industry loss experience
and estimates of pricing adequacy trends to estimate cash flows for IBNR.
The estimation of the liability for incurred claims 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 the liability for
incurred claims.
Any amounts recoverable from reinsurers are estimated using the same methodology as
for the underlying losses except for the requirement under IFRS 17 to assess the ceded
reinsurance recovery cash flows for the effect of any risk of non-performance, including
expected credit losses. Management monitors the creditworthiness of its reinsurers on an
ongoing basis and assesses any reinsurance assets for the risk of non-performance, with a
provision for non-performance risk being recognised as an expense in the period in which
it is determined.
Presentation of reinsurance contracts
Reinsurance assets and liabilities
The asset or liability for a portfolio of reinsurance contracts is the net position of both the
liability for remaining coverage and the liability for incurred claims. Whether a portfolio is in
a liability or asset position is typically impacted by the timing of cash flows received versus
cash flows paid. Conduit presents separately in the consolidated balance sheet portfolios
of reinsurance contracts issued and held that are in an asset position and those that are
in a liability position.
All reinsurance contract assets and liabilities are deemed monetary assets and liabilities
and are revalued at period end exchange rates.
Reinsurance revenue
Reinsurance revenue in the consolidated statement of comprehensive income is the
amount of expected premium cash flows, net of any deductions paid to the cedant
and excluding any non-distinct investment component. Conduit allocates the expected
premium receipts to each period of coverage on the basis of passage of time or the
expected risk pattern if it differs significantly from the passage of time.
Reinsurance service expenses
Reinsurance service expenses in the consolidated statement of comprehensive income
includes changes in the liability for incurred claims that do not arise from the application
of discount rates, being recognition and amortisation of any loss components, amortisation
of reinsurance acquisition expense cash flows and other attributable operating expenses.
Ceded reinsurance income and expenses
Conduit has elected to present the income and expenses from ceded reinsurance contracts
separately in the consolidated statement of comprehensive income. Ceded reinsurance
expenses represent the total expected ceded premiums and other amounts, that are not
contingent on recoveries, payable to Conduit's reinsurers. Conduit recognises ceded
reinsurance expenses based on the passage of time over the coverage period of a group
of contracts or expected risk pattern. Income from ceded reinsurance contracts includes
expected recoveries on incurred claims, changes in expected recoveries related to past
service, the provision for the effects of changes in risk of reinsurer non-performance plus
other amounts that are contingent on recoveries, such as ceded profit commissions
payable to the reinsured.
Net reinsurance finance income (expense)
Reinsurance finance income (expense) includes the changes in the carrying amounts
of reinsurance and ceded reinsurance assets and liabilities arising from the unwind of
discount recognised in prior periods and the effects of remeasuring to current discount
rates plus other financial assumptions. Conduit has elected to disaggregate the changes
in the risk adjustment for the time value of money and present in net reinsurance finance
income (expense).
Conduit has chosen not to disaggregate finance income (expense) between other
comprehensive income (OCI) and comprehensive income.
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 meets the requirements for mandatory
classification as FVTPL and is 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 held within a business model that 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 on a fair value basis.
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 income within
net unrealised gains (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 (losses)
on investments to net realised gains (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.
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.
Conduit also operates DSBP and LTIP awards. Under the 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.
The LTIP awards are awarded with or without performance criteria attached to the awards.
These nil cost awards granted to staff vest over a three-year period from the date of grant.
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.
Refer to note 7 for details of performance criteria attached to certain LTIP awards.
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 income, 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 income 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 within other expenses in the consolidated
statement of comprehensive income in the period when the services are rendered.
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 purchased 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.The investment mix by mandate and sector of Conduit's portfolio of fixed maturity
securities is as follows:
Non-US government and agency
Non-US government and agency
US government agency mortgage-backed
US government agency mortgage-backed
Non-agency mortgage-backed
Non-agency mortgage-backed
Agency commercial mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-backed
Non-agency commercial mortgage-backed
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 2024 include the Company's subsidiaries. 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 21.
2.
Summary of material accounting policies
The basis of preparation, use of judgements and estimates, consolidation principles and
material 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, and the DTR issued by the Financial Conduct
Authority, and are 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.
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 2024, the Board
have considered a number of factors, including the current balance sheet position and
Conduit\u2019s strategic and financial plan, taking account of possible changes in trading
performance and funding retention, stress testing and scenario analysis. 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 Board has a reasonable expectation that Conduit has
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, Conduit continues to adopt the going concern basis in preparing the
consolidated financial statements.
Changes in accounting policies and new standards
There were no new standards that became effective in the year ended 31 December 2024
that have had a material impact on Conduit.
Future accounting changes
No standards or interpretations have been issued that are expected to have a material
effect on Conduit\u2019s financial position, presentation or disclosure. IFRS 18, Presentation and
Disclosure in Financial Statements, will replace IAS 1, Presentation of Financial Statements,
and applies to reporting periods beginning on or after 1 January 2027. IFRS 18 will
require entities to classify all income and expenses on the consolidated statement of
comprehensive income into operating, investing and financing activities, disclose in a single
note management-defined performance measures, and provide enhanced guidance on how
to group information in the financial statements. Conduit is in the process of assessing the
impact that the new standard will have on its presentation and disclosure requirements,
but does not currently expect any material changes.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 the liability for
incurred claims and associated ceded reinsurance recoveries, as discussed in note 3 and
note 14.
Less significant estimates are made in determining the estimated fair value of certain
financial instruments, as discussed in note 3 and note 12.
In addition, some management judgement is exercised in determining the total premium
cash flows expected to be received from reinsurance contracts that are used to determine
the amount of reinsurance revenue recognised in the period.
While not significant, estimates are also used in the estimated fair value of the MIP as
discussed in note 7.
Consolidation principles
These consolidated financial statements comprise the financial statements of CHL and its
subsidiaries as at and for the year ended 31 December 2024. 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 consistent with Conduit\u2019s
accounting policies.
Foreign currency
The functional currency, which is the currency of the primary economic environment in
which Conduit operates, is US dollars. Items included in the financial statements of each
entity 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 income 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
IFRS 17 sets out the classification, measurement and presentation and disclosure
requirements for reinsurance contracts. It requires reinsurance contracts to be measured
using current estimates and assumptions that reflect the timing of cash flows and
recognition of profits as insurance services are delivered. The standard provides two main
measurement models which are the General Measurement Model (GMM) and the Premium
Allocation Approach (PAA).
The PAA simplifies the measurement of reinsurance contracts for remaining coverage, or
pre-claims, in comparison to the GMM. The GMM is used for the measurement of the liability
for incurred claims.PAA eligibility
Under IFRS 17, Conduit\u2019s reinsurance contracts issued and ceded reinsurance
contracts held are all eligible to be measured by applying the PAA, due to meeting
the following criteria:
\u2022
Loss-occurring reinsurance contracts with coverage period of one year or less are
automatically eligible; and
\u2022
Modelling of risk-attaching contracts or contracts with a coverage period greater than
one year produces a measurement for the group of reinsurance contracts that does
not differ materially from that which would be produced applying the GMM.
Classification
Contracts that transfer significant reinsurance risk at the inception of the contract are
accounted for as reinsurance contracts. Contracts purchased and held by Conduit under
which it transfers significant reinsurance risk to a counterparty are accounted for as
ceded 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.
Conduit\u2019s accounting policies apply to both reinsurance contracts issued and ceded
reinsurance contracts held unless explicitly referenced as applying to contracts issued
or ceded only. Conduit writes both excess of loss and proportional (also known as quota
share or pro-rata) reinsurance contracts. The type of contract impacts the recognition
of reinsurance revenue. Contract types are discussed on page 115.
Separating components from reinsurance contracts
IFRS 17 distinguishes three components that, if embedded in a reinsurance contract,
should be bifurcated, and accounted for separately. These are:
\u2022
Cash flows relating to embedded derivatives that are required to be separated;
\u2022
Cash flows relating to distinct investment components; and
\u2022
Promises to transfer distinct goods or distinct non-insurance services.
IFRS 17 then applies to all remaining components of the contract. Conduit does not
have any contracts containing non-insurance components that require separation.
Where contracts contain multiple reinsurance components that meet the requirements
for separation, these are separated and accounted for as standalone contracts.
Some reinsurance contracts issued contain profit-sharing arrangements, such as profit
commissions and no claims bonuses. Under these arrangements, there is a minimum
guaranteed amount that the policyholder will always receive either in the form of profit
commission, or as reimbursement for claims, or another contractual payment, irrespective
of the insured event happening. These are typically considered non-distinct investment
components. Non-distinct investment components are not separated from the reinsurance
contract as they are closely interrelated to the measurement of the reinsurance contract.
However, the impact of the non-distinct investment components are excluded from the
consolidated statement of comprehensive income by adjusting reinsurance revenue and
reinsurance service expenses by the minimum amount due. There is no impact to the
reinsurance service result as there is an equal reduction to both revenue and expenses.
Level of aggregation
Conduit manages reinsurance contracts issued by class of business within an operating
segment. Classes of business are aggregated into portfolios of contracts that are subject
to similar risks. Contracts within each portfolio are grouped into groups of contracts that
are issued within a calendar year, the annual cohort, and are (i) contracts that are onerous
at initial recognition; (ii) contracts that at initial recognition have no significant possibility
of subsequently becoming onerous; 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.
Onerous contracts
Under the PAA, it is assumed there are no contracts in the portfolio that are onerous at
initial recognition, unless there are facts and circumstances that may indicate otherwise.
Management primarily considers the following 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; and
\u2022
External factors, such as a change in market experience or regulations.If a group of contracts becomes onerous, Conduit increases the carrying amount of the
liability for remaining coverage to the amount of the fulfilment cash flows with the amount
of such an increase recognised immediately in reinsurance service expenses. Subsequently,
Conduit amortises the amount of the loss component by decreasing reinsurance service
expenses. The loss component amortisation is based on the passage of time over
the remaining coverage period of contracts within an onerous group. If facts and
circumstances indicate that the expected profitability of the onerous group during
the remaining coverage has changed, then Conduit remeasures the loss component
by reassessing the fulfilment cash flows as required until the loss component is reduced
to zero.
Where a loss component is expected to be partially or fully recovered by ceded reinsurance
contracts, the amount of recovery is recognised in ceded reinsurance recoveries.
Recognition
Conduit recognises groups of reinsurance contracts it issues from the earliest of:
\u2022
The beginning of the coverage period of the group of contracts;
\u2022
The date when the first payment from the cedant is due or when the first payment
is received if there is no due date; or
\u2022
For a group of onerous contracts, the date when facts and circumstances indicate
that the group is onerous.
For ceded reinsurance contracts Conduit recognises the group of contracts:
\u2022
If the reinsurance contracts provide proportionate coverage, at the later of the
beginning of the coverage period of the group, or the initial recognition of the
underlying covered reinsurance contracts issued; or
\u2022
For non-proportionate coverage, the beginning of the coverage period of the group
of contracts, unless an onerous group of underlying reinsurance contracts have been
recognised and the ceded reinsurance contract has been signed before that date.
Modification and derecognition
Conduit derecognises reinsurance contracts when:
\u2022
The rights and obligations relating to the contract are extinguished (meaning
discharged, cancelled or expired); or
\u2022
The contract is modified such that the modification results in a change in the
measurement model or the applicable standard for measuring a component of
the contract, substantially changes the contract boundary, or requires the modified
contract to be included in a different group. In such cases, Conduit derecognises
the initial contract and recognises the modified contract as a new contract. When
a modification is not treated as a derecognition, Conduit recognises amounts paid
or received for the modification with the contract as an adjustment to the relevant
liability for remaining coverage.
Contract boundaries
The measurement of a group of reinsurance contracts includes all future cash flows
expected to arise within the boundary of each contract in the group. Cash flows are within
the boundary of a reinsurance contract if they arise from substantive rights and obligations
that exist during the reporting period in which Conduit can compel the cedant to pay
the premiums, or in which Conduit has a substantive obligation to provide the cedant with
services. A substantive obligation to provide services ends when Conduit has the practical
ability to reassess the risks of the cedant and, as a result, can set a price of level of benefits
that fully reflects those risks. Where Conduit issues multi-year contracts and does not have
the ability to re-price on each policy anniversary the contract is considered one contract
and therefore future cash flows from each of the annual periods are considered on
initial recognition.
For ceded reinsurance contracts the cash flows are within the boundary of the contract
if Conduit has a substantive right to receive services or if Conduit is compelled to pay
premiums to the reinsurer. The substantive right to receive services from the reinsurer
ends when:
\u2022
The reinsurer has the practical ability to reassess the risks transferred to it and can
set a price of level of benefits that fully reflects those risks; or
\u2022
The reinsurer has a substantive right to terminate the coverage.Conduit assesses the contract boundary at initial recognition and at each subsequent
reporting date to include the effects of changes in circumstances on Conduit\u2019s substantive
rights and obligations. The assessment of the contract boundary, which defines the future
cash flows that are included in the measurement of the contract, requires judgement and
consideration of Conduit's substantive rights and obligations. Conduit issues risk-attaching
reinsurance contracts which provide reinsurance coverage to underlying contracts
issued within the terms of the contract. While the contracts can have an annual term the
contract boundary is assessed with consideration of the coverage period of the underlying
contracts. Contracts that cover claims from underlying contracts within the contract
period, loss-occurring contracts, are typically annual term. Where contracts contain
multi-year terms, Conduit exercises judgement on whether provisions within the contract
allow cancellation or re-pricing at each anniversary of the contract.
