Conduit Holdings Annual Report 2020

FY2020 Annual Report · Conduit Holdings

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The next generation
of reinsurance

Conduit Holdings Limited Annual Report 2020

Content

Conduit Re

Conduit Re is a pure play global reinsurance business.

We are a new company, but not a new team. We have
many decades of underwriting experience in our leadership
and underwriting teams.

We know the value of clean capacity and an unencumbered
balance sheet to brokers and clients in a hard market.

We have a disciplined and transparent underwriting
philosophy.

We embrace the latest and most powerful technology
available to provide the best products and service to
our customers.

Social responsibility and inclusiveness is at the core
of how we operate.

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Strategic report

Remuneration

02 Strategic overview
03 Key performance indicators
05 Executive Chairman’s statement
07 Chief Executive’s report
09 Underwriting report
12 Chief Financial Oﬃcer’s report
13 Enterprise risk management
18 Environmental, social and governance report

Governance

20 Chairman’s letter to shareholders
21 Board of directors
24 Corporate governance and compliance with the UK corporate

governance code
28 Directors’ report
30 Nomination committee report
31 Audit committee report
33 Section 172 statement

35 Statement from the chairman of the remuneration committee
36 Remuneration summary
39 Remuneration for 2021 and beyond

Financial statements

Independent auditor’s report to the Shareholders and Board
of Directors of Conduit Holdings Limited

45 Consolidated statement of comprehensive income
46 Consolidated balance sheet
47 Statement of consolidated cash ﬂows
48 Consolidated statement of changes in shareholders’ equity
49 Notes to the consolidated ﬁnancial statements

Appendix

60 Glossary

Strategic report
Strategic overview

Conduit Re’s objective is to build a reinsurance franchise
that will stand the test of time. The Conduit Re brand will
reﬂect the key tenets of our strategy:

Absolute focus on
shareholder value

Conduit Re will seek to maximise
growth in Return on Equity over the
long term to support an attractive
return to our investors.

Highly collaborative team culture

Conduit Re will always behave
as a single business unit, working
together to deliver the best
possible experience for all of
our stakeholders.

Disciplined and diverse
underwriting philosophy

Conduit Re is a pure play
reinsurance underwriting business
with a highly disciplined approach.
We will build and manage a
diversiﬁed and balanced portfolio
of risk over the insurance cycle.

Strong and transparent balance
sheet

Conduit Re will aim to maintain
strong capital adequacy to support
its rating, solvency and liquidity
at all times.

Enabled expertise and experience

Embedded risk management

Conduit Re will engage with
markets where we have a deep
knowledge and understanding
of risk and clients’ requirements.

Conduit Re will ensure that risk
management is a core element
of our business platform.

Leveraging IT and data analytics

An industry leader in ESG

Conduit Re will maximise the value
of information technology and
data to provide the best possible
service across the life cycle of our
reinsurance policies.

Conduit Re will seek to become
a leader in the re/insurance
industry to drive change in the
approach to ESG.

Strategic report
Key performance indicators

Consolidated ﬁnancial statements have been prepared
for the period from inception to 31 December 2020.
As Conduit began trading on 1 January 2021, this Annual
Report only contains formation costs and other costs
in connection with the set-up of the business. As it does
not include any trading information any discussion
of key performance indicators (KPIs) is not considered
useful information for this period. The 2021 Annual

Report will be clear of any noise around the formation
of the business and therefore will be more comparable
and consistent with future years, providing – we believe
– better information for our stakeholders as a result.
Conduit will provide transparent reporting on all aspects
of our business activities in future to ensure that all of our
stakeholders are provided with a clear and comprehensive
picture of the performance of our business.

The KPIs we intend to report are:

Financial KPIs

n Combined ratio
n Total investment return
n Return on equity
n Dividend yield
n Total shareholder return

Non-ﬁnancial KPIs

We will also regularly publish a number of other key
metrics in our annual reports and other shareholder
updates, including pricing and renewal indices and other
non-ﬁnancial indicators, particularly in relation to our
employees and our ESG objectives.

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Conduit Re is led by Neil Eckert (right) and Trevor
Carvey (left), highly experienced industry professionals
both of whom have a track record of building and
running successful global reinsurance businesses across
market cycles.

Strategic report
Executive Chairman’s statement

Introduction

We have taken the decision to ﬁle this Report and
Accounts for the short period from inception to December
2020, which will only cover the IPO and related expenses
as well as start-up costs. This will ensure that our future
reporting will be based on comparable twelve month
reporting periods. In our Trading Statement, we also
reiterated our intention to meet our IPO commitment to
start paying a dividend from this year, which we expect
to declare with our interim results later in the year.

The conception of Conduit Re

When Trevor Carvey and I ﬁrst discussed the idea of
establishing a new reinsurance underwriting business in
late 2019, we were already seeing the green shoots of a
turning global re/insurance market. Those green shoots
have now turned into the ﬁrst proper market correction
the industry has experienced since 2005/6 and possibly
the best market conditions since the early 2000s.
The timing of Conduit Re’s launch could not be better.

In re/insurance vernacular a “hard market” is one in
which rates and conditions are improving and tightening
leading to inherently more proﬁtable underwriting for
the market as a whole. All hard markets are diﬀerent in
nature and the 2020/2021 market correction is diﬀerent
to previous market turns that I have experienced in my
career in two important ways:

First, it has not been caused by a major shock loss, but
rather is a reaction to persistent long-term pressure
from soft pricing conditions, a series of consecutive high
catastrophe loss years and a low interest rate environment;

Second, it is being driven from the ground up rather
than the top down. We have seen insurance rates in most
classes of business improving since 2018 and we are now
starting to see the reinsurance markets reacting to this.

It is encouraging to see a market turning willingly as a
result of market discipline rather than a forced reaction
to a sudden reduction of industry capital. I believe this
is leading to a more sustained adjustment in the pricing
of event risk, but is also leading to a continuing hardening
across all lines of business in both terms and, most
importantly, conditions. This will beneﬁt the industry
as a whole. It will also lead to increased awareness of the
systemic nature of some risks and the need to be able
to quantify exposures. The 2020-2021 years could well
be remembered as the years of the unmodelled losses
as evidenced by Covid-19 and more recently winter
storm Uri. The market will have to adjust to start pricing
in basis risk of this nature.

A key question is the durability of favourable market
conditions in the light of recent capital raises. Our belief
is that these raises are immaterial compared to the extent
of recent underwriting losses together with the need
for continued reserve strengthening across the industry,
which will underpin the current hardening of terms
and conditions.

But the conception of Conduit Re was not only driven
by reinsurance rates and terms and conditions. It was
just as fundamentally driven by the gap created as a
result of the industry consolidation which has taken
place towards the end of the last cycle: a sure-ﬁre sign
of a soft market. The industry is now dominated by
huge global balance sheet underwriters, which creates
opportunities for more nimble footed reinsurers, able
to trade a portfolio across the market cycle to maximise
long-term returns and build a valuable franchise.

In a global market place shaped by years of industry
consolidation, Trevor and I see an opportunity to create
a new generation of reinsurer: entrepreneurial, pure play
with no conﬂicts, a ﬂexible operating model, embracing
the beneﬁts of recent technology and managing our
data in real time. It is these factors that will enable us
to build a new and diﬀerentiated reinsurance business
over the next cycle.

Building a franchise, not a fund

Trevor and his team comment in more detail in their
report on current underwriting conditions, so I would
prefer to take this opportunity to set out how we intend
to build value for our shareholders in the longer term:
to build a real franchise based on underwriting excellence,
cycle management and providing a ﬁrst class service
for our customers.

The core foundations of the business we are building
at Conduit Re are:

Excellence in everything we do. Underwriting. Claims.
Technology. Operations. Investment.

Culture: no nonsense and minimal bureaucracy.
We embrace the necessary governance structures
and reporting frameworks, but we also need to be lean
and enable individual responsibility – we encourage
our people to think like owners of the business in every
decision and they are remunerated accordingly.

People: an underwriting business is deﬁned by its people.
We have already been fortunate to have assembled a
ﬁrst class leadership team, both to lead our underwriting
activities and to build and manage our operations.
Our people are our unique selling point.

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Strategic report
Executive Chairman’s statement

Strategic report
Chief Executive’s report

Technology: we enjoy the beneﬁt of being new, we
can build systems without the challenge of legacy data
and we can embrace digital placement. We intend
to invest continuously to ensure that we enjoy the
best technological advantages. At every point in the
re/insurance product cycle, we will enable our people
to provide the best possible service to our customers
and the best possible results for our shareholders.

Governance: transparency is our mantra. We believe
that this is a key foundation to our business model and
this will be reﬂected in our corporate governance and
approach to risk management, which is set out in detail
elsewhere in this report including in the ESG section.