Measurement \u2013 Liability for remaining coverage
On initial recognition of each group of contracts, the carrying amount of the liability for
remaining coverage is measured as the premiums received on initial recognition, if any,
minus any reinsurance acquisition expense cash flows allocated to the group of contracts
and any amounts arising from the derecognition of the prepaid reinsurance acquisition
expense cash flows asset. Conduit has chosen not to expense reinsurance acquisition
expense cash flows on contracts with coverage of one year or less when they are incurred
in order to apply a consistent treatment of reinsurance acquisition expense cash flows
for all contracts, regardless of the length of coverage.
Subsequently, at the end of each reporting period, the liability for remaining coverage is:
\u2022
Increased by any premiums received in the period;
\u2022
Decreased for reinsurance acquisition expense cash flows paid in the period;
\u2022
Decreased for the amounts of expected premium cash flows recognised as reinsurance
revenue for the services provided in the period;
\u2022
Increased for the amortisation of reinsurance acquisition expense cash flows in the
period recognised as reinsurance service expenses; and
\u2022
Decreased for any non-distinct investment component paid or transferred to the
liability for incurred claims.
Conduit has elected not to adjust the liability for remaining coverage for the time value
of money as its reinsurance contracts do not contain a significant financing component.
Conduit measures the reinsurance asset for remaining coverage for its ceded reinsurance
contracts that it holds on the same basis as reinsurance contracts issued, adapted to reflect
the features that differ between contracts issued versus contracts held.
Reinsurance revenue recognised in the period is based on the total premium cash flows
expected to be received over the lifetime of the contract, net of any deductions that are
paid to the cedant. The amount of total expected revenue from a contract recognised
in the period is dependent on the type of reinsurance contract, as discussed below.
Excess of loss contracts
For the majority of excess of loss contracts, expected premium cash flows are assessed
based on the minimum and deposit or flat premium, as defined in the contract. Subsequent
adjustments to the minimum and deposit premium are assessed in the period in which
they are determined. For excess of loss contracts where no deposit is specified in the
contract, premium cash flows are assessed based on estimates of premiums provided
by the ceding company. Subsequent adjustments, based on reports of actual premium
by ceding companies, or revisions in estimates, are assessed in the period in which they
are determined. For multi-year policies that are payable in annual instalments, where
the reinsured has the sole ability to cancel, the total expected premium cash flows for all
annual periods are assessed at the inception of the contract. Where unilateral cancellation
by the reinsurer exists at each anniversary of the contract the annual periods are assessed
as separate contracts.
Reinsurance revenue for excess of loss contracts is generally recognised 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, reinsurance
revenue is recognised over the period of risk in proportion to the amount of reinsurance
protection provided. Where contract terms require the reinstatement of coverage after
a ceding company\u2019s loss, as the reinstatement is contingent on the loss, the estimated
mandatory reinstatement premiums are recorded within reinsurance service expenses.Proportional contracts
Premium cash flows for proportional contracts are assessed 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 premium cash flows are assessed 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. Reinsurance revenue 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 assessed in the
period in which they are determined.
Reinsurance acquisition expense cash flows
Reinsurance acquisition expense cash flows represent the cash flows that arise from
the cost of selling and underwriting a group of reinsurance contracts and include:
\u2022
Contract specific costs, such as brokerage;
\u2022
Operating expenses that are incurred in relation to the fulfilment of reinsurance
contracts; and
\u2022
An allocation of fixed and variable overheads.
Reinsurance 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 and recognised within reinsurance service expenses.
Commissions that are paid to cedants, such as ceding commissions, are not treated
as reinsurance acquisition expense cash flows as they do not relate to a service.
Such commissions are treated as a reduction in the expected premium recognised
as reinsurance revenue.
Ceded reinsurance expenses
Ceded reinsurance is purchased in the normal course of business to increase capital
capacity or to 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 a proportional basis, and may supplement this with the use
of ceded reinsurance cover linked to the issuance of catastrophe bonds or other capital
market products. Ceded reinsurance premiums are recognised as ceded reinsurance
expenses in the same manner as reinsurance contracts issued, depending on the terms of
the contract. Ceding commissions received are deducted from the premium paid that is
recognised in ceded reinsurance expenses. Other expenses incurred in the placing of ceded
reinsurance contracts that are in relation to a service by a third party, such as brokerage,
are recognised in ceded reinsurance expenses.
Measurement \u2013 Liability for incurred claims
The liability for incurred claims represents the estimated ultimate cost of settling all
reinsurance claims arising from events that have occurred up to the end of the reporting
period, including the operating costs that are expected to be incurred in the course of
settling such claims, reinstatement premiums on specific loss events, profit commissions
and similar expenses that are contingent on claims plus a provision for IBNR. The liability
for incurred claims is derived from the estimated fulfilment cash flows relating to expected
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 also include an explicit adjustment for
non-financial risk, the risk adjustment. Estimates of future cash flows for incurred claims
are discounted on initial recognition and then re-measured to current rates as at the
reporting date.
Cash flows for outstanding losses are estimated initially on the basis of reported losses
received from cedants. Cash flows for ACRs are determined where management\u2019s
expectation of the ultimate cost of the reported loss is greater than that reported.
Estimated cash flows for IBNR 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.
Cash flows for IBNR 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 cash flows 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 ofmanagement\u2019s judgement and experience, historical reinsurance industry loss experience
and estimates of pricing adequacy trends to estimate cash flows for IBNR.
The estimation of the liability for incurred claims 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 the liability for
incurred claims.
Any amounts recoverable from reinsurers are estimated using the same methodology as
for the underlying losses except for the requirement under IFRS 17 to assess the ceded
reinsurance recovery cash flows for the effect of any risk of non-performance, including
expected credit losses. Management monitors the creditworthiness of its reinsurers on an
ongoing basis and assesses any reinsurance assets for the risk of non-performance, with a
provision for non-performance risk being recognised as an expense in the period in which
it is determined.
Presentation of reinsurance contracts
Reinsurance assets and liabilities
The asset or liability for a portfolio of reinsurance contracts is the net position of both the
liability for remaining coverage and the liability for incurred claims. Whether a portfolio is in
a liability or asset position is typically impacted by the timing of cash flows received versus
cash flows paid. Conduit presents separately in the consolidated balance sheet portfolios
of reinsurance contracts issued and held that are in an asset position and those that are
in a liability position.
All reinsurance contract assets and liabilities are deemed monetary assets and liabilities
and are revalued at period end exchange rates.
Reinsurance revenue
Reinsurance revenue in the consolidated statement of comprehensive income is the
amount of expected premium cash flows, net of any deductions paid to the cedant
and excluding any non-distinct investment component. Conduit allocates the expected
premium receipts to each period of coverage on the basis of passage of time or the
expected risk pattern if it differs significantly from the passage of time.
Reinsurance service expenses
Reinsurance service expenses in the consolidated statement of comprehensive income
includes changes in the liability for incurred claims that do not arise from the application
of discount rates, being recognition and amortisation of any loss components, amortisation
of reinsurance acquisition expense cash flows and other attributable operating expenses.
Ceded reinsurance income and expenses
Conduit has elected to present the income and expenses from ceded reinsurance contracts
separately in the consolidated statement of comprehensive income. Ceded reinsurance
expenses represent the total expected ceded premiums and other amounts, that are not
contingent on recoveries, payable to Conduit's reinsurers. Conduit recognises ceded
reinsurance expenses based on the passage of time over the coverage period of a group
of contracts or expected risk pattern. Income from ceded reinsurance contracts includes
expected recoveries on incurred claims, changes in expected recoveries related to past
service, the provision for the effects of changes in risk of reinsurer non-performance plus
other amounts that are contingent on recoveries, such as ceded profit commissions
payable to the reinsured.
Net reinsurance finance income (expense)
Reinsurance finance income (expense) includes the changes in the carrying amounts
of reinsurance and ceded reinsurance assets and liabilities arising from the unwind of
discount recognised in prior periods and the effects of remeasuring to current discount
rates plus other financial assumptions. Conduit has elected to disaggregate the changes
in the risk adjustment for the time value of money and present in net reinsurance finance
income (expense).
Conduit has chosen not to disaggregate finance income (expense) between other
comprehensive income (OCI) and comprehensive income.
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 meets the requirements for mandatory
classification as FVTPL and is 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 held within a business model that 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 on a fair value basis.
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 income within
net unrealised gains (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 (losses)
on investments to net realised gains (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.
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.
Conduit also operates DSBP and LTIP awards. Under the 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.
The LTIP awards are awarded with or without performance criteria attached to the awards.
These nil cost awards granted to staff vest over a three-year period from the date of grant.
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.
Refer to note 7 for details of performance criteria attached to certain LTIP awards.
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 income, 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 income 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 within other expenses in the consolidated
statement of comprehensive income in the period when the services are rendered.
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 purchased 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.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. Risk appetite is prescribed by the Board and is 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.
Day-to-day management of risk is the responsibility of management, operating within the
defined appetite and tolerances. 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 CHL and CRL. To ensure transparency and accountability of the business
for 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.
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 transition
risk. 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. Transition 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.
Geopolitical and macroeconomic factors
During 2024, an unusually high proportion of the world selected new governments and
policy decisions and their implications will play out through 2025. 2024 also saw increased
levels of political unrest globally. The combination of these factors presents ongoing risk
into 2025, together with uncertainties as to economic policies and the associated impact
on global trade, interest rates and inflation.
In Bermuda, we have seen the progressing of legislation to implement the Bermuda
Corporate Income Tax ('CIT') from 2025 onwards. Conduit does not expect to meet
the criteria that would make it subject to the tax. If Conduit were to meet the Bermuda
CIT criteria in the future, it is likely that an exemption will be available for the first five
years in which the tax would otherwise apply. As CHL, CSL, CML and CRL do not meet
the qualifying criteria under Bermuda CIT, they continue to benefit from an existing
undertaking from the Bermuda government which exempts them from all Bermuda
local income, withholding and capital gains taxes until 31 March 2035.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
A five-year strategic plan is produced that defines the overriding 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 and are stored centrally
in our pricing platform;
\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 calculate the
associated expected losses; and
\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 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 has exposure to other natural
catastrophes that can occur throughout the year, such as earthquakes, tsunamis, droughts,
floods, hail, tornadoes, and wildfires. In addition, Conduit is exposed to risk losses
throughout the year from perils such as fire, explosion, war, terrorism, political risk, cyber
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. Conduit\u2019s most
significant modelled exposure to any single peril and region combination at the commonly
reported 100-year and 250-year return periods were to Florida windstorm as at 31
December 2023 and California earthquake as at 31 December 2024. 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.
The table shows modelled estimated net exposure as at 31 December 2024 which reflects
reduced attachment points to aggregate reinsurance protections resulting from events
during the year. This has a notable impact on net Florida windstorm exposure. The 31
December 2023 exposures did not benefit from reductions in the attachment points of
aggregate reinsurance protections. Any reduction in estimated loss for events that
happened in 2024 will increase modelled loss shown above.
While modelling is an important tool in assessing exposure and aggregations, the reliability
of modelling varies by peril and region. Modelling is also dependent on various judgemental
assumptions and input data provided by cedants, which can vary in precision and accuracy.
As such actual exposures are likely to vary from those shown. There could also be an
unmodelled loss which exceeds these figures. The models also contain loss scenarios at
higher return periods which could cause a larger loss to capital than the modelled
expectation shown above.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 reinsurance revenue by geographic region and operating segment are as follows:
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 typically 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 ultimate net loss excess of loss basis,
however industry loss warranties, catastrophe bonds issuances, or proportional treaty
arrangements may also be utilised.
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 a liability for incurred claims 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 officers 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.
Conduit 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, but are not limited to, aviation,
energy, engineering and construction, environmental, 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 claims arising from any one event. 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 airlines, aircraft, airports,
aircraft manufacturers and aviation related products, and includes cover for the aircraft
themselves as well as losses arising from passenger and third-party liability claims against
airlines and/or operators and/or manufacturers.Energy
The energy class of business provides reinsurance cover for a global spread of accounts
that includes risks such as downstream energy, midstream energy, upstream energy,
energy liability, construction and natural perils related coverages such as Gulf of Mexico
wind and hurricane programmes. Policies typically cover legal liability of an insured and
property for physical damage (including natural catastrophe), machinery breakdown
perils and consequential business interruption exposure. Loss limits are set at a level
commensurate with the modelled estimated maximum loss scenario.
Engineering and construction
The class covers a wide range of products falling under related property and business
income protection on a worldwide basis. These products include, but are not limited to,
contractors\u2019 all risks, erection all risks, plant and equipment, machinery breakdown and
loss of profits. Projects range from small bespoke to large civil engineering constructions.
The main hazards are fire and explosion, theft, collapse and natural perils such as
earthquake, windstorm and flood.
Environmental
Environmental products generally provide cover relating to the environmental and energy
casualty classes with regard to pollution. The related sectors typically include energy,
construction, and industrial which includes both commercial and residential risks.
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 commonly provides cover for legal liability for losses arising from
the operation of marine and offshore related assets including but not limited to the
reinsurance of the International Group of Protection and Indemnity Clubs, the operation
and management of ships and vessels, cargo, and marine builders' risks covering the
building of ocean-going vessels and offshore assets.
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.
Renewables
The class covers a wide range of tailored solutions globally. The class includes offshore and
onshore wind power, ground and rooftop solar power plus bioenergy fuels and associated
operations. The risks exposed are quite unique, from difficult construction operations to
installing complex equipment that is routinely exposed to natural hazards. Policies typically
include cover for physical damage, legal liability, machinery breakdown and business
interruption for both construction and operational phases.