Environmental and social objectives: I have been at
the leading edge of managing environmental change
through the power of ﬁnancial markets since 2005 when
I co-founded the world’s ﬁrst – and now largest – carbon
futures exchange. The re/insurance industry has not
been as quick as it might have been to embrace its
responsibility in this area, which I believe has created
some negativity towards the sector as a whole.
At Conduit, we will be taking an industry leadership
position in driving change and as we stated in our
IPO prospectus, we will always be a net-zero-carbon
business. We will also seek to take this one step further
by encouraging all of our stakeholders to participate in
our projects and become zero-carbon in their own right.

We have already established the Conduit Foundation,
which will seek to sponsor and support a number of social
and environmental initiatives. We have received generous
founder donations totalling in excess of $250,000
to start the mission and we will match this ourselves
to bring initial funding to $500,000. Elsewhere in this
document we provide a more detailed report on our
approach to the E (environment), the S (social) and the
G (governance) in ESG.

Brand: establishing and understanding our values, our
approach to customers and the way that we communicate
with all of our stakeholders, including our investor
relations activities, all play an important part of generating
value for shareholders. These are the ingredients of
a strong B2B brand and our objective is to establish
Conduit, not just as a centre of excellence for reinsurance
underwriting, but also with a leading reputation in our
industry.

Conclusion

I am told that Conduit is the largest start-up IPO in the
history of the LSE, and it is the result of a monumental
amount of work and support from our team, our advisers
and our investors. I’d like to say a huge thank you
to each and every person who supported us in making
Conduit a reality. We will be working tirelessly to repay
that conﬁdence in us.

As we set out in our initial Trading Statement on 15
January, we got oﬀ to a ﬂying start. We have already
established the core of a top class management and
underwriting team, we are embracing the beneﬁts that
technology brings to the table for the new generation
of reinsurance underwriters and we have established
strong relationships with our key trading partners around
the market. It is an exciting time to be building a new
reinsurance business and we couldn’t have asked for
a better start to Conduit’s business.

Neil Eckert
Executive Chairman
1 April 2021

Introduction – the hard work starts here

I am pleased to provide my ﬁrst Chief Executive Report
on behalf of Conduit Holdings Limited. The launch of
our business is the culmination of a huge amount of hard
work over the last twelve months in very challenging
circumstances. I would like to take this opportunity to
thank our investors who have placed their trust in us to
take advantage of the current opportunities presented
by the global re/insurance markets.

But the really hard work for Neil, myself and the
growing Conduit team has just begun. We have already
achieved a lot in laying the foundations of the business
but there is much more work to be done to achieve our
ambitious goals of creating a recognised reinsurance
underwriting franchise. Our sleeves are fully rolled up
and we are building a high quality team equipped for
the challenges ahead.

Lessons learned

Having been involved in underwriting since 1982, I have
traded through several re/insurance cycles as part of
some very diﬀerent organisations, all of them with their
own strengths and approaches to the business model,
strategy and culture. The business model that we are
building at Conduit Re is the result of many lessons
learned and is about creating long-term value in a
reinsurance business.

There is a lot of talk today about rate increases and
improvements in terms and conditions, and we discuss
these in more detail in our Underwriting Report. It is
undoubtedly the case that current market conditions
are favourable in our key target classes of business and
they continue to improve across the board. This will
help us establish Conduit Re and to build our portfolio
to critical mass in the medium term.

But the launch of Conduit Re is not purely a reaction to
immediate market opportunities: it is about building a
reinsurance underwriting franchise that will stand the
test of time. There are several factors that we believe will
establish Conduit Re as a brand in the market for the
next generation of the re/insurance industry:

We will be a pure play reinsurance underwriting
business. We will build and manage a portfolio of treaty
reinsurance risk and we will not create conﬂicts of
interest with our customers and markets by moving
away from this core competency.

We will always be informed capacity and will embed
insurance expertise within our treaty underwriting
teams enabling us to exercise better and more informed
judgements on the business that we transact.

We will manage our volatility through diversiﬁcation
and balance in our exposures – not simply rely on our
retrocession partners.

We intend to actively manage the reinsurance cycle,
seeking to develop the optimum portfolio mix to best
handle the swings that we see in our diverse market
place.

We will protect our solvency capital and not seek to
leverage our returns by taking excessive risk with our
invested assets.

We will maximise the value of technology and data
analysis tools enabling us to provide the best possible
service to our customers and business partners.

The Conduit Re team

There are two core elements in any reinsurance business
that shape the culture and eﬀectiveness of the business
model; the people and the platform. These have been
our immediate focus.

I am very pleased that we have attracted such high
calibre people to Conduit Re in such a short space of
time to build and lead our business platform. We intend
that Conduit Re will always be deﬁned by our people.

There is always, of course, a focus on the underwriting
talent in an underwriting business and we are delighted
to have on board Marc Bearman, Chris Board, Angus
Hampton, Greg Roberts and Erik Soria – the leaders of
our underwriting teams – from whom you will hear more
from in the months ahead as we build out the business.
They all share the ethos that will deﬁne our brand.

We have also assembled a ﬁrst class operating team
of people who excel in their individual areas of expertise
and most of whom have been through the start-up
journey before.

With this team in place, we have already established
the core business culture at Conduit Re: a no-nonsense,
roll your sleeves up, collaborative approach to ensuring
underwriting excellence and the highest level of service
to our business partners.

One key business principle that both Neil and I have
learned is the importance of ownership. The culture
at Conduit Re will always be one where employees are
encouraged and rewarded to think and act like owners
throughout all levels of the organisation.

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Strategic report
Chief Executive’s report

The Conduit Re platform

Conclusion

A lot has been spoken about ‘legacy’ in recent years,
particularly in relation to legacy claims creating a drag
on the industry’s capital and resources. We are in the
advantageous position of being able to provide clean,
legacy-free capital to our clients and it is up to us to
ensure that we avoid this issue for ourselves in the future.

Technology is also part of discussions around legacy.
The re/insurance industry has never been the quickest
to adopt new technology because moving massive
amounts of data onto a new platform is expensive, time
consuming and risky. This has created an ongoing legacy
issue for the industry as a whole. However, there have
been signiﬁcant advances made in business technology
in recent years: cloud servers, web applications, distributed
ledger databases (blockchain) and real time data sharing
and analysis tools.

As a new business we are in the fortunate position of
being able to maximise the value of modern technology
from the get-go. We have the opportunity to create an
operating platform with the latest available technology,
and this is what we are doing. By building a platform
that can adapt and evolve as technology adapts and
evolves, we will also ensure that Conduit Re always
provides its people with the leading technology tools
to enable informed decision making at every stage
in the policy life cycle.

I believe that 2021 will be seen as a generational
transformation in the way the re/insurance industry
operates and Conduit Re will be at the forefront of that
change. A more transparent marketplace, changing
working practices, a real-time approach to sharing
data – the life blood of the industry – and a step change
in the adoption of technology will enable a more modern
and eﬃcient underwriting process.

I have no doubt others will eventually adopt the same
industry changes that we are now embracing as a result
of our freedom and ﬂexibility as a start-up. But we have
a head start and will work to maintain this advantage
by being a business that is always one step ahead
of the pack.

Neil and I would like to express our thanks for the
overwhelming level of support we have received from
our business partners, brokers, clients and markets.
A big thank you to everyone who has supported
Conduit Re in getting oﬀ to such a successful start.
We are excited to continue working with you.

Trevor Carvey
Chief Executive Oﬃcer and Chief Underwriting Oﬃcer
1 April 2021

Strategic report
Underwriting report

I am pleased with the reception that Conduit Re has had
to date. Feedback both from brokers and cedants has
been extremely positive and we are seen as an attractive
partner oﬀering added value immediately.

Solid preparation ahead of our launch with a highly
experienced leadership team in place, a deliberate
approach to the market, combined with the just over
$1 billion of clean capital raised by Conduit, have
contributed to our being viewed as a secure and
responsible partner by cedants and brokers alike and
we thank them for their support. From our experience
to date, we are already perceived as contributing
intelligent and disciplined capital to the market and
the fact that we do not compete with our clients on the
insurance side is also opening the right doors for us.

We are pleased with the quality and quantity of business
ﬂow we have seen since coming to the market and we
are conﬁdent in the prospects for a successful 2021 and
beyond. The following report, compiled with input from
Marc Bearman, Chris Board, Greg Roberts and Erik Soria,
sets out our views of the current market environment
and our approach to it.

Property

Conduit Re navigated a complex market around the
reinsurance renewal season by aligning and attaching
ourselves to underlying rising market conditions and
promoting underwriting discipline.

We positioned ourselves as an experienced and disciplined
following market with a concerted focus on supporting
target cedants. Most cedants are already long-term
trading partners of our underwriting team and signings
were generously accommodated, supported by the fact
that we oﬀered reasonable shares and enhanced by our
use of both the local and the wholesale market.

The property market continues to harden. January
treaties were mostly negotiated at rate increases below
initial estimates but the measurement of actual increase
varies across reports from brokers and risk takers.
Demand for reinsurance limit was marginally increased.
The macro environment is one of low inﬂationary
pressure and so underlying exposure did not signiﬁcantly
increase.

We expect to see continued reinsurance rate improvement
on both excess of loss and quota share due to original
rate development. There was talk that the retrocession
market was less hard than anticipated but we expect
reinsurer peak zone appetite to continue to moderate
on a gross basis.

It is worth noting that January placements are typically
a lower average rate on line than key renewal phases
later on in the year, such as the renewal placements
in June and July, which are heavily dominated by North
Atlantic wind.

The upward pricing trend is also causing in-force
multi-year placements to fall behind current margin
levels. Reinsurers are less willing to lock future pricing
into contracts and Conduit Re was able to participate
in some deals where the multi-year contracts were
converted back to annual placements.

Conduit Re has been carefully evaluating adjustment
mechanisms, with a bias towards those that would
beneﬁt from improvements in underlying rates. With this
in mind, we reviewed subject premiums carefully and
where we felt they were unachievable we insisted on and
supported revised subject bases, resulting in increased
adjustable rates.

There continues to be a lack of clarity in inherent
Covid-19 positions on international contracts – best
demonstrated by European and Australasian cedants
who continue to claim on business interruption (BI)
coverage on their property contracts. Unlike event
cancellation and trade credit, BI coverage in the main
is not a deliberate coverage for Covid-19. Some US
commercial cedants continue to oﬀer sub limited
coverage for communicable disease and so far this
language has not yet suﬀered from judicial overturn.
We continue to watch this situation.

The property reinsurance markets will also undoubtedly
be impacted by the recent winter storm Uri in the US,
which is a timely reminder for the market ahead of
the key mid-year renewals of the need to factor in the
increasing costs of so-called ‘secondary loss events’.
The insurance losses arising from winter storm Uri are
complex and will take a while to determine, but it would
appear to be the costliest US winter storm on record.
These ‘non-critical’ perils continue to demand their own
premium and margin allocations, once again testing
attrition versus peak zone exposures.

We will continue to monitor the rating environment
in our target markets, reviewing opportunities in both
absolute and relative terms.

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Strategic report
Underwriting report

Casualty

International

As the global casualty markets continued to wrestle
with the convergence of issues such as litigation funding
(“social inﬂation”), chronic under-pricing on underlying
classes and reserve deteriorations throughout 2020,
the January 2021 reinsurance renewal season presented
an attractive opportunity to capitalise on the growing
dislocation across territories, casualty classes and product
lines. Moreover, uncertainty continues in the casualty
reinsurance market on perceived insurable loss estimates
pertaining to Covid-19 and in our view these have not yet
been fully recognised in rate rises in both loss impacted
and non-loss impacted accounts.

Throughout the renewal season, both in the US and
international markets we communicated our deliberate
approach to the market: we value the ability to work with
cedants who demonstrate a proven underwriting track
record and best in-class management. We speciﬁcally
value working with cedants in the long-tail specialty
lines, where capacity and competition remains ﬁnite.
This creates the circumstances required to improve
margins and create greater long-term resilience, which
are not so present in some non-specialty business lines
that typically have smaller margins to work with in
challenging markets.

The rate environment in US casualty is generally very
positive with the strongest areas being in the longer
tail/specialty lines – particularly professional liability
– and excess casualty, with the weakest area being
worker’s compensation.

Conduit Re’s risk appetite for US casualty is a deliberate
approach to develop a core treaty casualty portfolio
of long-tail specialty lines with cedants who demonstrate
a proven underwriting track record and have best in-class
management. We believe the core specialised makeup
of the Conduit Re portfolio will provide us with a resilient
base and the ability to more adequately manage the
market cycle without ever having to sacriﬁce underwriting
acumen. We do have the ability to write most lines,
including reserving some more general capacity for core
clients who request support across various casualty,
property and specialty lines.

Conduit Re has been very well received by both brokers
and clients alike with extremely broad general market
acceptance enabling us to build our portfolio and brand
from day one of our operation.

In international casualty, the market clearing price
continues to move its way back towards adequate levels,
with the January renewals representing the start of what
is likely to be the second consecutive full calendar year
of compounded rate rises.

The international quota share market proved to be
challenging, with clients generally unwilling to accept the
need for reduced ceding commissions and hard event
limits. There was very little acknowledgement of prior
year loss deterioration in the structural economics with
rising original rate used to mask these inconsistencies
and to facilitate negotiations.

On the other hand, the per risk market displayed the
greatest dislocation and pricing momentum with loss
impacted accounts up as much as 15% with a general
acceptance of organic 0-10% rate rises on loss free
programmes. The London market clash space experienced
an equal degree of ﬂux with rates up as much as 15%
on loss impacted accounts and 7.5% on loss free accounts.
These price increases stem from both a general discomfort
with prior year results and historic chronic under-pricing.
Moreover, there is a general perception that further back
year deteriorations will continue and remediation can
be expected as we move forward.

Pricing momentum is unlikely to ease oﬀ with gradual
compounding increases expected as the reinsurance
market continues to catch up with and regain ground
previously lost to the underlying insurance markets.

The Japanese, Canadian and London Market renewals on
1 April will be a good barometer for subsequent renewal
dates with reinsurers poised to accelerate the positive
momentum. We believe that the upward trajectory is set
to continue throughout the year.

Specialty

We were able to secure a large number of submissions
from brokers and clients in the run-up to 1 January, and
established ourselves sensibly in the market to build
our portfolio of diversiﬁed specialty classes. As with
property and casualty classes at this renewal season,
the underlying primary rating levels moved signiﬁcantly
and the quota share route to market paid dividends
over a pure excess of loss approach. There were however
various instances of clients retaining more, especially
on proportional structures where we witnessed an
understandable desire to retain premium adequacy
and margin after several healthy years of compounding
rate increases.

Strategic report
Underwriting report

Moreover we saw evidence of a cutback in capacity
on some of the market key risk scenarios, with reinsurers
reducing positions and shares on contracts where both
peak natural catastrophe and peak risk aggregate
exposures are being monitored and identiﬁed more
diligently. Terror blast zone capacity constraints were
also in evidence and Conduit Re was able to capitalise
on this to establish a presence on targeted programmes.

The majority of direct classes again experienced rate
increases, especially in aviation, property and downstream
energy, which showed the strongest increases in a more
challenging marketplace. The compounded increases in
those classes are slowly getting the base premium back
to where it needs to be. The aviation sector is still reeling
from Boeing losses and suﬀering from a contraction in
capacity, while downstream energy and property insurers
are demanding hikes, especially on loss aﬀected business
or covering peak cat aﬀected regions. We expect
renewable energy oﬀerings to continue to gain in number
over the year as the industry investment takes hold.
Upstream energy remains a reasonable proposition
to us as a reinsurer but is not as attractive as its onshore
cousin.

Mainstream marine classes are showing healthy risk
adjusted rate rises on excess of loss accounts and are
an area where reinsurers at least seem to be ﬁnally
coming to grips with the need for robust discussion
and insistence on suitable cyber and communicable
disease clauses.

As a general comment on acquisition costs in the
specialty proportional market, we note that commissions
remained relatively static from a year ago with reinsurers
opting to take the strong underlying rate increases
rather than push commissions down. Exceptions to this
are the ‘bridesmaid’ classes, such as marine hull, which
remain unfortunately ‘under water’ in our view. More
broadly, an insistence by reinsurers on event limits in
specialty classes is being accepted more than ever and
is something we expect to continue. We see this simply
as good housekeeping that should be in place in any
circumstance.

In these contracts, given the wide array of underlying
policy language worldwide, there was some evidence
of clients pushing for basic ‘follow the fortunes’ cover
for both communicable disease and cyber. It is true to
say that the specialty proportional market has a way to
go before any market clarity is arrived at. We have made
public Conduit Re’s broad position on cyber: we believe
that the class has a way to go before rating and policy
language is at a state that would allow us to enter
meaningfully. Recent events such as the Solar Wind
hack simply underline our position.

Essentially, the specialty market is still buoyant and will
continue to be so in 2021. With our underwriter base
and broker relationships spanning many companies and
regions, Conduit Re has a great window into a diversiﬁed
world of risks, both on a quota share and an excess
of loss basis. We are experienced in spotting emerging
rating trends – both positive and negative – and with our
knowledge of appropriate policy exclusionary language
we see the broad specialty class as adding signiﬁcant
value to Conduit Re over time.