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 property, specialty and casualty classes of business
including commercial and personal automobile, general liability, workers compensation,
employers 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, notably earthquakes and named storms), 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 also use reinsurance linked to 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 capitalthan 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, among 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.
Fulfilment cash flows
Fulfilment cash flows consist of:
\u2022
The estimates of future cash flows required in the ultimate settlement of claims;
\u2022
An adjustment for the time value of money; and
\u2022
A risk adjustment for non-financial risk
Estimates of future cash flows
A significant and critical judgement and estimate made by management is the estimation
of future cash flows in relation to ultimate claims settlements. Management estimates,
in an unbiased way, future cash flows to cover its estimated liability for both reported
and unreported claims on events that have occurred up to the latest valuation date,
incorporating all reasonable and supportable information that is available without undue
cost or effort. Management uses methodologies that calculate a point estimate for the
ultimate losses, representing management\u2019s best estimate of ultimate future cash flows.
Conduit estimates the future cash flows 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 management believes may not be adequately estimated
by the cedant as at that date.
Liabilities for incurred claims are not permitted until the occurrence of an event which may
give rise to a claim. As a result, only provisions applicable to losses that have occurred up
to the reporting date are established, with no allowance for the provision of a contingency
liability 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 liabilities from time to time. The estimated timing of the future cash flows is
determined by applying cash flow payment assumptions to the best estimate of ultimate
future cash flows.
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 the net ultimate liability for incurred claims.
The judgements and estimates used in establishing future cash flow calculations may be
revised as additional experience or other data becomes available. Future cash flows 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 assumptions and methodologies on a quarterly
basis and develop an actuarial best estimate of Conduit\u2019s future cash flows using the
processes outlined above. The management Reserving Committee reviews the estimate
for the liability for incurred claims 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.
Risk adjustment
The risk adjustment for non-financial risk is the compensation that Conduit requires
for bearing the uncertainty about the amount and timing of the cash flows arising from
reinsurance contracts. Conduit determines the risk adjustment at the entity level and
allocates to the groups of reinsurance contracts.
Conduit has estimated the risk adjustment using a margin-based approach. The margins
are calibrated to a targeted confidence interval range using the BMA BSCR risk framework.
Conduit expects that the risk adjustment recognised within the fulfilment cash flow will fall
within the range of the 75th and the 85th percentile, gross and net of ceded reinsurance.
Conduit estimates that the risk adjustment net of ceded reinsurance corresponds to the
81st percentile as at 31 December 2024 (31 December 2023: 82nd percentile).
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.
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; and
\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 laws and regulation, including capital, governance or licensing requirements;
and
\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
Reviewing and amending underwriting plans and outlook as necessary;
\u2022
Reducing exposure to, or withdrawing from, market sectors where conditions have
reached unattractive levels;
\u2022
Purchasing appropriate, cost-effective reinsurance cover to mitigate exposures;
\u2022
Closely monitoring changes in rates, terms and conditions and inflation;
\u2022
Ensuring through rigorous underwriting criteria that surplus capital does not drive
short-term risk appetite;
\u2022
Holding an underwriting roundtable meeting, typically daily, where deal flow, pricing
and opportunities are discussed;Holding quarterly management Underwriting Oversight Committee meetings that
consider matters that include underwriting performance for CRL;
\u2022
Holding an annual strategy review meeting;
\u2022
Holding a quarterly Underwriting Committee board meeting that considers matters
including underwriting performance for CRL;
\u2022
Holding a quarterly Risk, Capital and Compliance Committee meeting to review
relevant risk and capital considerations for CRL; and
\u2022
Holding regular meetings with regulators and rating agencies.
Reinsurance finance risk
Estimates of future cash flows for incurred claims are discounted on initial recognition
and then re-measured to current rates as at each reporting date. Reinsurance liabilities and
ceded assets for incurred claims are therefore sensitive to the level of market interest rates.
Interest rate risk on reinsurance contracts is the risk that the value of the future cash flows
will fluctuate due to changes in market interest rates. Movements in interest rates may lead
to an adverse impact on the value of Conduit\u2019s reinsurance contract assets and liabilities.
Conduit manages this risk by monitoring the duration of reinsurance contract cash flows
and adopting policies regarding asset and liability matching to reduce the volatility arising
from interest rate movements on assets and liabilities in the consolidated statement of
comprehensive income.
The total reinsurance contract assets and liabilities exposed to interest rate risk are
detailed below:
Ceded asset for incurred claims
Liability for incurred claims
Discount rates
All future cash flows are discounted using yield curves that are adjusted to reflect the characteristics of the cash flows and the liquidity of the reinsurance contracts. Conduit determines
its discount rates using a bottom-up method of using a risk-free rate, plus an illiquidity premium where applicable. Risk-free rates are determined by reference to the yields published by
EIOPA for the relevant, material currencies. The illiquidity premium is estimated by reference to observable market corporate bond yields.
The annual spot rates, including illiquidity premium, used for the re-measurement of the net liability for incurred claims as at the balance sheet date are shown below for all portfolios:
The sensitivity of Conduit's net reinsurance liability for incurred claims to interest rate
maintained. Conduit also prioritises liquid asset classes with higher credit quality and
movements is detailed below, assuming linear movements in interest rates:
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
Immediate shift in yield (basis points)
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
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.
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.
The Investment Committee of the CRL Board 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, duration 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 four 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
Conduit focuses on the most significant risks in its investment portfolio which are interest
rate risk, credit risk and liquidity risk, and has built stress testing and risk analytics around
these risks to ensure they are within tolerances and preferences. 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.
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 meets 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 risk framework.Corporate and non-US government and agency bonds by country are as follows:
The sector allocation of corporate bonds is as follows:
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.
Immediate shift in yield (basis points)
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 2.5 years
as at 31 December 2024 (as at 31 December 2023: 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:
99th percentile confidence level
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 and liabilities. Foreign currency gains and losses are recorded in the period they occur in the consolidated
statement of comprehensive income.
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 and ceded reinsurance assets and liabilities, cash holdings and dividend payable, if applicable.
With the adoption of IFRS 17 all reinsurance and ceded reinsurance assets and liabilities are monetary items and are revalued at period end exchange rates.
The following table summarises the carrying value of all monetary and non-monetary assets and liabilities categorised by Conduit\u2019s main currencies.
The impact on profit from a proportional foreign exchange movement of 10.0% against the US dollar at year end spot rates would be an increase or decrease of $1.3 million
(31 December 2023: increase or decrease of $0.4 million).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; and
\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; and
\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:
Fixed maturity securities at FVTPL
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Asset-backed and mortgage-backed
Fixed maturity securities at FVTPL
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Asset-backed and mortgage-backed
The estimated maturity profile of the reinsurance liability for incurred claims and financial liabilities of Conduit is as follows:
Years until liability becomes due \u2013 discounted
Reinsurance liability for incurred claims
Other reinsurance payables
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 incurred claims is complex and incorporates a significant amount of judgement. The timing of payments 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 2024, cash and cash equivalents were $313.2 million (31 December 2023: $199.8 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 2024, 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.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 expected
premium cash flows due from cedants and on ceded reinsurance recoverables.
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 total expected
premium cash flows due from reinsurance brokers and cedants and on ceded reinsurance
recoverables due from Conduit\u2019s reinsurers. Credit risk on total expected premium cash
flows due 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.
Ceded reinsurance recoverables are recorded within ceded reinsurance contract assets
as the ceded asset for incurred claims which is shown in note 14.
The table opposite presents an analysis of Conduit\u2019s major exposures to counterparty
credit risk, based on their rating. Expected premium cash flows are not rated, however
there is limited default risk associated with these amounts.
The ceded reinsurance assets classified as other are fully collateralised.
As at 31 December 2024 the average credit quality of Conduit's cash and cash equivalents
and portfolio of fixed maturity securities was AA (31 December 2023: AA).Operational risk is the risk of loss resulting from inadequate or failed internal processes,
personnel, systems or external events. During the reporting period, various operational risks
were identified, and steps were taken to manage or mitigate those 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; and
\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
Total tangible capital is as follows:
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; and
\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 as a Class 4 (re)insurer by the BMA and is required to hold sufficient
capital under applicable regulations. The BMA\u2019s regulatory framework has been assessed as
equivalent to the EU\u2019s Solvency II regime. CRL had sufficient capital at all times throughout
the year to meet the BMA\u2019s requirements, inclusive of the BSCR standard formula and
minimum margin of solvency.
Retention risk
Risks associated with succession planning, staff retention and key person 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.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 Risk disclosures section in note 3.
US and international property catastrophe and non-catastrophe risks on
an excess of loss and proportional contract basis.
US and international casualty risks principally including directors and officers
liability, financial institutions liability, general liability, medical malpractice,
professional liability and transactional liability.
Diverse portfolio of business, including aviation, energy, engineering and
construction, environmental, marine, renewables, political violence and
terrorism and whole account.
Reportable segment performance is measured by the reinsurance service and finance
result 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.
Year ended 31 December 2024
Reinsurance revenue by geographic region
Year ended 31 December 2023
Reinsurance revenue by geographic region
Included within the worldwide geographic region, are premiums written with external
parties in Bermuda for $0.7 million (31 December 2023: $4.0 million).Ceded reinsurance expenses
Reinsurance losses and loss related amounts, discounted
Reinsurance operating expenses
Reinsurance service expenses
Ceded reinsurance recoveries
Reinsurance service result
Net reinsurance finance income (expense)
Reinsurance service and finance result
Net unallocated revenue (expenses)
Total comprehensive income
Net loss ratio (discounted)
Reinsurance operating expense ratio
Other operating expense ratio
Combined ratio (discounted)
Net loss ratio (undiscounted)
Combined ratio (undiscounted)
Fixed maturity securities
Cash and cash equivalents
Fixed maturity securities
Cash and cash equivalents
Included in net investment income is $1.6 million of investment management and custody
fees for the year ended 31 December 2024 (31 December 2023: $1.3 million). Net foreign
exchange gains (losses) on cash and cash equivalents and fixed maturity securities for
the year ended 31 December 2024 was $(4.5) million (31 December 2023: nil). Foreign
exchange impacts are not included in the investment returns in the table above.
6. Reinsurance finance return
Interest accretion from reinsurance contracts
Interest accretion from ceded reinsurance contracts held
Change in discount rates from reinsurance contracts
Change in discount rates from ceded reinsurance contracts held
Net change in discount rates
Net reinsurance finance income (expense)
Employee benefits and other incentives
Aggregate remuneration and other incentives of Conduit\u2019s employees is as follows:
Equity-based incentive expense
Total employee benefits and other incentives
Equity-based incentive schemes
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 establishing 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 17
for additional details.
The following table lists the assumptions used in the stochastic model for the MIP awards:
Assumptions
range from 17.2% \u2013 19.0%
range from 0.3% \u2013 0.6%
Expected life of instruments
1.
The expected volatility was calculated based on a comparator group of companies.
2.
The risk-free interest rate is based on the yield of 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 advisers 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 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 income, 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;Vesting conditions, other than market conditions linked to the share price of CHL,
are not taken into account when estimating the fair value; and
\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 income, with a corresponding adjustment to shareholders\u2019 equity.
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.
Outstanding as at 31 December 2022
Outstanding as at 31 December 2023
Outstanding as at 31 December 2024
LTIP \u2013 time vesting criteria
The LTIP is a retention scheme with awards granted to staff members as nil cost options.
The nil cost options vest over a three year period from the date of grant and the time
vesting criteria are the only stipulations 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.
Outstanding as at 31 December 2022
Outstanding as at 31 December 2023
Outstanding as at 31 December 2024
LTIP \u2013 performance criteria
The LTIP awards with performance criteria vest three years from the date of grant and are
dependent on certain performance criteria being met. A maximum of 75% of the awards
will vest if the change in NTAVS is in excess of a required threshold, while the remaining
25% is subject to the TSR return over the vesting period being in excess of a required
threshold. 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.Outstanding as at 31 December 2023
Outstanding as at 31 December 2024
8. Other operating expenses
Other operating expenses include:
During the year ended 31 December 2024, KPMG Audit Limited provided non-audit
services in relation to Conduit's 2024 interim review and carbon emission disclosures.
Fees for non-audit services in the year ended 31 December 2024 totalled $0.1 million
(31 December 2023: $0.1 million).
Interest expense on lease liabilities
Refer to note 16 for details of Conduit\u2019s financing arrangements.
10.
Tax
Bermuda
CHL, CSL, CML and CRL have received an undertaking from the Bermuda government
which exempts them from all Bermuda local income, withholding and capital gains taxes
until 31 March 2035. On 27 December 2023 the Bermuda government enacted legislation,
the Bermuda CIT Act of 2023, into law. CHL, CSL, CML and CRL are currently not in scope
for this new legislation and as such, the exemptions provided by the Bermuda government
undertaking still apply.
11.
Cash and cash equivalents
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 16 for
cash and cash equivalents provided as collateral under Conduit\u2019s financing arrangements.Fixed maturity securities, at FVTPL
Non-US government and agency
US government agency mortgage-
Non-agency mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-
Fixed maturity securities, at FVTPL
Non-US government and agency
US government agency mortgage-
Non-agency mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-
As at 31 December 2024 other assets and other payables included nil and $6.4 million
for investments sold and purchased, respectively (31 December 2023: $0.1 million and nil,
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 years ended 31 December 2024
and 2023. 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 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 $19.1 million and transfers from Level (II) to (I)
securities amounted to $54.7 million during the year ended 31 December 2024 using end of
current period positions and estimated fair values. Transfers from Level (I) to (II) securities
amounted to $9.4 million and transfers from Level (II) to (I) securities amounted to $63.4
million during the year ended 31 December 2023 using end of current period positions and
estimated fair values. There were no investments included in Level (III) for either year end.
The fair value hierarchy of Conduit's investment portfolio is as follows:
Fixed maturity securities, at FVTPL
Non-US government and agency
US government agency mortgage-backed
Non-agency mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-backed
Fixed maturity securities, at FVTPL
Non-US government and agency
US government agency mortgage-backed
Non-agency mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-backed
Refer to note 16 for investments provided as collateral under Conduit\u2019s financing
arrangements.
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:
Fixed maturity securities, at FVTPL
US government agency mortgage-backed
Non-agency mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-backed
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 16 for
investments provided as collateral under Conduit\u2019s financing arrangements.14. Reinsurance contracts
The breakdown of portfolios of reinsurance contracts issued and reinsurance contracts
held, that are in an asset position and those in a liability position and by type of reinsurance
asset or liability, is set out below.
Reinsurance contract liabilities
Liability for remaining coverage
Liability for incurred claims
Other reinsurance receivables (payables)
Reinsurance net asset (liability)
Ceded reinsurance contract assets
Ceded asset (liability) for remaining coverage
Ceded asset for incurred claims
Ceded other receivables (payables)
Ceded reinsurance net asset (liability)
The reconciliation from the opening to the closing balances of the liability for remaining
coverage and the liability for incurred claims for reinsurance contracts issued and ceded
reinsurance contracts held is shown below. The reconciliation shows the movement in the
liability by the reinsurance service result, total comprehensive income (loss) and cash flows
separately for reinsurance contracts issued and ceded reinsurance contracts held.Year ended 31 December ($m)
Opening reinsurance asset (liability)
Reinsurance service expenses
Incurred claims and other expenses
Amortisation of reinsurance acquisition expense cash flows
Changes to liabilities for incurred claims for past service
Reinsurance service expenses
Reinsurance service result
Reinsurance finance income (expense)
Total changes in comprehensive income (loss)
Claims and other attributable expenses paid
Reinsurance acquisition expense cash flows
Closing reinsurance asset (liability)
Year ended 31 December ($m)
Opening ceded reinsurance asset (liability)
Ceded reinsurance expenses
Ceded reinsurance recoveries
Amounts recoverable on incurred claims
Changes to amounts recoverable for incurred claims
Ceded reinsurance recoveries
Reinsurance service result
Ceded reinsurance finance income (expense)
Total changes in comprehensive income (loss)
Closing ceded reinsurance asset (liability)
Year ended 31 December ($m)
Opening net reinsurance asset (liability)
Net reinsurance service expenses
Net incurred claims and other expenses
Amortisation of reinsurance acquisition expense cash flows
Changes to net liabilities for incurred claims for past service
Net reinsurance service expenses
Reinsurance service result
Net reinsurance finance income (expense)
Total changes in comprehensive income (loss)
Net claims and other attributable expenses paid
Reinsurance acquisition expense cash flows
Closing net reinsurance asset (liability)
The estimation of the liability for incurred claims 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 the liability for incurred claims.
The liability established by Conduit is viewed as adequate, however a 20% increase in estimated undiscounted losses would have a $222.7 million adverse impact on comprehensive
income (31 December 2023: $133.9 million).
Conduit did not book any additional case reserves for the years ended 31 December 2024 and 2023. The net liability for incurred claims as at 31 December 2024 had an estimated duration
of 2.8 years (31 December 2023: 3.1 years).
During 2024 Conduit was impacted by significant losses in relation to Hurricanes Helene and Milton, recording an undiscounted net loss, after reinsurance and reinstatement premiums,
of $68.0 million. While there were numerous other catastrophe and risk loss events that impacted Conduit in 2024, none of those were material individually to Conduit.
2023 by comparison, despite being an active period for natural catastrophe losses for the industry, did not have any major event losses individually or in aggregate which had a material
impact on Conduit in relation to these events. Undiscounted ultimate loss estimates, net of ceded reinsurance and reinstatement premiums, for previously reported loss events
remain stable.
The inherent uncertainty in estimating the net liability for incurred claims gives rise to favourable or adverse development. During the year ended 31 December 2024 the changes
in the discounted net liability for incurred claims for prior accident years was a reduction of $4.3 million (31 December 2023: $3.9 million). Despite some adverse development on the 2022
accident year, overall favourable development was due to IBNR releases due to a lack of reported claims.
Prior accident year claims development
Total claims development \u2013 favourable (unfavourable)
Claims development table
The following tables show the estimates of cumulative undiscounted incurred claims, including the risk adjustment, for each successive accident year at each reporting date, together with
the cumulative payments to date:
Gross undiscounted claims, including risk adjustment
Current estimate of undiscounted incurred claims
Cumulative payments to date
Current estimate of undiscounted liability for incurred claims
Current estimate of discounted liability for incurred claims
Ceded undiscounted recoveries, including risk adjustment
Current estimate of ceded undiscounted incurred recoveries
Cumulative recoveries received to date
Current estimate of ceded undiscounted asset for incurred claims
Current estimate of ceded asset for incurred claims
Net undiscounted claims, including risk adjustment
Current estimate of net undiscounted incurred claims
Cumulative payments to date
Current estimate of net undiscounted liability for incurred claims
Current estimate of net liability for incurred claims
A reconciliation of the net liability for incurred claims per the claims development tables to the carrying amounts included in the balance sheet has been provided below. Loss related
amounts represent amounts due that are contingent on claims, such as reinstatement premiums and profit commissions.
Reconciliation to carrying amounts:
Undiscounted liability for incurred claims per claims development tables
Liability for incurred claims per claims development tables
Other loss related amounts
Liability (asset) for incurred claims
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.
Balance and net book value as at 31 December 2022
Balance and net book value as at 31 December 2023
Balance and net book value as at 31 December 2024
Between one and five years
Total undiscounted lease liabilities
The discounted lease liability as at 31 December 2024 was $1.6 million (31 December
2023: $2.3 million). Conduit does not face significant liquidity risk with respect to
its lease liabilities.
Amounts recognised in the consolidated financial statements
Consolidated statement of comprehensive income
Interest expense on lease liabilities
Depreciation of right-of-use assets
Consolidated statement of cash flows
Financing arrangements
Letters of credit and trust accounts
CRL is a non-admitted reinsurer in the US and Canada but does have approved reciprocal
jurisdiction reinsurer ('RJR') status in certain states of the US which is renewed annually.
Subject to certain exceptions, RJR status reduces the need for CRL to post collateral
to support cedants in states where CRL has RJR status. However, terms and conditions
of certain reinsurance contracts with US and Canadian cedants require CRL to provide
collateral for outstanding insurance contract liabilities, including the liability for remaining
coverage and liability for incurred claims. 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 in note 3.
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 LOC facility. Terms of the standby LOC 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 increased the aggregate amount of the commitment under the facility up to
$175.0 million by the end of 2023, reducing it to $150.0 million during 2024. As at 31
December 2024, $121.2 million (31 December 2023: $125.3 million) was outstanding under
the standby LOC facility and is secured by cash and cash equivalents and investments of
$141.4 million (31 December 2023: $153.2 million).
Uncommitted letter of credit facility
During September 2021, CRL entered into a $75.0 million uncommitted LOC facility with
Citibank Europe PLC which was increased to $125.0 million during 2023. The facility
remains at $125.0 million as at 31 December 2024. Terms of the uncommitted LOC facility
include standard qualitative representations. As at 31 December 2024, $99.0 million
(31 December 2023: $72.9 million) was outstanding under the uncommitted LOC facility
and is secured by cash and cash equivalents and investments of $106.8 million
(31 December 2023: $89.1 million).
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 2024, $239.1 million (31 December 2023:
$170.8 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 2024 collateral requests and amendments received
subsequent to the year end date, but in relation to that financial year, were a net reduction
of $17.8 million. For the year ended 31 December 2023 there was a net increase of
$18.2 million. These collateral requests will be processed in the normal course of business.
Any funding requirements will be satisfied using cash and cash equivalents and/or
investments with any reductions being released from restricted funds.Authorised common shares of $0.01 each
Authorised A1 shares of \u00a30.01 each
Authorised A2 shares of $0.01 each
As at 31 December 2024 and 2023
Allotted, called-up and fully paid
As at 31 December 2024 and 2023
The number of common shares in issue less own shares held as at 31 December 2024 was 156,977,997 (31 December 2023: 158,056,137).
CHL holds 18,000 A1 and A2 shares at 31 December 2024 and 2023. The A1 and A2 shares issued by CML 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.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 21 for information on shares held by
the EBT.
18. Other reserves
Other reserves consist of the following:
Equity-based incentive expense
Equity-based incentive expense
Other reserves include Conduit\u2019s equity-based incentive expense.
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
any such proceedings (including litigation) will have a material effect on its results and
financial position.
20. Earnings per share
The following reflects the earnings and share data used in the basic and diluted earnings
per share computations:
Total comprehensive income
Basic weighted average number of shares
Dilutive effect of equity-based incentives
Diluted weighted average number of shares
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.21. Related party disclosures
These consolidated financial statements include CHL and the entities listed below:
Holding company, Ultimate parent
General insurance business
1.
CRSL dissolved effective 14 January 2025
2.
CML is part-owned by members of management. Management\u2019s share ownership in CML exists solely for
the purposes of the Group\u2019s MIP 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.
Conduit Reinsurance Services Limited (CRSL)
CRSL was established at the inception of Conduit with the expectation that certain support
services would be provided to group companies. These support services have not been
required and the voluntary liquidation of CRSL commenced during 2024. The process was
completed on 14 January 2025.
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 2024, advances of $9.4 million (31 December
2023: $13.7 million) 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 2024 the trust
purchased common shares of 1,417,422 (31 December 2023: 2,336,000).
On 18 May 2023, CHL completed the transfer of 757,823 common shares held in treasury
with a value of $3.6 million to the EBT.
During the year ended 31 December 2024 the EBT distributed 339,282 shares with a value
of $1.7 million to employees. For the year ended 31 December 2023 the EBT distributed
250,963 shares at a value of $0.9 million.
Stabilitas Re
Stabilitas Re Limited a special purpose vehicle (Stabilitas Re), was launched in June 2023.
Conduit sponsored the launch of a catastrophe bond issued by Stabilitas Re and CRL
entered into a collateralised reinsurance agreement with Stabilitas Re as part of the
transaction. The catastrophe bond was issued to third-party investors by Stabilitas Re.
Conduit has no ownership interest in, nor any control, over Stabilitas Re and therefore does
not consolidate that entity.Key management compensation
Remuneration for key management of Conduit\u2019s Executive Group, and Non-Executive
Directors, was as follows:
Equity-based incentive expense
Directors' fees and expenses
Loans to employees, including key management, to assist with environmental and
other projects, have been made by CSL. These loans are short term and interest free.
Any financial benefit to the employee is generally not material.
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.
Subsequent events
Dividends
On 18 February 2025, Conduit\u2019s Board of Directors declared a final dividend for 2024
of $0.18 (approximately \u00a30.14) per common share, which will result in an aggregate
payment of $29.7 million. The dividend will be paid in pounds sterling on 17 April 2025
to shareholders of record on 21 March 2025 (the Record Date) using the pound sterling/US
dollar spot exchange rate at 12 noon BST on the Record Date.
California Wildfires
The January 2025 California wildfires have caused widespread damage across the Los
Angeles area. While there is still considerable uncertainty due to the complicated nature of
the losses and recency of the event, our preliminary undiscounted ultimate loss estimate
across all divisions is between $100 million and $140 million, net of reinsurance recoveries
and reinstatement premiums.
Our current preliminary estimate is based on an analysis of in-force contracts with
exposure within the Los Angeles area, evaluating all the initial information we have received
from brokers, cedants and other industry sources, along with a review of the latest
modelled losses for our portfolio at various return periods. As additional information
emerges our ultimate loss may vary from this preliminary estimate. The financial impact on
Conduit of this event will be reflected in the interim results for the six months ended 30
June 2025.Additional performance measures (the 'APMs')
Conduit presents certain APMs to evaluate, monitor and manage the business and to aid readers\u2019 understanding of Conduit's financial statements and methodologies used. These
are common measures used across the (re)insurance industry and allow the reader of Conduit's financial reports to compare those with other companies in the (re)insurance industry.
The APMs should be viewed as complementary to, rather than a substitute for, the figures prepared in accordance with IFRS. Conduit\u2019s Audit Committee has evaluated the use of these
APMs and reviewed their overall presentation to ensure that they were not given undue prominence. This information has not been audited.
Management believes the APMs included in the consolidated financial statements are important for understanding Conduit\u2019s overall results of operations and may be helpful to investors
and other interested parties who may benefit from having a consistent basis for comparison with other companies within the (re)insurance industry. However, these measures may not be
comparable to similarly labelled measures used by companies inside or outside the (re)insurance industry. In addition, the information contained herein should not be viewed as superior
to, or a substitute for, the measures determined in accordance with the accounting principles used by Conduit for its audited consolidated financial statements or in accordance with IFRS.