Concluding remarks

As we have consistently said, Conduit Re’s underwriting
philosophy is one of balance and diversiﬁcation and our
initial book building has followed these core principles.
The market continues to improve across all of our target
classes and we remain of the view that this will lead
to sustained attractive market conditions.

We have achieved what we set out to achieve in these
ﬁrst few months and are well positioned to deliver on
the plans we set out to investors in our IPO process.

Trevor Carvey
Chief Underwriting Oﬃcer and Chief Executive Oﬃcer
1 April 2021

10 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 11

Strategic report
Chief Financial Oﬃcer’s report

After a pretty unsuccessful attempt at retirement this
time last year, the opportunity to join the Conduit Re
team at the beginning of its journey to build a new and
exciting reinsurance business was too good for me
to pass up. It’s rare for a role that seems like a perfect
ﬁt to come along. Like Neil and Trevor, I hope to bring
the lessons I have learned in previous roles to beneﬁt
Conduit and our stakeholders.

We will also soon be appointing investment managers
to manage our funds. Capital preservation and liquidity
to support our underwriting remain of paramount
importance to us, so you can expect to see the boring,
low duration, high quality portfolio that we promised
at IPO. We will, however, challenge our investment
managers to fully integrate ESG into their investment
processes.

So, with not much to comment on looking back on the
year-end numbers, we think we have a great deal to
look forward to in 2021. We are building our teams, our
technology and what we believe will be a great book
of business in attractive market conditions. I look forward
to having much more to report on over the coming
months and years.

Elaine Whelan
Chief Financial Oﬃcer
1 April 2021

We have produced consolidated ﬁnancial statements
for the period from incorporation to 31 December 2020.
They consist mostly of the expenses from our IPO and
operating expenses, mostly salaries and the like, from
our ﬁrst month of setting up the business.

While the Group didn’t have any “active business”
in 2020, it was far from an inactive period. We had
a very successful IPO in December 2020, a subsequent
conﬁrmation of our A– rating from AM Best and a
renewal season leading up to 1 January that went entirely
according to plan. The Company is well positioned to
underwrite the improving market in 2021, with a balance
sheet free of legacy issues and unwelcome reserve
surprises. With 2020 being the ﬁfth costliest catastrophe
loss year on record, ongoing adverse reserve development
in casualty books, and an over-hang from Covid-19, we
expect the market – which is good enough – to continue
to get better.

We raised a total of £790 million ($1,057 million), net
of oﬀering expenses, in the IPO in December. The support
we received from our new shareholders was phenomenal
– and much appreciated. Since then, we have been busy
building the business in line with our plan. As I mentioned,
our book at 1 January was broadly in line with our
expectations. While it will take some time for us to fully
build out our book – and therefore fully deploy our
capital – we are quite happy to take our time, focus
on risk selection and maintain a balanced approach.
Conduit is an underwriting business ﬁrst and foremost
and that is rightly where our principal focus is. Our plan
is for sensible growth over the next few years. We will
adapt as the opportunities evolve but our approach
to underwriting discipline will remain the same.

Strategic report
Enterprise risk management

Enterprise risk management in a modern,
legacy free environment

Conduit is building a modern and forward-looking
organisation in which risk management is integral to our
culture and guiding our strategy and operational plans.

Just as our underwriting philosophy actively seeks to
maximise the beneﬁt of technology to appraise, price
and measure underwriting risk, technology is also at
the heart of how we measure, manage and monitor our
own business risks. As a new reinsurer, free from legacy
constraints and organisational complexity, we are well
positioned to establish complete transparency and
auditability in all our activities.

We are embedding controls and oversight in our systems
and processes to provide a transparent and common
view across the business. This enables our risk team
to leverage data analytics in their role as the ‘second line
of defence’, providing timely support and challenge
throughout the organisation.

The Conduit risk team collaborates closely with the
other ‘second line’ functions (actuarial and compliance)
and with ﬁndings from ‘third line’ functions (internal
audit, external audit and the independent loss reserve
specialist) to support the CHL and CRL boards in their
oversight of risks and controls.

Conduit is a highly focused pure play global reinsurer
in a single location with one balance sheet. As a well-
capitalised start-up, Conduit’s risk capacity is initially
constrained more by operational capacity and appetite
than by ﬁnancial capacity and we are respectful of the
need to grow our operational capacity in a deliberate
and purposeful way to support our underwriting strategy.

By starting life as a public company, we are less exposed
to the short-term growth pressures that can be faced
when private capital providers are motivated by seeking
a liquidity event in the medium term. We are able to focus
on long-term performance and building our business
in a way that is sustainable and compatible with our
responsible environmental, social and governance values.
This longer term focus also helps us to manage our
operational risks.

Current progress

Our risk appetite is, and will continue to be, consistent
with the disclosures we made in the IPO prospectus:

n As a reinsurance underwriter, we actively seek

underwriting risk but will maintain a balanced portfolio
of reinsurance classes and geographical exposures
and strict limits on our exposures to natural
catastrophes and man-made loss events.

n We will take a cautious approach to investment risk;

our primary aim is to protect capital and consequently
we have a low appetite to expose our capital base
to investment losses and a low appetite for volatility.

n We will seek to manage other risks prudently and

build our systems, operations and controls to ensure
robustness, resilience, eﬃciency and adaptability.

The underwriting period leading up to 1 January 2021
took place in parallel with us building out our senior
team and while deploying phase one of our pricing tools,
underwriting platform and catastrophe risk aggregation
system. Therefore, immediate underwriting risks were
managed by involving multiple sets of eyes on every risk
and with a focus on a manageable number of contracts.
Our outwards protection was agreed with well-known
and ﬁnancially strong providers of retrocessional capacity.

Operational risks were mitigated by engaging a licenced
insurance manager to support administration and
accounting processes, through active management from
the executive team and through direct risk involvement
across all areas of the business: appropriate during a
start-up phase while longer term processes and controls
are being built out.

The overall risk policy and enterprise risk framework
were approved at board meetings held in February
2021, together with reﬁned risk appetite and tolerance
statements, building on those established prior to
the IPO.

A baseline view of our risk appetite and exposures
is set out overleaf.

12 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 13

Strategic report
Enterprise risk management

Risk category

Relative appetite / preference

Status

Risk category

Relative appetite / preference

Status

Overall – capital
adequacy

Underwriting –
premium

Underwriting –
exposure and
aggregations

Underwriting –
reserve

Investment, market
and liquidity

Low
We maintain capital to support a minimum
rating of A– by AM Best and to provide
a surplus over the regulatory enhanced
capital requirement of twice that prescribed
as an early warning buﬀer prescribed by
the BMA.

On track
We have secured an A– rating by AM Best
and have substantial capital to deploy.

High
This is the risk we seek in order to generate
return. The risk is managed by seeking
a target portfolio based on our view of
rate adequacy and target diversiﬁcation,
supported by event and /or aggregate
retrocessional protections.

On track
On 1 January we underwrote a balanced
portfolio of business consistent with our
planning expectations. Initial bias towards
quota-share with further excess of loss
business expected through the year as
our business ﬂow continues and team
develops.

Medium
We underwrite catastrophe exposed
reinsurance through our property and
specialty lines, and business exposed to
other aggregations notably across casualty
lines. We seek to understand and manage
our exposures generally to a lower level
than our Bermuda peer group.

On track
On 1 January we took on a modest amount
of catastrophe risk and put in place
initial retrocessional support at a lower
attachment point than originally planned.
Non-property catastrophe aggregations
are also limited at this stage and also
subject to our retrocessional protections.

Medium
We underwrite a mix of classes including
those where reserves take time to develop.
We seek to minimise reserve risk through
rigorous data analytics using market data
and beneﬁt from an external loss reserve
specialist review (from 2021 year-end).

Low
Our primary aim is to protect capital
and consequently we have a low appetite
to expose our capital base to investment
losses and a low appetite for volatility.

On track
No loss reserves required as at 2020
year-end. Chief Actuary now in place,
as is independent loss reserve specialist.

On track
As at year-end the funds raised from the
IPO had not been deployed and so were
highly liquid money market funds. The
selection process for investment managers
has been undertaken in Q1 2021.
Investment managers selected will deploy
an investment strategy consistent with
our investment and ESG criteria.

Low
We use reinsurance to provide protection
and therefore select reinsurers who provide
limited credit risk.

On track
All retrocessionaires currently A–, A
or fully collateralised. A counterparty
security committee is now in place.

Credit

Operational and
systems

Low
We seek to minimise our operational
risk within the context of operating as
a reinsurer. We seek to attract and retain
high quality staﬀ and gain competitive
advantage by use of high quality and
integrated systems.