Below are explanations, and associated calculations, of the APMs presented by Conduit:
For the majority of excess of loss contracts, premiums written are recorded
Amounts payable by the cedant before any deductions, which may include
based on the minimum and deposit or flat premium, as defined in the contract.
taxes, brokerage and commission. Reinstatement premiums are excluded.
Premiums written for proportional contracts on a risks attaching basis are
written over the term of the contract in line with the underlying exposures.
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. Reinstatement premiums are excluded.
Ratio of net losses and loss related amounts expressed as a percentage of net
Net losses and loss related amounts / Net reinsurance revenue
reinsurance revenue in a period. This can be calculated using discounted or
undiscounted net losses and loss related amounts.
Undiscounted net losses and loss related amounts / Net reinsurance revenue
Ratio of reinsurance operating expenses, which includes acquisition expenses
Reinsurance operating expenses / Net reinsurance revenue
charged by insurance brokers and other insurance intermediaries to Conduit,
and operating expenses paid that are attributable to the fulfilment of
reinsurance contracts, expressed as a percentage of net reinsurance revenue
164
Additional performance measures (the \u201cAPMs\u201d)
continued
Ratio of other operating expenses expressed as a percentage of net reinsurance
Other operating expenses / Net reinsurance revenue
The sum of the net loss ratio, reinsurance operating expense ratio and other
Net loss ratio + Net reinsurance operating expense ratio + Other operating
operating expense ratio. Other operating expenses are not allocated to the
The sum of the net loss ratio (undiscounted), reinsurance operating expense
Net loss ratio (undiscounted) + Net reinsurance operating expense ratio +
ratio and other operating expense ratio. Other operating expenses are not
Other operating expense ratio
allocated to the segment combined ratio.
Ratio of the net losses and loss related amounts of an accident year (or calendar
Accident year net losses and loss related amounts / Net reinsurance revenue
year) revalued at the current balance sheet date expressed as a percentage of
net reinsurance revenue in a period.
Conduit's principal investment objective is to preserve capital and provide
Net investment income + Net unrealised gains (losses) on investments +
adequate liquidity to support the payment of losses and other liabilities. In light
Net realised gains (losses) on investments / Non-operating cash and cash
of this, Conduit looks to generate an appropriate total net investment return.
equivalents + Fixed maturity securities, at beginning of period
Conduit bases its total net investment return on the sum of non-operating cash
and cash equivalents and fixed maturity securities. Total net investment return
is calculated daily and expressed as a percentage.
RoE enables Conduit to compare itself against other peer companies in the
Profit (loss) after tax for the period / Total shareholders' equity, at beginning
immediate industry. It is also a key measure internally and is integral in the
performance-related pay determinations. RoE is calculated as the profit for
the period divided by the opening total shareholders' equity.
165
Additional performance measures (the \u201cAPMs\u201d)
continued
Total shareholder return allows Conduit to compare itself against other public
Closing Common Share price, at end of period \u2013 Opening Common Share price,
peer companies. Total shareholder return is calculated as the percentage
at beginning of period + Common Share dividends during the period /
change in Common Share price over a period, after adjustment for Common
Opening Common Share price, at beginning of period
Calculated by dividing the annual dividends per Common Share by the Common
Annual dividends per Common Share / Closing Common Share price
Share price on the last day of the given year and expressed as a percentage.
This provides a measure of book value per share for all shares in issue less own
Total shareholders' equity less intangible assets, at the end of the period /
shares held in treasury or the EBT trust.
Total common shares in issue less own shares held
The GBP equivalent of NTAVS is calculated using the end of period exchange
rate between USD and GBP.
Basis of preparation
These consolidated financial statements are prepared on a going concern basis in
accordance with IFRS as issued by the IASB, and the DTR issued by the Financial Conduct
Authority, and are 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.
",
"dimensions": {
"concept": "ifrs-full:StatementOfIFRSCompliance",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f199": {
"value": "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 2024, the Board
have considered a number of factors, including the current balance sheet position and
Conduit\u2019s strategic and financial plan, taking account of possible changes in trading
performance and funding retention, stress testing and scenario analysis. 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 Board has a reasonable expectation that Conduit has
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, Conduit continues to adopt the going concern basis in preparing the
consolidated financial statements.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfGoingConcernExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f200": {
"value": "Changes in accounting policies and new standards
There were no new standards that became effective in the year ended 31 December 2024
that have had a material impact on Conduit.
Future accounting changes
No standards or interpretations have been issued that are expected to have a material
effect on Conduit\u2019s financial position, presentation or disclosure. IFRS 18, Presentation and
Disclosure in Financial Statements, will replace IAS 1, Presentation of Financial Statements,
and applies to reporting periods beginning on or after 1 January 2027. IFRS 18 will
require entities to classify all income and expenses on the consolidated statement of
comprehensive income into operating, investing and financing activities, disclose in a single
note management-defined performance measures, and provide enhanced guidance on how
to group information in the financial statements. Conduit is in the process of assessing the
impact that the new standard will have on its presentation and disclosure requirements,
but does not currently expect any material changes.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f201": {
"value": "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 the liability for
incurred claims and associated ceded reinsurance recoveries, as discussed in note 3 and
note 14.
Less significant estimates are made in determining the estimated fair value of certain
financial instruments, as discussed in note 3 and note 12.
In addition, some management judgement is exercised in determining the total premium
cash flows expected to be received from reinsurance contracts that are used to determine
the amount of reinsurance revenue recognised in the period.
While not significant, estimates are also used in the estimated fair value of the MIP as
discussed in note 7.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f202": {
"value": "Consolidation principles
These consolidated financial statements comprise the financial statements of CHL and its
subsidiaries as at and for the year ended 31 December 2024. 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 consistent with Conduit\u2019s
accounting policies.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f203": {
"value": "Foreign currency
The functional currency, which is the currency of the primary economic environment in
which Conduit operates, is US dollars. Items included in the financial statements of each
entity 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 income 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.
",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f204": {
"value": "Reinsurance contracts
IFRS 17 sets out the classification, measurement and presentation and disclosure
requirements for reinsurance contracts. It requires reinsurance contracts to be measured
using current estimates and assumptions that reflect the timing of cash flows and
recognition of profits as insurance services are delivered. The standard provides two main
measurement models which are the General Measurement Model (GMM) and the Premium
Allocation Approach (PAA).
The PAA simplifies the measurement of reinsurance contracts for remaining coverage, or
pre-claims, in comparison to the GMM. The GMM is used for the measurement of the liability
for incurred claims.PAA eligibility
Under IFRS 17, Conduit\u2019s reinsurance contracts issued and ceded reinsurance
contracts held are all eligible to be measured by applying the PAA, due to meeting
the following criteria:
\u2022
Loss-occurring reinsurance contracts with coverage period of one year or less are
automatically eligible; and
\u2022
Modelling of risk-attaching contracts or contracts with a coverage period greater than
one year produces a measurement for the group of reinsurance contracts that does
not differ materially from that which would be produced applying the GMM.
Classification
Contracts that transfer significant reinsurance risk at the inception of the contract are
accounted for as reinsurance contracts. Contracts purchased and held by Conduit under
which it transfers significant reinsurance risk to a counterparty are accounted for as
ceded 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.
Conduit\u2019s accounting policies apply to both reinsurance contracts issued and ceded
reinsurance contracts held unless explicitly referenced as applying to contracts issued
or ceded only. Conduit writes both excess of loss and proportional (also known as quota
share or pro-rata) reinsurance contracts. The type of contract impacts the recognition
of reinsurance revenue. Contract types are discussed on page 115.
Separating components from reinsurance contracts
IFRS 17 distinguishes three components that, if embedded in a reinsurance contract,
should be bifurcated, and accounted for separately. These are:
\u2022
Cash flows relating to embedded derivatives that are required to be separated;
\u2022
Cash flows relating to distinct investment components; and
\u2022
Promises to transfer distinct goods or distinct non-insurance services.
IFRS 17 then applies to all remaining components of the contract. Conduit does not
have any contracts containing non-insurance components that require separation.
Where contracts contain multiple reinsurance components that meet the requirements
for separation, these are separated and accounted for as standalone contracts.
Some reinsurance contracts issued contain profit-sharing arrangements, such as profit
commissions and no claims bonuses. Under these arrangements, there is a minimum
guaranteed amount that the policyholder will always receive either in the form of profit
commission, or as reimbursement for claims, or another contractual payment, irrespective
of the insured event happening. These are typically considered non-distinct investment
components. Non-distinct investment components are not separated from the reinsurance
contract as they are closely interrelated to the measurement of the reinsurance contract.
However, the impact of the non-distinct investment components are excluded from the
consolidated statement of comprehensive income by adjusting reinsurance revenue and
reinsurance service expenses by the minimum amount due. There is no impact to the
reinsurance service result as there is an equal reduction to both revenue and expenses.
Level of aggregation
Conduit manages reinsurance contracts issued by class of business within an operating
segment. Classes of business are aggregated into portfolios of contracts that are subject
to similar risks. Contracts within each portfolio are grouped into groups of contracts that
are issued within a calendar year, the annual cohort, and are (i) contracts that are onerous
at initial recognition; (ii) contracts that at initial recognition have no significant possibility
of subsequently becoming onerous; 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.
Onerous contracts
Under the PAA, it is assumed there are no contracts in the portfolio that are onerous at
initial recognition, unless there are facts and circumstances that may indicate otherwise.
Management primarily considers the following 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; and
\u2022
External factors, such as a change in market experience or regulations.If a group of contracts becomes onerous, Conduit increases the carrying amount of the
liability for remaining coverage to the amount of the fulfilment cash flows with the amount
of such an increase recognised immediately in reinsurance service expenses. Subsequently,
Conduit amortises the amount of the loss component by decreasing reinsurance service
expenses. The loss component amortisation is based on the passage of time over
the remaining coverage period of contracts within an onerous group. If facts and
circumstances indicate that the expected profitability of the onerous group during
the remaining coverage has changed, then Conduit remeasures the loss component
by reassessing the fulfilment cash flows as required until the loss component is reduced
to zero.
Where a loss component is expected to be partially or fully recovered by ceded reinsurance
contracts, the amount of recovery is recognised in ceded reinsurance recoveries.
Recognition
Conduit recognises groups of reinsurance contracts it issues from the earliest of:
\u2022
The beginning of the coverage period of the group of contracts;
\u2022
The date when the first payment from the cedant is due or when the first payment
is received if there is no due date; or
\u2022
For a group of onerous contracts, the date when facts and circumstances indicate
that the group is onerous.
For ceded reinsurance contracts Conduit recognises the group of contracts:
\u2022
If the reinsurance contracts provide proportionate coverage, at the later of the
beginning of the coverage period of the group, or the initial recognition of the
underlying covered reinsurance contracts issued; or
\u2022
For non-proportionate coverage, the beginning of the coverage period of the group
of contracts, unless an onerous group of underlying reinsurance contracts have been
recognised and the ceded reinsurance contract has been signed before that date.
Modification and derecognition
Conduit derecognises reinsurance contracts when:
\u2022
The rights and obligations relating to the contract are extinguished (meaning
discharged, cancelled or expired); or
\u2022
The contract is modified such that the modification results in a change in the
measurement model or the applicable standard for measuring a component of
the contract, substantially changes the contract boundary, or requires the modified
contract to be included in a different group. In such cases, Conduit derecognises
the initial contract and recognises the modified contract as a new contract. When
a modification is not treated as a derecognition, Conduit recognises amounts paid
or received for the modification with the contract as an adjustment to the relevant
liability for remaining coverage.
Contract boundaries
The measurement of a group of reinsurance contracts includes all future cash flows
expected to arise within the boundary of each contract in the group. Cash flows are within
the boundary of a reinsurance contract if they arise from substantive rights and obligations
that exist during the reporting period in which Conduit can compel the cedant to pay
the premiums, or in which Conduit has a substantive obligation to provide the cedant with
services. A substantive obligation to provide services ends when Conduit has the practical
ability to reassess the risks of the cedant and, as a result, can set a price of level of benefits
that fully reflects those risks. Where Conduit issues multi-year contracts and does not have
the ability to re-price on each policy anniversary the contract is considered one contract
and therefore future cash flows from each of the annual periods are considered on
initial recognition.
For ceded reinsurance contracts the cash flows are within the boundary of the contract
if Conduit has a substantive right to receive services or if Conduit is compelled to pay
premiums to the reinsurer. The substantive right to receive services from the reinsurer
ends when:
\u2022
The reinsurer has the practical ability to reassess the risks transferred to it and can
set a price of level of benefits that fully reflects those risks; or
\u2022
The reinsurer has a substantive right to terminate the coverage.Conduit assesses the contract boundary at initial recognition and at each subsequent
reporting date to include the effects of changes in circumstances on Conduit\u2019s substantive
rights and obligations. The assessment of the contract boundary, which defines the future
cash flows that are included in the measurement of the contract, requires judgement and
consideration of Conduit's substantive rights and obligations. Conduit issues risk-attaching
reinsurance contracts which provide reinsurance coverage to underlying contracts
issued within the terms of the contract. While the contracts can have an annual term the
contract boundary is assessed with consideration of the coverage period of the underlying
contracts. Contracts that cover claims from underlying contracts within the contract
period, loss-occurring contracts, are typically annual term. Where contracts contain
multi-year terms, Conduit exercises judgement on whether provisions within the contract
allow cancellation or re-pricing at each anniversary of the contract.
Measurement \u2013 Liability for remaining coverage
On initial recognition of each group of contracts, the carrying amount of the liability for
remaining coverage is measured as the premiums received on initial recognition, if any,
minus any reinsurance acquisition expense cash flows allocated to the group of contracts
and any amounts arising from the derecognition of the prepaid reinsurance acquisition
expense cash flows asset. Conduit has chosen not to expense reinsurance acquisition
expense cash flows on contracts with coverage of one year or less when they are incurred
in order to apply a consistent treatment of reinsurance acquisition expense cash flows
for all contracts, regardless of the length of coverage.
Subsequently, at the end of each reporting period, the liability for remaining coverage is:
\u2022
Increased by any premiums received in the period;
\u2022
Decreased for reinsurance acquisition expense cash flows paid in the period;
\u2022
Decreased for the amounts of expected premium cash flows recognised as reinsurance
revenue for the services provided in the period;
\u2022
Increased for the amortisation of reinsurance acquisition expense cash flows in the
period recognised as reinsurance service expenses; and
\u2022
Decreased for any non-distinct investment component paid or transferred to the
liability for incurred claims.
Conduit has elected not to adjust the liability for remaining coverage for the time value
of money as its reinsurance contracts do not contain a significant financing component.
Conduit measures the reinsurance asset for remaining coverage for its ceded reinsurance
contracts that it holds on the same basis as reinsurance contracts issued, adapted to reflect
the features that differ between contracts issued versus contracts held.
Reinsurance revenue recognised in the period is based on the total premium cash flows
expected to be received over the lifetime of the contract, net of any deductions that are
paid to the cedant. The amount of total expected revenue from a contract recognised
in the period is dependent on the type of reinsurance contract, as discussed below.
Excess of loss contracts
For the majority of excess of loss contracts, expected premium cash flows are assessed
based on the minimum and deposit or flat premium, as defined in the contract. Subsequent
adjustments to the minimum and deposit premium are assessed in the period in which
they are determined. For excess of loss contracts where no deposit is specified in the
contract, premium cash flows are assessed based on estimates of premiums provided
by the ceding company. Subsequent adjustments, based on reports of actual premium
by ceding companies, or revisions in estimates, are assessed in the period in which they
are determined. For multi-year policies that are payable in annual instalments, where
the reinsured has the sole ability to cancel, the total expected premium cash flows for all
annual periods are assessed at the inception of the contract. Where unilateral cancellation
by the reinsurer exists at each anniversary of the contract the annual periods are assessed
as separate contracts.
Reinsurance revenue for excess of loss contracts is generally recognised 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, reinsurance
revenue is recognised over the period of risk in proportion to the amount of reinsurance
protection provided. Where contract terms require the reinstatement of coverage after
a ceding company\u2019s loss, as the reinstatement is contingent on the loss, the estimated
mandatory reinstatement premiums are recorded within reinsurance service expenses.Proportional contracts
Premium cash flows for proportional contracts are assessed 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 premium cash flows are assessed 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. Reinsurance revenue 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 assessed in the
period in which they are determined.
Reinsurance acquisition expense cash flows
Reinsurance acquisition expense cash flows represent the cash flows that arise from
the cost of selling and underwriting a group of reinsurance contracts and include:
\u2022
Contract specific costs, such as brokerage;
\u2022
Operating expenses that are incurred in relation to the fulfilment of reinsurance
contracts; and
\u2022
An allocation of fixed and variable overheads.
Reinsurance 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 and recognised within reinsurance service expenses.
Commissions that are paid to cedants, such as ceding commissions, are not treated
as reinsurance acquisition expense cash flows as they do not relate to a service.
Such commissions are treated as a reduction in the expected premium recognised
as reinsurance revenue.
Ceded reinsurance expenses
Ceded reinsurance is purchased in the normal course of business to increase capital
capacity or to 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 a proportional basis, and may supplement this with the use
of ceded reinsurance cover linked to the issuance of catastrophe bonds or other capital
market products. Ceded reinsurance premiums are recognised as ceded reinsurance
expenses in the same manner as reinsurance contracts issued, depending on the terms of
the contract. Ceding commissions received are deducted from the premium paid that is
recognised in ceded reinsurance expenses. Other expenses incurred in the placing of ceded
reinsurance contracts that are in relation to a service by a third party, such as brokerage,
are recognised in ceded reinsurance expenses.
Measurement \u2013 Liability for incurred claims
The liability for incurred claims represents the estimated ultimate cost of settling all
reinsurance claims arising from events that have occurred up to the end of the reporting
period, including the operating costs that are expected to be incurred in the course of
settling such claims, reinstatement premiums on specific loss events, profit commissions
and similar expenses that are contingent on claims plus a provision for IBNR. The liability
for incurred claims is derived from the estimated fulfilment cash flows relating to expected
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 also include an explicit adjustment for
non-financial risk, the risk adjustment. Estimates of future cash flows for incurred claims
are discounted on initial recognition and then re-measured to current rates as at the
reporting date.
Cash flows for outstanding losses are estimated initially on the basis of reported losses
received from cedants. Cash flows for ACRs are determined where management\u2019s
expectation of the ultimate cost of the reported loss is greater than that reported.
Estimated cash flows for IBNR 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.
Cash flows for IBNR 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 cash flows 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 ofmanagement\u2019s judgement and experience, historical reinsurance industry loss experience
and estimates of pricing adequacy trends to estimate cash flows for IBNR.
The estimation of the liability for incurred claims 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 the liability for
incurred claims.
Any amounts recoverable from reinsurers are estimated using the same methodology as
for the underlying losses except for the requirement under IFRS 17 to assess the ceded
reinsurance recovery cash flows for the effect of any risk of non-performance, including
expected credit losses. Management monitors the creditworthiness of its reinsurers on an
ongoing basis and assesses any reinsurance assets for the risk of non-performance, with a
provision for non-performance risk being recognised as an expense in the period in which
it is determined.
Presentation of reinsurance contracts
Reinsurance assets and liabilities
The asset or liability for a portfolio of reinsurance contracts is the net position of both the
liability for remaining coverage and the liability for incurred claims. Whether a portfolio is in
a liability or asset position is typically impacted by the timing of cash flows received versus
cash flows paid. Conduit presents separately in the consolidated balance sheet portfolios
of reinsurance contracts issued and held that are in an asset position and those that are
in a liability position.
All reinsurance contract assets and liabilities are deemed monetary assets and liabilities
and are revalued at period end exchange rates.
Reinsurance revenue
Reinsurance revenue in the consolidated statement of comprehensive income is the
amount of expected premium cash flows, net of any deductions paid to the cedant
and excluding any non-distinct investment component. Conduit allocates the expected
premium receipts to each period of coverage on the basis of passage of time or the
expected risk pattern if it differs significantly from the passage of time.
Reinsurance service expenses
Reinsurance service expenses in the consolidated statement of comprehensive income
includes changes in the liability for incurred claims that do not arise from the application
of discount rates, being recognition and amortisation of any loss components, amortisation
of reinsurance acquisition expense cash flows and other attributable operating expenses.
Ceded reinsurance income and expenses
Conduit has elected to present the income and expenses from ceded reinsurance contracts
separately in the consolidated statement of comprehensive income. Ceded reinsurance
expenses represent the total expected ceded premiums and other amounts, that are not
contingent on recoveries, payable to Conduit's reinsurers. Conduit recognises ceded
reinsurance expenses based on the passage of time over the coverage period of a group
of contracts or expected risk pattern. Income from ceded reinsurance contracts includes
expected recoveries on incurred claims, changes in expected recoveries related to past
service, the provision for the effects of changes in risk of reinsurer non-performance plus
other amounts that are contingent on recoveries, such as ceded profit commissions
payable to the reinsured.
Net reinsurance finance income (expense)
Reinsurance finance income (expense) includes the changes in the carrying amounts
of reinsurance and ceded reinsurance assets and liabilities arising from the unwind of
discount recognised in prior periods and the effects of remeasuring to current discount
rates plus other financial assumptions. Conduit has elected to disaggregate the changes
in the risk adjustment for the time value of money and present in net reinsurance finance
income (expense).
Conduit has chosen not to disaggregate finance income (expense) between other
comprehensive income (OCI) and comprehensive income.
",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForReinsuranceExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f205": {
"value": "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.Cash and cash equivalents
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 16 for
cash and cash equivalents provided as collateral under Conduit\u2019s financing arrangements.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f206": {
"value": "Investments
Conduit\u2019s fixed maturity securities portfolio meets the requirements for mandatory
classification as FVTPL and is 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 held within a business model that 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 on a fair value basis.
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 income within
net unrealised gains (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 (losses)
on investments to net realised gains (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.
",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForHeldtomaturityInvestmentsExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f207": {
"value": "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.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f208": {
"value": "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.
Conduit also operates DSBP and LTIP awards. Under the 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.
The LTIP awards are awarded with or without performance criteria attached to the awards.
These nil cost awards granted to staff vest over a three-year period from the date of grant.
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.
Refer to note 7 for details of performance criteria attached to certain LTIP awards.
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 income, 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 income 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 within other expenses in the consolidated
statement of comprehensive income in the period when the services are rendered.
",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f209": {
"value": "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.
",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f210": {
"value": "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.
",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f211": {
"value": "Own shares
Own shares include shares repurchased under share repurchase authorisations and held
in treasury, plus shares purchased 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.
",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForTreasurySharesExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f212": {
"value": "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.",
"dimensions": {
"concept": "ifrs-full:DescriptionOfAccountingPolicyForIssuedCapitalExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f213": {
"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. Risk appetite is prescribed by the Board and is 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.
Day-to-day management of risk is the responsibility of management, operating within the
defined appetite and tolerances. 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 CHL and CRL. To ensure transparency and accountability of the business
for 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.
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 transition
risk. 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. Transition 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.
Geopolitical and macroeconomic factors
During 2024, an unusually high proportion of the world selected new governments and
policy decisions and their implications will play out through 2025. 2024 also saw increased
levels of political unrest globally. The combination of these factors presents ongoing risk
into 2025, together with uncertainties as to economic policies and the associated impact
on global trade, interest rates and inflation.
In Bermuda, we have seen the progressing of legislation to implement the Bermuda
Corporate Income Tax ('CIT') from 2025 onwards. Conduit does not expect to meet
the criteria that would make it subject to the tax. If Conduit were to meet the Bermuda
CIT criteria in the future, it is likely that an exemption will be available for the first five
years in which the tax would otherwise apply. As CHL, CSL, CML and CRL do not meet
the qualifying criteria under Bermuda CIT, they continue to benefit from an existing
undertaking from the Bermuda government which exempts them from all Bermuda
local income, withholding and capital gains taxes until 31 March 2035.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
A five-year strategic plan is produced that defines the overriding 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 and are stored centrally
in our pricing platform;
\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 calculate the
associated expected losses; and
\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 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 has exposure to other natural
catastrophes that can occur throughout the year, such as earthquakes, tsunamis, droughts,
floods, hail, tornadoes, and wildfires. In addition, Conduit is exposed to risk losses
throughout the year from perils such as fire, explosion, war, terrorism, political risk, cyber
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. Conduit\u2019s most
significant modelled exposure to any single peril and region combination at the commonly
reported 100-year and 250-year return periods were to Florida windstorm as at 31
December 2023 and California earthquake as at 31 December 2024. 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.
The table shows modelled estimated net exposure as at 31 December 2024 which reflects
reduced attachment points to aggregate reinsurance protections resulting from events
during the year. This has a notable impact on net Florida windstorm exposure. The 31
December 2023 exposures did not benefit from reductions in the attachment points of
aggregate reinsurance protections. Any reduction in estimated loss for events that
happened in 2024 will increase modelled loss shown above.
While modelling is an important tool in assessing exposure and aggregations, the reliability
of modelling varies by peril and region. Modelling is also dependent on various judgemental
assumptions and input data provided by cedants, which can vary in precision and accuracy.
As such actual exposures are likely to vary from those shown. There could also be an
unmodelled loss which exceeds these figures. The models also contain loss scenarios at
higher return periods which could cause a larger loss to capital than the modelled
expectation shown above.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 typically 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 ultimate net loss excess of loss basis,
however industry loss warranties, catastrophe bonds issuances, or proportional treaty
arrangements may also be utilised.
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 a liability for incurred claims 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 officers 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.
Conduit 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, but are not limited to, aviation,
energy, engineering and construction, environmental, 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 claims arising from any one event. 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 airlines, aircraft, airports,
aircraft manufacturers and aviation related products, and includes cover for the aircraft
themselves as well as losses arising from passenger and third-party liability claims against
airlines and/or operators and/or manufacturers.Energy
The energy class of business provides reinsurance cover for a global spread of accounts
that includes risks such as downstream energy, midstream energy, upstream energy,
energy liability, construction and natural perils related coverages such as Gulf of Mexico
wind and hurricane programmes. Policies typically cover legal liability of an insured and
property for physical damage (including natural catastrophe), machinery breakdown
perils and consequential business interruption exposure. Loss limits are set at a level
commensurate with the modelled estimated maximum loss scenario.
Engineering and construction
The class covers a wide range of products falling under related property and business
income protection on a worldwide basis. These products include, but are not limited to,
contractors\u2019 all risks, erection all risks, plant and equipment, machinery breakdown and
loss of profits. Projects range from small bespoke to large civil engineering constructions.
The main hazards are fire and explosion, theft, collapse and natural perils such as
earthquake, windstorm and flood.
Environmental
Environmental products generally provide cover relating to the environmental and energy
casualty classes with regard to pollution. The related sectors typically include energy,
construction, and industrial which includes both commercial and residential risks.