On track for current maturity – elevated
During the start-up phase operational risks
are elevated as people are recruited and
systems and processes are implemented.
We are using a licenced insurance manager
to reduce operational risk in the start-up
phase. Operations is a core focus for the
management team, risk and internal audit.
Staﬃng is being increased and a build-out
of processes and controls is underway.
The outsourcing committee is overseeing
outsource and software as a service
suppliers, and includes senior operations,
risk and legal/compliance representation.

On track
Initial period of elevated risk, noted in the
prospectus, has passed with acceptance
by regulators, rating agency and target
brokers and markets. Market conditions
remain favourable.

On track
Public coverage favourable to date.

Strategic

Low
We seek to manage risk by keeping a clear
and focused strategy as a single balance
sheet reinsurer based in one location.

Low
A focus on maintaining and enhancing
brand and franchise value. Support from
the ESG committee, established by the
holding company board.

Reputational

Legal, regulatory
and litigation

Very low
We seek to minimise our legal, litigation
and regulatory risk by investing in our
systems and people. We have no appetite
for censure by regulators and tax
authorities.

On track for current maturity – elevated
Initial period of elevated risk while
governance structures were being
conﬁrmed and the team built out.
Reducing risk by using support from
a licenced insurance manager.

14 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 15

Strategic report
Enterprise risk management

Overall enterprise risk management framework and risk governance

Risk policy framework: Risk management

Risk context

Emerging risk

Culture
Risk context

Values

Strategy

Risk capacity

Risk appetite statements

Overall risk register

Risk tolerances

Inherent
risk

Residual
risk

Risk indicators

Other risk,
compliance
and capital
matters
(not detailed
in this chart)

Executive management committee

Policies

Objectives

Risks

Controls

Attestation

Veriﬁcation

Risk dashboard

Facilitation

Tools

Challenge

Independent
veriﬁcation

m
a
n
a
g
e
m
e
n
t
o
f

r
i
s
k

S
e
c
o
n
d

l
i

n
e

e
e
t
t
i

m
m
o
c
k
s
i
R

k
s
i
r

f
o
t
n
e
m
e
g
a
n
a
m
e
n

i
l

t
s
r
i
F

Audit committee

Third line independent
assurance

Internal audit

External audit

Loss reserve specialist

Suitable third party reviews
may span ﬁrst and second
line of defence

Compliance reviews

Breaches

c
o
m
p

l
i

a
n
c
e

S
e
c
o
n
d

l
i

n
e

The Board is required under the UK Code to establish
procedures to manage risk, oversee the internal control
framework, and determine the nature and extent of the
principal risks the company is willing to accept in the
context of achieving its long-term strategic objectives.
To this end, the Board is supported by the CHL audit
committee and the CRL board and committees, most
notably the CRL risk, capital and compliance committee.

The Board prescribes risk preferences that guide the
CRL board and committees as they establish risk appetite
and tolerances statements. The Board also monitors the
eﬀectiveness of the overall enterprise risk management
framework, leveraging the work undertaken by the CRL
board and committees. CHL directors are invited to
attend CRL board and committee meetings and are
provided with the associated materials and minutes.
In addition, three CHL independent non-exeutive directors
also sit as directors on the CRL board.

CRL operates a ‘three lines of defence’ risk management
model with the Chief Risk Oﬃcer reporting directly to
the CRL Board’s risk, capital and compliance committee.
This reporting includes regular reporting of compliance
with risk appetite and tolerance statements, emerging
risks, risk event reports and the solvency self-assessment.
Membership of this committee includes directors who
also serve on the boards of both CHL and CRL.

The risk function provides independent challenge
and oversight of the identiﬁcation, measurement,
management and monitoring of risk by the ﬁrst line
of defence, supporting the CRL risk, capital and
compliance committee and the CHL Board. Day to day
oversight of the management of risk by the ﬁrst line
of defence and the independent challenge provided
by the second line is supported by the Chief Executive
Oﬃcer and the executive management committee.

Outputs from other second line of defence functions
(compliance and actuarial) and from the third line
(internal audit, external audit and the independent loss
reserve specialist) are fed back in to the overall risk
assessment. These may be used, where appropriate,
to support independent validation, alongside the risk
function’s own reports and those of other independent
third parties.

Roadmap to a business-as-usual risk function

Our overall risk policy and reﬁned risk preferences,
appetite and tolerances were reviewed and approved
at our board and committee meetings in February 2021.
The CHL audit committee and the CRL risk, capital and
compliance committee also reviewed the group risk
register and our plans to embed risk management and
controls as we roll out additional systems and processes.

Throughout 2021, individual risk policies speciﬁc to
individual business areas or risk groupings will be
implemented. These are owned by the ﬁrst line risk
owners and include the identiﬁcation of risk management
objectives consistent with our risk appetite statements.
They go on to identify the relevant risks and controls and
set out any attestation requirements and the mechanisms
by which compliance is veriﬁed. Until these policies
are implemented, the risk function will be more directly
involved through participation in meetings and with
the support of other second line of defence functions.

In parallel with the risk policy roll-out, key risk indicators
are being developed, leveraging the ﬂexibility and
transparency of our chosen operational systems.
Similarly, the links between risk and capital requirements
are also being developed, evolving from a launch focus
on rating agency and regulatory capital to developing
our own view of the capital required to support our
exposures as a key management tool.

Given our focus on embedding modelling and processes
in our systems, validation is of particular importance.
This applies to pricing models, catastrophe models and
the capital model. During the roll-out phase, validation
will be undertaken as part of the build process with our
risk team providing independent and constructive input.
Once embedded, models and systems will be subject
to more structured independent validation, led by the
risk team, with reporting to the CRL risk, capital and
compliance committee.

A base level of stress and scenario tests, including
reverse stress tests, were undertaken as part of the initial
business plan build out and rating agency and regulatory
submissions and these will be further expanded and
reﬁned ahead of the 2022 business planning cycle.

16 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 17

Strategic report
Environmental, social and governance report

Introduction from the Executive Chairman

Environmental (E)

Everyone and anyone in the investment community is
talking about ‘ESG’ and ‘net-zero-carbon’ but I fear that
a lot of lip service is paid to the fundamental goals of
ESG. As someone who has been a passionate advocate
of environmental change for the last 20 years, I intend
to ensure that Conduit will act as an inﬂuencer in an
industry that is never at the front of the queue when
it comes to change.

As a new company, with zero historical carbon footprint,
Conduit is in the fortunate position of being able to
start life as it means to go on. Environmental and Social
responsibility will not just be a chapter in our report and
accounts, but will be woven into the fabric of everything
we do at Conduit, from the day to day behaviour of
our team, to the way we do business. It is not just about
carbon, but addressing the issues caused by climate
change, such as the ‘climate coverage gap’, resilience
and post catastrophic event response. These are serious
challenges, but at the same time, tremendous business
opportunities.

We have already stated that we intend to be a net-
zero-carbon business from the very beginning, but
our ambition goes much further than this: to be seen
as an inﬂuencer by our stakeholders.

As Executive Chairman, I bring to Conduit the beneﬁt
of my experience and relationships at the cutting edge
of corporate environmental responsibility. Between 2005
and 2010, I helped to build the world’s largest carbon
futures exchange, now part of ICE, and I remain the
Chairman of Incubex, the fastest growing environmental
derivatives platform in the world. I am actively involved
in some of the world’s leading carbon reduction initiatives
including the Sustainable Markets Initiative, co-chaired
by The Prince of Wales and the World Carbon Fund,
where I am a strategic advisor. I will therefore seek
to leverage these involvements to help to establish ESG
as a fundamental tenet of Conduit’s brand.

I have always believed passionately that the free market
can be a force for good, and our overall goal at Conduit
is to maximise overall value in the long term rather than
short term proﬁt. I believe that the most valued businesses
of the future will be those that adopt the values of
responsible capitalism, as is our unavowed intention.

To achieve our goals in the short term we will be
purchasing enough carbon credits to oﬀset our
anticipated carbon footprint for the ﬁrst seven years
of the company’s life. We will be reporting on this
in future reports and accounts and will produce an
annual environmental audit.

In the longer term, we intend to sponsor a number of
environmental initiatives and projects and to encourage
our stakeholders to follow suit and possibly to invest
alongside us.

We are delighted to see that a number of other leading
businesses in the industry are pursuing similar strategies
and our hope is that we can cooperate in many areas
and to develop this momentum as an industry.

As Elaine has alluded to in the Chief Financial Oﬃcer’s
Report, we will also seek to inﬂuence change through
our investment strategy and will, where possible,
be seeking impact investments such as ‘green bonds’,
so long as these adhere to our strict investment criteria
in terms of both quality and duration. We are in the
process of appointing our investment managers and
this will be a critical factor in our appointments.