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 commonly provides cover for legal liability for losses arising from
the operation of marine and offshore related assets including but not limited to the
reinsurance of the International Group of Protection and Indemnity Clubs, the operation
and management of ships and vessels, cargo, and marine builders' risks covering the
building of ocean-going vessels and offshore assets.
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.
Renewables
The class covers a wide range of tailored solutions globally. The class includes offshore and
onshore wind power, ground and rooftop solar power plus bioenergy fuels and associated
operations. The risks exposed are quite unique, from difficult construction operations to
installing complex equipment that is routinely exposed to natural hazards. Policies typically
include cover for physical damage, legal liability, machinery breakdown and business
interruption for both construction and operational phases.
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 property, specialty and casualty classes of business
including commercial and personal automobile, general liability, workers compensation,
employers 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, notably earthquakes and named storms), 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 also use reinsurance linked to 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 capitalthan 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, among 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.
Fulfilment cash flows
Fulfilment cash flows consist of:
\u2022
The estimates of future cash flows required in the ultimate settlement of claims;
\u2022
An adjustment for the time value of money; and
\u2022
A risk adjustment for non-financial risk
Estimates of future cash flows
A significant and critical judgement and estimate made by management is the estimation
of future cash flows in relation to ultimate claims settlements. Management estimates,
in an unbiased way, future cash flows to cover its estimated liability for both reported
and unreported claims on events that have occurred up to the latest valuation date,
incorporating all reasonable and supportable information that is available without undue
cost or effort. Management uses methodologies that calculate a point estimate for the
ultimate losses, representing management\u2019s best estimate of ultimate future cash flows.
Conduit estimates the future cash flows 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 management believes may not be adequately estimated
by the cedant as at that date.
Liabilities for incurred claims are not permitted until the occurrence of an event which may
give rise to a claim. As a result, only provisions applicable to losses that have occurred up
to the reporting date are established, with no allowance for the provision of a contingency
liability 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 liabilities from time to time. The estimated timing of the future cash flows is
determined by applying cash flow payment assumptions to the best estimate of ultimate
future cash flows.
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 the net ultimate liability for incurred claims.
The judgements and estimates used in establishing future cash flow calculations may be
revised as additional experience or other data becomes available. Future cash flows 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 assumptions and methodologies on a quarterly
basis and develop an actuarial best estimate of Conduit\u2019s future cash flows using the
processes outlined above. The management Reserving Committee reviews the estimate
for the liability for incurred claims 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.
Risk adjustment
The risk adjustment for non-financial risk is the compensation that Conduit requires
for bearing the uncertainty about the amount and timing of the cash flows arising from
reinsurance contracts. Conduit determines the risk adjustment at the entity level and
allocates to the groups of reinsurance contracts.
Conduit has estimated the risk adjustment using a margin-based approach. The margins
are calibrated to a targeted confidence interval range using the BMA BSCR risk framework.
Conduit expects that the risk adjustment recognised within the fulfilment cash flow will fall
within the range of the 75th and the 85th percentile, gross and net of ceded reinsurance.
Conduit estimates that the risk adjustment net of ceded reinsurance corresponds to the
81st percentile as at 31 December 2024 (31 December 2023: 82nd percentile).
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.
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; and
\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; and
\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:
Fixed maturity securities at FVTPL
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Asset-backed and mortgage-backed
Fixed maturity securities at FVTPL
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Asset-backed and mortgage-backed
The estimated maturity profile of the reinsurance liability for incurred claims and financial liabilities of Conduit is as follows:
Years until liability becomes due \u2013 discounted
Reinsurance liability for incurred claims
Other reinsurance payables
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 incurred claims is complex and incorporates a significant amount of judgement. The timing of payments 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 2024, cash and cash equivalents were $313.2 million (31 December 2023: $199.8 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 2024, 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.Operational risk is the risk of loss resulting from inadequate or failed internal processes,
personnel, systems or external events. During the reporting period, various operational risks
were identified, and steps were taken to manage or mitigate those 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; and
\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
Total tangible capital is as follows:
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; and
\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 as a Class 4 (re)insurer by the BMA and is required to hold sufficient
capital under applicable regulations. The BMA\u2019s regulatory framework has been assessed as
equivalent to the EU\u2019s Solvency II regime. CRL had sufficient capital at all times throughout
the year to meet the BMA\u2019s requirements, inclusive of the BSCR standard formula and
minimum margin of solvency.
Retention risk
Risks associated with succession planning, staff retention and key person 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": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f214": {
"value": "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 reinsurance revenue by geographic region and operating segment are as follows:
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 Risk disclosures section in note 3.
US and international property catastrophe and non-catastrophe risks on
an excess of loss and proportional contract basis.
US and international casualty risks principally including directors and officers
liability, financial institutions liability, general liability, medical malpractice,
professional liability and transactional liability.
Diverse portfolio of business, including aviation, energy, engineering and
construction, environmental, marine, renewables, political violence and
terrorism and whole account.
Reportable segment performance is measured by the reinsurance service and finance
result 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.
Year ended 31 December 2024
Reinsurance revenue by geographic region
Year ended 31 December 2023
Reinsurance revenue by geographic region
Included within the worldwide geographic region, are premiums written with external
parties in Bermuda for $0.7 million (31 December 2023: $4.0 million).Ceded reinsurance expenses
Reinsurance losses and loss related amounts, discounted
Reinsurance operating expenses
Reinsurance service expenses
Ceded reinsurance recoveries
Reinsurance service result
Net reinsurance finance income (expense)
Reinsurance service and finance result
Net unallocated revenue (expenses)
Total comprehensive income
Net loss ratio (discounted)
Reinsurance operating expense ratio
Other operating expense ratio
Combined ratio (discounted)
Net loss ratio (undiscounted)
Combined ratio (undiscounted)
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; and
\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 laws and regulation, including capital, governance or licensing requirements;
and
\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
Reviewing and amending underwriting plans and outlook as necessary;
\u2022
Reducing exposure to, or withdrawing from, market sectors where conditions have
reached unattractive levels;
\u2022
Purchasing appropriate, cost-effective reinsurance cover to mitigate exposures;
\u2022
Closely monitoring changes in rates, terms and conditions and inflation;
\u2022
Ensuring through rigorous underwriting criteria that surplus capital does not drive
short-term risk appetite;
\u2022
Holding an underwriting roundtable meeting, typically daily, where deal flow, pricing
and opportunities are discussed;Holding quarterly management Underwriting Oversight Committee meetings that
consider matters that include underwriting performance for CRL;
\u2022
Holding an annual strategy review meeting;
\u2022
Holding a quarterly Underwriting Committee board meeting that considers matters
including underwriting performance for CRL;
\u2022
Holding a quarterly Risk, Capital and Compliance Committee meeting to review
relevant risk and capital considerations for CRL; and
\u2022
Holding regular meetings with regulators and rating agencies.
Reinsurance finance risk
Estimates of future cash flows for incurred claims are discounted on initial recognition
and then re-measured to current rates as at each reporting date. Reinsurance liabilities and
ceded assets for incurred claims are therefore sensitive to the level of market interest rates.
Interest rate risk on reinsurance contracts is the risk that the value of the future cash flows
will fluctuate due to changes in market interest rates. Movements in interest rates may lead
to an adverse impact on the value of Conduit\u2019s reinsurance contract assets and liabilities.
Conduit manages this risk by monitoring the duration of reinsurance contract cash flows
and adopting policies regarding asset and liability matching to reduce the volatility arising
from interest rate movements on assets and liabilities in the consolidated statement of
comprehensive income.
The total reinsurance contract assets and liabilities exposed to interest rate risk are
detailed below:
Ceded asset for incurred claims
Liability for incurred claims
Discount rates
All future cash flows are discounted using yield curves that are adjusted to reflect the characteristics of the cash flows and the liquidity of the reinsurance contracts. Conduit determines
its discount rates using a bottom-up method of using a risk-free rate, plus an illiquidity premium where applicable. Risk-free rates are determined by reference to the yields published by
EIOPA for the relevant, material currencies. The illiquidity premium is estimated by reference to observable market corporate bond yields.
The annual spot rates, including illiquidity premium, used for the re-measurement of the net liability for incurred claims as at the balance sheet date are shown below for all portfolios:
The sensitivity of Conduit's net reinsurance liability for incurred claims to interest rate
maintained. Conduit also prioritises liquid asset classes with higher credit quality and
movements is detailed below, assuming linear movements in interest rates:
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
Immediate shift in yield (basis points)
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
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.
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.
The Investment Committee of the CRL Board 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, duration 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 four 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
Conduit focuses on the most significant risks in its investment portfolio which are interest
rate risk, credit risk and liquidity risk, and has built stress testing and risk analytics around
these risks to ensure they are within tolerances and preferences. 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.
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 meets 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 risk framework.The investment mix by mandate and sector of Conduit's portfolio of fixed maturity
securities is as follows:
Non-US government and agency
Non-US government and agency
US government agency mortgage-backed
US government agency mortgage-backed
Non-agency mortgage-backed
Non-agency mortgage-backed
Agency commercial mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-backed
Non-agency commercial mortgage-backed
Corporate and non-US government and agency bonds by country are as follows:
The sector allocation of corporate bonds is as follows:
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.
Immediate shift in yield (basis points)
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 2.5 years
as at 31 December 2024 (as at 31 December 2023: 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:
99th percentile confidence level
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 and liabilities. Foreign currency gains and losses are recorded in the period they occur in the consolidated
statement of comprehensive income.
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 and ceded reinsurance assets and liabilities, cash holdings and dividend payable, if applicable.
With the adoption of IFRS 17 all reinsurance and ceded reinsurance assets and liabilities are monetary items and are revalued at period end exchange rates.
The following table summarises the carrying value of all monetary and non-monetary assets and liabilities categorised by Conduit\u2019s main currencies.
The impact on profit from a proportional foreign exchange movement of 10.0% against the US dollar at year end spot rates would be an increase or decrease of $1.3 million
(31 December 2023: increase or decrease of $0.4 million).",
"dimensions": {
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"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f216": {
"value": "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 expected
premium cash flows due from cedants and on ceded reinsurance recoverables.
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 total expected
premium cash flows due from reinsurance brokers and cedants and on ceded reinsurance
recoverables due from Conduit\u2019s reinsurers. Credit risk on total expected premium cash
flows due 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.
Ceded reinsurance recoverables are recorded within ceded reinsurance contract assets
as the ceded asset for incurred claims which is shown in note 14.
The table opposite presents an analysis of Conduit\u2019s major exposures to counterparty
credit risk, based on their rating. Expected premium cash flows are not rated, however
there is limited default risk associated with these amounts.
The ceded reinsurance assets classified as other are fully collateralised.
As at 31 December 2024 the average credit quality of Conduit's cash and cash equivalents
and portfolio of fixed maturity securities was AA (31 December 2023: AA).Total expected premium cash flows represents the premium, net of deductions,
expected to be received for past and future reinsurance coverage. The following table
shows total expected premium cash flows that are not yet due and those that are past
due but not impaired, which represents the exposure to credit risk on reinsurance
contracts issued at the balance sheet date.
Less than 90 days past due
For the years ended 31 December 2024 and 2023 no provisions have been made for
impaired or irrecoverable balances and no amount was charged to the consolidated
statement of comprehensive income in respect of bad debts.
",
"dimensions": {
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"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f217": {
"value": "Fixed maturity securities
Cash and cash equivalents
Fixed maturity securities
Cash and cash equivalents
Included in net investment income is $1.6 million of investment management and custody
fees for the year ended 31 December 2024 (31 December 2023: $1.3 million). Net foreign
exchange gains (losses) on cash and cash equivalents and fixed maturity securities for
the year ended 31 December 2024 was $(4.5) million (31 December 2023: nil). Foreign
exchange impacts are not included in the investment returns in the table above.
Fixed maturity securities, at FVTPL
Non-US government and agency
US government agency mortgage-
Non-agency mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-
Fixed maturity securities, at FVTPL
Non-US government and agency
US government agency mortgage-
Non-agency mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-
As at 31 December 2024 other assets and other payables included nil and $6.4 million
for investments sold and purchased, respectively (31 December 2023: $0.1 million and nil,
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 years ended 31 December 2024
and 2023. 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 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 $19.1 million and transfers from Level (II) to (I)
securities amounted to $54.7 million during the year ended 31 December 2024 using end of
current period positions and estimated fair values. Transfers from Level (I) to (II) securities
amounted to $9.4 million and transfers from Level (II) to (I) securities amounted to $63.4
million during the year ended 31 December 2023 using end of current period positions and
estimated fair values. There were no investments included in Level (III) for either year end.
The fair value hierarchy of Conduit's investment portfolio is as follows:
Fixed maturity securities, at FVTPL
Non-US government and agency
US government agency mortgage-backed
Non-agency mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-backed
Fixed maturity securities, at FVTPL
Non-US government and agency
US government agency mortgage-backed
Non-agency mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-backed
Refer to note 16 for investments provided as collateral under Conduit\u2019s financing
arrangements.
",
"dimensions": {
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"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f218": {
"value": "6. Reinsurance finance return
Interest accretion from reinsurance contracts
Interest accretion from ceded reinsurance contracts held
Change in discount rates from reinsurance contracts
Change in discount rates from ceded reinsurance contracts held
Net change in discount rates
Net reinsurance finance income (expense)
14. Reinsurance contracts
The breakdown of portfolios of reinsurance contracts issued and reinsurance contracts
held, that are in an asset position and those in a liability position and by type of reinsurance
asset or liability, is set out below.