We have also formed our charity, the Conduit Foundation,
which has the ability to support our environmental
initiatives including acting as a retirement vehicle for
carbon oﬀsets.

Finally, as we have also already stated, we will be actively
supporting the key global initiatives and organisations
that are driving real change in the area of Environmental
and Social Responsibility. We will immediately seek
to start work in establishing and supporting industry
initiatives, starting in Bermuda where there are already
a number of proactive and like-minded businesses.

Social responsibility (S)

The Group has established a charity in Bermuda, the
Conduit Foundation, which has begun to engage with
the local community to identify worthwhile projects where
it can make a positive impact in the local community
either alone or in partnership with other providers.

The next step will be to establish a strategy for the
deployment of funds held in the Foundation to further
our environmental, social and charitable aims. It is about
more than just giving: it will be designed to encourage
maximum outreach and engagement with the local
community in a manner that underpins and promotes
our core values.

Reporting framework

Conduit will regularly update all stakeholders on its ESG
policies and initiatives through its website and as part
of its corporate communications strategy. An ESG Report
will be set out in the Annual Report and Accounts and
be published on the Group website.

Conduit will use the UN Environment Programme Finance
Initiative as its reporting framework for all stakeholders and
will benchmark against its Key Principles for Sustainable
Investment wherever possible, in particular considering:

n Embed in decision making ESG issues relevant to

insurance business;

n Work together with clients and business partners
to raise awareness of ESG issues, manage risk and
develop solutions;

n Work together with governments, regulators and

other key stakeholders to promote widespread action
across society on ESG issues;

n Demonstrate accountability and transparency
in regularly disclosing publicly the progress in
implementing the Principles.

Neil Eckert
Executive Chairman
1 April 2021

Away from the activities of the Foundation, Conduit
is committed to recruit, retain and develop people with
diverse backgrounds and experiences at all levels of our
business, in a truly inclusive environment. Conduit will,
wherever possible, employ locals with the encouragement
of internships and work placements. There will be a strong
focus on employee development programmes and
educational support. The Board has already appointed
a Non-Executive Director, Malcolm Furbert, to be
responsible for engagement with our workforce.

Governance (G)

The Executive Chairman and Head of Human Resources
at Conduit are charged with leading the Group’s ESG
policies.

Conduit has established an ESG committee made up
of Board and non-Board members. This committee is
chaired by Sir Nicholas Soames and will meet quarterly
to consider the Group’s ESG approach and activities.
Its ﬁndings and reports will be made available to the
whole Board formally through Board papers.

The ESG committee will assist Conduit in challenging
convention, improving business practices over outdated
norms and help build a business which is regarded as
great to work for, great to invest in and great to have as
a community partner. The ESG committee will challenge
itself and be challenged by the Board to bring sound ESG
principles into the day to day life of the Group; promoting
better risk management, innovation, sustainable
outperformance and community engagement.

The Group also has a number of policies in place in
order to support the governance structures, including
anti-bribery and corruption, modern slavery and
whistleblowing.

The Board is absolutely committed to meeting best
practice in, and has begun to embed high standards
of, governance throughout the Group with particular
emphasis on ERM. The Board plans to continue on this
path in 2021. Further details will be provided in the
2021 Annual Report.

Committee terms of reference are set out on the
Group website.

18 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 19

Governance
Chairman’s letter to shareholders

Governance
Board of directors

Dear Shareholders,

Employee engagement

Directors

I am pleased to provide this introduction to the corporate
governance section of the Company’s ﬁrst Annual Report.
As a standard listed company, the Company is not
required to comply with the UK Corporate Governance
Code but I and the rest of the Board are committed
to high standards of corporate governance and intend,
to comply with the Code and govern the Company
as if it were a premium listed company or explain why
it is not complying.

Governance

As a start-up, the Company’s governance structures were
only put into place a few weeks before the end of the
ﬁnancial period. We have reported on the arrangements
that we have already made and the Board plans to
develop these further during the course of 2021.

Although it is early in Conduit’s existence, the process
of engagement with the governance aspects of ESG has
already begun, both within our Board and as part of
management’s strategic and business planning processes,
to foster a strong, purposeful and proﬁtable culture of
sustainable governance. The business is led by a strong
management team accountable to an independent,
diverse and eﬀective Board and committee structure.
We are also developing our ESG strategy, which is
referred to elsewhere in this report which will be overseen
by a committee chaired by Sir Nicholas Soames, who
is highly regarded, experienced and independent.

I am pleased to conﬁrm that Malcolm Furbert has been
appointed as our Non-Executive Director responsible
for engagement with our workforce. As our team grows
during 2021, Malcolm looks forward to gathering their
views to help shape the culture of the Group.

Purpose, values and strategy

As a newly incorporated company, we intend to continue
developing our purpose and values but our strategy
is clear: we aim to build a superlative reinsurance business
with best-in-class underwriters, leading technology,
pricing and risk management capabilities to deliver
returns across the underwriting cycle. We also intend
to operate in excess of accepted market ESG principles.
Above all, we wish to establish our reputation as
an organisation that holds integrity and eﬀective
communication at the centre of everything we do.

I hope that the information provided in this Governance
Report demonstrates our commitment to the best
corporate governance and we will provide you with
further details during the course of 2021.

Neil Eckert
Executive Chairman
1 April 2021

Neil Eckert – Executive Chairman

Appointed to the Board: 6 October 2020.

Skills and experience: Neil Eckert is an entrepreneur
with four decades of re/insurance industry experience.
Beginning as a reinsurance broker, he rose through the
ranks to board member at Benﬁeld Lovick & Rees & Co.
He then founded Brit Insurance Limited in 1995,
remaining as CEO until 2005 and member of the Board
until 2008.

Neil was also the co-founder and CEO of Climate
Exchange PLC until its sale to ICE in 2010. Neil then
founded Aggregated Micropower Holdings plc, which
was sold in January 2020.

Neil is passionate about all things environmental and
will be key to Conduit’s ESG strategy.

External directorships: Incubex Ltd, Ebix Inc Boutique
Modern Limited, Chalvington Management Limited,
Chalvington Batteries Limited, Bellaroma Investments
Limited, Bishopsgate Solar 1 Limited, Seago Yachting
Limited, Ripe Village Stores, Ripe Foods Limited, Natural
Capital Exchange Limited, Wingrove House Limited,
Whetstone Properties Limited, Titan (South West)
Limited, Cricket Management Limited.

Committee memberships: ESG Committee.

Trevor Carvey – Executive Director, Chief Executive
Oﬃcer and Chief Underwriting Oﬃcer

Appointed to the Board: 18 November 2020.

Skills and experience: Trevor Carvey is a highly regarded
reinsurance manager and underwriter with a track record
of proﬁtable build-outs in the reinsurance industry.
Having led the consolidation and subsequent proﬁtable
turnaround of the GE Frankona Marine & Energy Global
portfolio in the 1990s, he then became a founding
underwriter and leader at Arch Re Bermuda in 2002.

In 2007 Trevor joined Harbor Point Re in the UK to lead
the build-out of its reinsurance operations. He became
CUO Europe of the Alterra Re business after Harbor
Point’s merger with Max Re in 2012. Trevor was then
responsible for the successful integration of Alterra Re’s
Global Re unit into Markel.

In 2015 Trevor joined Hamilton to assist in building
out a new treaty reinsurance strategy in the UK and
subsequently served as active underwriter for the
three years from 2016 to 2018.

Trevor leads all aspects of Conduit Re’s business, in
particular the build out of its underwriting activities.

External directorships: Triple R Industries Limited,
Beneﬁcial House (Birmingham) Regeneration LLP,
Stanley Dock (All Suite) Regeneration LLP.

Committee memberships: None.

Elaine Whelan – Executive Director and
Chief Financial Oﬃcer

Appointed to the Board: 14 January 2021.

Skills and experience: Elaine Whelan is a highly
accomplished and experienced public company CFO
who has worked in the re/insurance industry for over
20 years. She is a member of The Institute of Chartered
Accountants of Scotland, a member of The Chartered
Professional Accountants of Bermuda and a member
of The Institute of Directors.

Elaine joined PwC in Bermuda in 1997. From 2001 to
2006 she held a number of positions at Zurich Insurance
Company, Bermuda Branch, ending up as Chief Accounting
Oﬃcer. In 2006 she joined the Lancashire Group as
Financial Controller. She subsequently performed various
ﬁnancial and management roles for the Lancashire
Group, including as CEO, Lancashire Insurance Company
Limited. From January 2011 to February 2020 Elaine
was Group CFO, Lancashire Holdings Limited, and she
was also a main board director from January 2013 to
February 2020.

Elaine is responsible for all aspects of Conduit Re’s
ﬁnancial management and reporting and sits as an
executive director on the boards of CHL and CRL.

External directorships: None.

Committee memberships: None.

Sir Brian Williamson CBE – Senior Independent Director

Appointed to the Board: 17 November 2020

Skills and experience: Sir Brian Williamson has held
a number of chairmanships and directorships in banking,
exchanges, funds, investment trusts and private equity.

Sir Brian was chairman and chief executive of Gerrard
Group PLC., a member of the Court of the Bank of Ireland.
Sir Brian was a director of HSBC Holdings PLC, where
he was also the chairman of the nomination committee.
Sir Brian was also a director of NYSE Euronext and
chairman of the Remuneration committee.

20 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 21

External directorships: American Financial Exchange,
LLC, Environmental Financial Products, LLC.

Committee memberships: Remuneration Committee
and Nomination Committee.

Company secretary

Greg Lunn – General Counsel and Company Secretary

Date of appointment: 7 December 2020,

Skills and experience: Greg Lunn is a highly experienced
lawyer who has held a number of senior in-house legal
positions in the global re/insurance industry over the last
25 years.

His most recent role in the industry was as group legal
counsel for Lancashire Holdings Limited, where he was
also initially responsible for establishing Lancashire’s
internal audit function. Prior to this role, he spent 10
years in senior management roles in the legal team at
ACE Group.

Greg is responsible for all legal aspects of the Group’s
business including governance structure and regulation
and compliance.

Governance
Board of directors

Sir Brian was one of the four founders of the London
International Financial Futures Exchange and twice
chairman. In the US, Sir Brian has been a member
of both Nasdaq (additionally serving as chairman of
its international advisory board), the New York Stock
Exchange and, in the UK, The Climate Exchange PLC.

Sir Brian is currently a director of the London International
Vintners Exchange and Incubex, which is in partnership
with the European Energy Exchange, part of Deutsche
Borse Group and Nodal Exchange in the US.

Sir Brian is a former director of Fleming Emerging
Markets Investment Trust PLC, Templeton Emerging
Market Investment Trust PLC, Waverton Investment Trust
PLC and he chaired Electra Private Equity PLC. Sir Brian
was also the ﬁrst chairman of Resolution Life Group.

Sir Brian has served on regulatory bodies in both the US
and UK, the National Association of Securities Dealers
and The Financial Services Authority.

External directorships: Edenbeg Trust Corporation
Limited, R.J. Fleming & Co.Limited, LIV-EX Limited,
Bergos Fleming Politeia, Incubex Inc.

Committee memberships: Remuneration committee
(Chair) and nomination committee.

Elizabeth Murphy – Independent Non-Executive Director

Appointed to the Board: 17 November 2020.

Skills and experience: Elizabeth Murphy is a Bermuda
resident and has worked in the insurance and reinsurance
industry for more than 30 years. Elizabeth qualiﬁed
as a Chartered Accountant with Coopers & Lybrand
in London and moved to work for them in Bermuda.
She continued her career with ACE Tempest Reinsurance
Ltd as Chief Financial Oﬃcer from 1993 to 2000 and
as Treasurer of ACE Limited for the next two years.

From 2002 to 2006, Elizabeth worked for Scottish Re
Group Limited, as Chief Financial Oﬃcer and Executive
Vice President. From 2006 to 2008 she was a
non-executive director of Kiln Limited, Chair of the
Compensation Committee and Member of the Audit
committee and she also served on the Board of SCPIE
Holdings Inc. where she was a member of the Audit
Committee and Stock Option Committee. From 2009
to 2015 Elizabeth was an Executive Director and Chief
Financial Oﬃcer of Amlin Bermuda Ltd. / Amlin AG
and a member of the Risk Committee.

External directorships: Bernina Re Ltd.

Committee memberships: Audit committee (Chair) and
nomination committee.

Ken Randall – Independent Non-Executive Director

Appointed to the Board: 17 November 2020.

Skills and experience: Ken Randall is a Certiﬁed
Accountant and has worked in the Insurance industry
for more than 46 years. During the early 1980s, Ken
was Head of Regulation at Lloyd’s which was then
a self-regulated institution. From 1985 until 1991 Ken
served as Chief Executive of the Merrett Group, which
managed a number of prominent Syndicates at Lloyd’s.

In 1991, Ken left Merrett to set up his own business in
partnership with Alan Quilter. Over the next 8 years they
developed the Randall & Quilter Group’s principal
subsidiary, the Eastgate Group, into the UK’s largest third
party provider of insurance services with 1,300 employees
and a turnover of over £80m per annum. Eastgate was
sold to Capita plc in November 2000.

Following the sale of Eastgate, Ken and Alan refocused
Randall & Quilter onto the acquisition of non-life legacy
run-oﬀ portfolios and again developed an insurance
servicing business in London and the US; initially, the
Randall & Quilter Group’s service oﬀering focused on
legacy portfolios.

In recent years Randall & Quilter has also developed
a fast-growing programme management business
in Europe and the US, with contracted premium income
in excess of $1 billion per annum.

Ken retired from full time employment on 31 March 2021
and on the same date ceased as a director of Randall &
Quilter Holdings Limited and all its subsidiary companies.

External directorships: Tradesman Program Managers,
LLC, Roosevelt Road Ltd, Roosevelt Road Re Ltd,
Renaissance Capital Partners Limited, Financial Guaranty
Insurance Company Ltd.

Committee memberships: Audit committee, nomination
committee (Chair) and remuneration committee.

Malcolm Furbert – Independent Non-Executive Director

Appointed to the Board: 17 November 2020.

Skills and experience: Malcolm Furbert is a corporate
and regulatory lawyer with over 30 years’ experience
including as a corporate lawyer with one of Bermuda’s
leading law ﬁrms and over 15 years’ diverse in-house
legal counsel and management experience with Bermuda
based insurance and reinsurance companies (including
American International Company Limited, Catlin Insurance
Company Limited and XL Catlin), most recently as
General Counsel and Head of Compliance & Regulatory
Aﬀairs for the Bermuda operations of XL Catlin a
Bermuda based global re/insurance company (following
the acquisition of the Catlin Group by XL Capital).

Governance
Board of directors

In these roles he provided general and transactional
legal and regulatory advice and support to all business
areas, and had oversight over the Bermuda compliance
function. He also acted as company secretary to both
regulated and non-regulated group companies.

He holds a B.A. in Economics from Dalhousie University,
an LLB (Hons) from Bristol University and is a member
of the Bar of England and Wales and the Bermuda Bar.

External directorships: mBermuda Ltd., Summit Capital
Limited.

Committee memberships: Remuneration Committee and
Nomination Committee.

Dr. Richard L. Sandor – Independent Non-Executive
Director

Date of appointment: 26 November 2020.

Skills and experience: Dr. Richard L. Sandor is an
entrepreneur and economist and is Chairman and CEO
of the American Financial Exchange (AFX) and the CEO
of Environmental Financial Products (EFP).

Dr. Sandor is currently the Aaron Director Lecturer
in Law and Economics at the University of Chicago Law
School and an honorary Professor at the University
of Hong Kong and the school of Economics at Fudan
University. He formerly taught at graduate and
undergraduate levels at several universities throughout
California, Illinois, New York, China and England.

Dr. Sandor was awarded the title of Chevalier de la
Légion d’honneur (Knight of the Legion of Honour)
in France, for his accomplishments in the ﬁeld of
environmental ﬁnance and carbon trading. He is a
member of the Advisory Board of the Center for
Financial Stability, a member of the Board of Governors
of the School of the Art Institute (SAIC), a senior Fellow
of the Milken Institute and International Emissions
Trading Association and a member of the Advisory
Committee of the Ronald Coase Centre for Property
Rights Research at the University of Hong Kong.

He formerly served on the boards of leading commodity
and futures exchanges in the US, such as the CME and
ICE, and in London and China, as well as one of North
America’s largest utility companies, American Electric
Power, and several philanthropic and non-for-proﬁt
organizations.

He has a Bachelor of Arts degree from the City University
of New York, Brooklyn College, and a Ph.D. in Economics
from the University of Minnesota. In addition, he holds
an honorary degree of Doctor of Science, honoris causa,
from the Swiss Federal Institute of Technology (ETH).

22 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 23

Governance
Corporate governance and compliance with the
UK corporate governance code

UK corporate governance code compliance

The Board is committed to the highest standards of
corporate governance. As a company with a standard
listing on the LSE, the Company is not required to
comply, or otherwise explain non-compliance, with the
requirements of the UK Code. However, the Company
has chosen to comply (or explain non-compliance)
with the UK Code, published by the FRC in July 2018.
The UK Code can be found on the FRC’s website,
www.frc.org.uk. The Company has an Audit Committee
which is responsible for the internal control and risk
management systems, further details of which are set
out on page 31.