Reinsurance contract liabilities
Liability for remaining coverage
Liability for incurred claims
Other reinsurance receivables (payables)
Reinsurance net asset (liability)
Ceded reinsurance contract assets
Ceded asset (liability) for remaining coverage
Ceded asset for incurred claims
Ceded other receivables (payables)
Ceded reinsurance net asset (liability)
The reconciliation from the opening to the closing balances of the liability for remaining
coverage and the liability for incurred claims for reinsurance contracts issued and ceded
reinsurance contracts held is shown below. The reconciliation shows the movement in the
liability by the reinsurance service result, total comprehensive income (loss) and cash flows
separately for reinsurance contracts issued and ceded reinsurance contracts held.Year ended 31 December ($m)
Opening reinsurance asset (liability)
Reinsurance service expenses
Incurred claims and other expenses
Amortisation of reinsurance acquisition expense cash flows
Changes to liabilities for incurred claims for past service
Reinsurance service expenses
Reinsurance service result
Reinsurance finance income (expense)
Total changes in comprehensive income (loss)
Claims and other attributable expenses paid
Reinsurance acquisition expense cash flows
Closing reinsurance asset (liability)
Year ended 31 December ($m)
Opening ceded reinsurance asset (liability)
Ceded reinsurance expenses
Ceded reinsurance recoveries
Amounts recoverable on incurred claims
Changes to amounts recoverable for incurred claims
Ceded reinsurance recoveries
Reinsurance service result
Ceded reinsurance finance income (expense)
Total changes in comprehensive income (loss)
Closing ceded reinsurance asset (liability)
Year ended 31 December ($m)
Opening net reinsurance asset (liability)
Net reinsurance service expenses
Net incurred claims and other expenses
Amortisation of reinsurance acquisition expense cash flows
Changes to net liabilities for incurred claims for past service
Net reinsurance service expenses
Reinsurance service result
Net reinsurance finance income (expense)
Total changes in comprehensive income (loss)
Net claims and other attributable expenses paid
Reinsurance acquisition expense cash flows
Closing net reinsurance asset (liability)
The estimation of the liability for incurred claims 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 the liability for incurred claims.
The liability established by Conduit is viewed as adequate, however a 20% increase in estimated undiscounted losses would have a $222.7 million adverse impact on comprehensive
income (31 December 2023: $133.9 million).
Conduit did not book any additional case reserves for the years ended 31 December 2024 and 2023. The net liability for incurred claims as at 31 December 2024 had an estimated duration
of 2.8 years (31 December 2023: 3.1 years).
During 2024 Conduit was impacted by significant losses in relation to Hurricanes Helene and Milton, recording an undiscounted net loss, after reinsurance and reinstatement premiums,
of $68.0 million. While there were numerous other catastrophe and risk loss events that impacted Conduit in 2024, none of those were material individually to Conduit.
2023 by comparison, despite being an active period for natural catastrophe losses for the industry, did not have any major event losses individually or in aggregate which had a material
impact on Conduit in relation to these events. Undiscounted ultimate loss estimates, net of ceded reinsurance and reinstatement premiums, for previously reported loss events
remain stable.
The inherent uncertainty in estimating the net liability for incurred claims gives rise to favourable or adverse development. During the year ended 31 December 2024 the changes
in the discounted net liability for incurred claims for prior accident years was a reduction of $4.3 million (31 December 2023: $3.9 million). Despite some adverse development on the 2022
accident year, overall favourable development was due to IBNR releases due to a lack of reported claims.
Prior accident year claims development
Total claims development \u2013 favourable (unfavourable)
Claims development table
The following tables show the estimates of cumulative undiscounted incurred claims, including the risk adjustment, for each successive accident year at each reporting date, together with
the cumulative payments to date:
Gross undiscounted claims, including risk adjustment
Current estimate of undiscounted incurred claims
Cumulative payments to date
Current estimate of undiscounted liability for incurred claims
Current estimate of discounted liability for incurred claims
Ceded undiscounted recoveries, including risk adjustment
Current estimate of ceded undiscounted incurred recoveries
Cumulative recoveries received to date
Current estimate of ceded undiscounted asset for incurred claims
Current estimate of ceded asset for incurred claims
Net undiscounted claims, including risk adjustment
Current estimate of net undiscounted incurred claims
Cumulative payments to date
Current estimate of net undiscounted liability for incurred claims
Current estimate of net liability for incurred claims
A reconciliation of the net liability for incurred claims per the claims development tables to the carrying amounts included in the balance sheet has been provided below. Loss related
amounts represent amounts due that are contingent on claims, such as reinstatement premiums and profit commissions.
Reconciliation to carrying amounts:
Undiscounted liability for incurred claims per claims development tables
Liability for incurred claims per claims development tables
Other loss related amounts
Liability (asset) for incurred claims
Employee benefits and other incentives
Aggregate remuneration and other incentives of Conduit\u2019s employees is as follows:
Equity-based incentive expense
Total employee benefits and other incentives
Equity-based incentive schemes
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 establishing 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 17
for additional details.
The following table lists the assumptions used in the stochastic model for the MIP awards:
Assumptions
range from 17.2% \u2013 19.0%
range from 0.3% \u2013 0.6%
Expected life of instruments
1.
The expected volatility was calculated based on a comparator group of companies.
2.
The risk-free interest rate is based on the yield of 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 advisers 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 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 income, 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;Vesting conditions, other than market conditions linked to the share price of CHL,
are not taken into account when estimating the fair value; and
\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 income, with a corresponding adjustment to shareholders\u2019 equity.
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.
Outstanding as at 31 December 2022
Outstanding as at 31 December 2023
Outstanding as at 31 December 2024
LTIP \u2013 time vesting criteria
The LTIP is a retention scheme with awards granted to staff members as nil cost options.
The nil cost options vest over a three year period from the date of grant and the time
vesting criteria are the only stipulations 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.
Outstanding as at 31 December 2022
Outstanding as at 31 December 2023
Outstanding as at 31 December 2024
LTIP \u2013 performance criteria
The LTIP awards with performance criteria vest three years from the date of grant and are
dependent on certain performance criteria being met. A maximum of 75% of the awards
will vest if the change in NTAVS is in excess of a required threshold, while the remaining
25% is subject to the TSR return over the vesting period being in excess of a required
threshold. 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.Outstanding as at 31 December 2023
Outstanding as at 31 December 2024
8. Other operating expenses
Other operating expenses include:
During the year ended 31 December 2024, KPMG Audit Limited provided non-audit
services in relation to Conduit's 2024 interim review and carbon emission disclosures.
Fees for non-audit services in the year ended 31 December 2024 totalled $0.1 million
(31 December 2023: $0.1 million).
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f221": {
"value": "Interest expense on lease liabilities
Tax
Bermuda
CHL, CSL, CML and CRL have received an undertaking from the Bermuda government
which exempts them from all Bermuda local income, withholding and capital gains taxes
until 31 March 2035. On 27 December 2023 the Bermuda government enacted legislation,
the Bermuda CIT Act of 2023, into law. CHL, CSL, CML and CRL are currently not in scope
for this new legislation and as such, the exemptions provided by the Bermuda government
undertaking still apply.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTaxReceivablesAndPayablesExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f223": {
"value": "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:
Fixed maturity securities, at FVTPL
US government agency mortgage-backed
Non-agency mortgage-backed
Agency commercial mortgage-backed
Non-agency commercial mortgage-backed
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 16 for
investments provided as collateral under Conduit\u2019s financing arrangements.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfInterestsInOtherEntitiesExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f224": {
"value": "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.
Balance and net book value as at 31 December 2022
Balance and net book value as at 31 December 2023
Balance and net book value as at 31 December 2024
Between one and five years
Total undiscounted lease liabilities
The discounted lease liability as at 31 December 2024 was $1.6 million (31 December
2023: $2.3 million). Conduit does not face significant liquidity risk with respect to
its lease liabilities.
Amounts recognised in the consolidated financial statements
Consolidated statement of comprehensive income
Interest expense on lease liabilities
Depreciation of right-of-use assets
Consolidated statement of cash flows
Authorised common shares of $0.01 each
Authorised A1 shares of \u00a30.01 each
Authorised A2 shares of $0.01 each
As at 31 December 2024 and 2023
Allotted, called-up and fully paid
As at 31 December 2024 and 2023
The number of common shares in issue less own shares held as at 31 December 2024 was 156,977,997 (31 December 2023: 158,056,137).
CHL holds 18,000 A1 and A2 shares at 31 December 2024 and 2023. The A1 and A2 shares issued by CML 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.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f226": {
"value": "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 21 for information on shares held by
the EBT.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfTreasurySharesExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f227": {
"value": "",
"dimensions": {
"concept": "ifrs-full:DisclosureOfDividendsExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f228": {
"value": "18. Other reserves
Other reserves consist of the following:
Equity-based incentive expense
Equity-based incentive expense
Other reserves include Conduit\u2019s equity-based incentive expense.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f229": {
"value": "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
any such proceedings (including litigation) will have a material effect on its results and
financial position.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f230": {
"value": "20. Earnings per share
The following reflects the earnings and share data used in the basic and diluted earnings
per share computations:
Total comprehensive income
Basic weighted average number of shares
Dilutive effect of equity-based incentives
Diluted weighted average number of shares
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.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f231": {
"value": "21. Related party disclosures
These consolidated financial statements include CHL and the entities listed below:
Holding company, Ultimate parent
General insurance business
1.
CRSL dissolved effective 14 January 2025
2.
CML is part-owned by members of management. Management\u2019s share ownership in CML exists solely for
the purposes of the Group\u2019s MIP 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.
Conduit Reinsurance Services Limited (CRSL)
CRSL was established at the inception of Conduit with the expectation that certain support
services would be provided to group companies. These support services have not been
required and the voluntary liquidation of CRSL commenced during 2024. The process was
completed on 14 January 2025.
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 2024, advances of $9.4 million (31 December
2023: $13.7 million) 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 2024 the trust
purchased common shares of 1,417,422 (31 December 2023: 2,336,000).
On 18 May 2023, CHL completed the transfer of 757,823 common shares held in treasury
with a value of $3.6 million to the EBT.
During the year ended 31 December 2024 the EBT distributed 339,282 shares with a value
of $1.7 million to employees. For the year ended 31 December 2023 the EBT distributed
250,963 shares at a value of $0.9 million.
Stabilitas Re
Stabilitas Re Limited a special purpose vehicle (Stabilitas Re), was launched in June 2023.
Conduit sponsored the launch of a catastrophe bond issued by Stabilitas Re and CRL
entered into a collateralised reinsurance agreement with Stabilitas Re as part of the
transaction. The catastrophe bond was issued to third-party investors by Stabilitas Re.
Conduit has no ownership interest in, nor any control, over Stabilitas Re and therefore does
not consolidate that entity.Key management compensation
Remuneration for key management of Conduit\u2019s Executive Group, and Non-Executive
Directors, was as follows:
Equity-based incentive expense
Directors' fees and expenses
Loans to employees, including key management, to assist with environmental and
other projects, have been made by CSL. These loans are short term and interest free.
Any financial benefit to the employee is generally not material.
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.
",
"dimensions": {
"concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f232": {
"value": "Subsequent events
Dividends
On 18 February 2025, Conduit\u2019s Board of Directors declared a final dividend for 2024
of $0.18 (approximately \u00a30.14) per common share, which will result in an aggregate
payment of $29.7 million. The dividend will be paid in pounds sterling on 17 April 2025
to shareholders of record on 21 March 2025 (the Record Date) using the pound sterling/US
dollar spot exchange rate at 12 noon BST on the Record Date.
California Wildfires
The January 2025 California wildfires have caused widespread damage across the Los
Angeles area. While there is still considerable uncertainty due to the complicated nature of
the losses and recency of the event, our preliminary undiscounted ultimate loss estimate
across all divisions is between $100 million and $140 million, net of reinsurance recoveries
and reinstatement premiums.
Our current preliminary estimate is based on an analysis of in-force contracts with
exposure within the Los Angeles area, evaluating all the initial information we have received
from brokers, cedants and other industry sources, along with a review of the latest
modelled losses for our portfolio at various return periods. As additional information
emerges our ultimate loss may vary from this preliminary estimate. The financial impact on
Conduit of this event will be reflected in the interim results for the six months ended 30
June 2025.",
"dimensions": {
"concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f233": {
"value": "Conduit Holdings Limited",
"dimensions": {
"concept": "ifrs-full:LegalFormOfEntity",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f234": {
"value": "Conduit Holdings Limited",
"dimensions": {
"concept": "ifrs-full:NameOfUltimateParentOfGroup",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f235": {
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"concept": "ifrs-full:NameOfParentEntity",
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"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f236": {
"value": "Clarendon House2 Church StreetHamilton HM11 Bermuda",
"dimensions": {
"concept": "ifrs-full:AddressOfRegisteredOfficeOfEntity",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f237": {
"value": "Bermuda",
"dimensions": {
"concept": "ifrs-full:DomicileOfEntity",
"language": "en",
"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
}
},
"f238": {
"value": "Bermuda",
"dimensions": {
"concept": "ifrs-full:CountryOfIncorporation",
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"entity": "scheme:21380085AE62D1BXSF19",
"period": "2024-01-01T00:00:00/2025-01-01T00:00:00"
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},
"f239": {
"value": "Bermuda",
"dimensions": {
"concept": "ifrs-full:PrincipalPlaceOfBusiness",
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}