Compliance statement

The Board considers that for the ﬁnancial period ended
31 December 2020, the Company has complied with the
provisions of the UK Code, save that:

n The Company did not comply with Provision 10 of the
Code as Neil Eckert is Executive Chairman and was
not independent at appointment as he was a founder
of the Company. However, over half the Board
(excluding the Chair) are Non-Executive Directors
whom the Board considers to be independent and the
roles of Chair and Chief Executive Oﬃcer at Conduit
are not exercised by the same individual. Further,
the Board believes that eﬀective business leadership
is provided by Neil Eckert as Executive Chairman and
Trevor Carvey as Chief Executive whilst at the same
time, appropriate checks and balances and scrutiny
will be maintained through the balance of the Board
as a whole, the strong and relevant experience of the
independent Non-Executive Directors and the clear
separation of duties between the Executive Chairman
and the Senior Independent Director, as set out on
the Company’s website.

n Given the very short time available to recruit and

appoint directors and the need to appoint a number
of directors based in Bermuda, the Company did not
comply with Provision 20 of the Code in its start-up
phase, which provides that open advertising and/or an
external search consultancy should generally be used
for the appointment of the chair and non-executive
directors. While an external search ﬁrm was not used
during the initial start-up phase of the business,
Conduit believes that it has formed a strong Board
with an excellent mix of diversity, skills and experience
and conﬁrms it will comply with this provision for
subsequent appointments or it will explain clearly
why is has not.

n The Company did not comply with Provision 5 of
the Code at such time, which requires a workforce
engagement mechanism to be in place. For the short
period of its existence up to 31 December 2020 the
Company had only a handful of employees, all
of whom were senior and actively engaged in the
establishment of the business. The Company is now
compliant as Malcolm Furbert, a Non-Executive
Director, has been appointed as the Company’s
non-executive director responsible for workforce
engagement.

n The Company does not comply with Provision 37 of
the Code which provides that remuneration schemes
and policies should enable the use of discretion to
override formulaic outcomes. In the context of the
Company being a start-up, it was determined that
an absolute calibration to the MIP programme rather
than a relative return or discretionary based scheme
was appropriate in the circumstances. Malus and
clawback provisions apply to both bonus payments
and the MIP programme and are set out in more detail
on page 37.

n The Company did not comply with Provision 23

of the Code at such time which requires it to have
a diversity and inclusion policy in place. However,
it was the intention of the founders of the business
to engage positively in diversity and inclusion as the
business grows and settles into Bermuda. Further, the
nomination committee has subsequently approved
such a policy which is summarised in the nomination
committee report on page 30.

Governance framework

The Group maintains a relatively simple corporate
structure and corporate governance framework.
The Board maintains overall responsibility for the Group
and has established an audit committee, a nomination
committee and a remuneration committee – whose
terms of reference are available on the Company’s
website and updated as necessary. It has also established
a non-board committee focused on the Group’s approach
to ESG, chaired by Sir Nicholas Soames, a senior and
independent industry ﬁgure who is not otherwise
involved with the Group as a director or oﬃcer.

In relation to the day to day operations in the Group’s
reinsurance business, the Board relies on a strong board
at operating company level, which includes three
independent Non-Executive Board members (Elizabeth
Murphy, Ken Randall and Malcolm Furbert) who serve
at both Company Board and operating company Board
level, each of whom has extensive board level experience
of regulated insurance companies in Bermuda.

The CRL board has, in turn, established four
sub-committees: Risk, Capital and Compliance; Audit;
Strategy; and Underwriting. It has also established
an executive management committee comprised
of the chief and senior executives. CRL operates a strict,
“three lines of defence” model with all second-line
functions (risk, compliance, actuarial) reporting to the
CRL Risk, Capital and Compliance Committee; and the
third line (internal and external audit, independent loss
reserve specialist) reporting to the CRL Audit Committee.
While three independent non-executive directors serve
on the board of CRL, all independent non-executive
directors are encouraged to attend as observers any
board or board committee meetings across the Group,
subject to any conﬂict management limitations. Conduit
is committed to being an open and transparent Group
from a governance perspective.

The Board

Conduit has put in place a Board with a strong blend
of experience in insurance and other ﬁnancial services,
accounting and governance and other areas. The Board
has and will continue to oversee the Company’s early
trading and operation as a public company. Under the
leadership of the Senior Independent Director, with input
from the nomination committee, the Board will consider
in the ﬁrst half of 2021 the long-term board skills and
diversity required to take the business forward and, if
appropriate, following due process make additions to
the Board and reﬁnements to the governance structure.
The Board is mindful that Conduit is a new entity seeking
to build a superlative business and the Senior Independent
Director will regularly lead a Board review to make sure
that Conduit has the required Board resources available
to help meet its objectives.

The names and biographies of each of the current
Directors of the Company are shown on pages 21 to 23.
Elaine Whelan was appointed to the Board after the
end of the reporting period and, for the period reported
on, Mark Heintzman was the Chief Financial Oﬃcer
of the Company.

Non-Executive Director independence

The UK Code recommends that at least half the board
of directors of a UK listed company, excluding the chair,
should comprise non-executive directors determined by
the Board to be independent in character and judgement
and free from relationships or circumstances which
may aﬀect, or could appear to aﬀect, this judgement.
The Board has determined that all of the Non-Executive
Directors (being Sir Brian Williamson, Elizabeth Murphy,
Ken Randall, Malcolm Furbert and Dr. Richard Sandor)
are free from any business or other relationship that
could materially interfere with the exercise of their
independent judgment and are therefore ‘‘independent
non-executive directors” within the meaning of the
UK Code. The Company has three Executive Directors
(including the Executive Chair) and ﬁve independent
Non-Executive Directors.

Board meetings and attendance

The Board schedules meetings quarterly and receives
additional updates in the months where no formal
meetings are scheduled. Additional meetings will be
arranged as necessary, including in relation to business
of the committees. All Directors receive an agenda and
timely board packs in advance of the meetings.

The number of Board and Committee meetings attended
by each Director in the year ended 31 December 2020,
relative to the number of meetings held during their time
in oﬃce was as follows:

Nomination Audit Remuneration
Director Board* Committee Committee Committee

Neil Eckert** 0/2* – – –

Trevor Carvey** 0/2 – – –

Mark Heintzman*** 2/2 – – –

Sir Brian Williamson** 0/2 – – –

Elizabeth Murphy 2/2 – 1/1 –

Ken Randall 2/2 – 1/1 –

Malcolm Furbert 2/2 – – –

Dr. Richard Sandor 1/1 – – –

24 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 25

Governance
Corporate governance and compliance with the
UK corporate governance code

*The Company was incorporated on 6 October 2020.
Between then and 7 December 2020 when the Company’s
Admission occurred, there were eight board meetings.
Out of these eight board meetings held, six were
administrative meetings which had to be held in Bermuda,
related to legal/administrative aspects of the formation
of the Company and the Group. Although Neil Eckert
was a Director during this period and he received notice
of each meeting, these six administrative meetings were
held involving nominee directors who had been appointed
in a temporary capacity in the lead-up to the IPO, pending
the appointment of the Board that was in place at the
time of the IPO (the details of the members of which
were disclosed in the Prospectus). Neil was not able
to be in Bermuda during this period due to the severe
travel restrictions caused by the Covid-19 pandemic.
Furthermore, as part of the Company’s risk management
framework, the Group follows regulatory and tax
operating advice and guidelines, common for groups
established in Bermuda, that require the situs of the
Company’s Board and Committee meetings and
decision-making to be Bermuda.

**Neil Eckert, Trevor Carvey and Sir Brian Williamson
were unable to attend Board meetings in 2020 due
to the severe travel restrictions caused by the Covid-19
pandemic which prevented them from travelling to
Bermuda in the run-up to the IPO. Neil Eckert, Trevor
Carvey and Sir Brian Williamson were, however, fully
involved in the IPO process, attended Board information
sessions and regularly engaged with the other Directors
and the senior managers outside the boardroom.
See below for a summary of the Board activities, all

of which occurred in the 4th quarter of 2020 following
the Company’s incorporation on 6 October 2020.

***Resigned from the Board on 13 January 2021.

Board responsibilities

The Board is responsible for leading and controlling the
Company and has overall authority for the management
and conduct of its business, strategy and development.
The Board is also responsible for ensuring the
maintenance of a sound system of internal controls
and risk management (including ﬁnancial, operational
and compliance controls) and for reviewing the overall
eﬀectiveness of systems in place as well as for the
approval of any changes to the capital, corporate and/or
management structure of the Company. To ensure
transparency and accountability of the business to the
independent non-executive directors, the Board will
be invited to attend subsidiary board level meetings
and see all minutes and records of such subsidiary board
and committee meetings.

The Board has established procedures for Directors to
take independent professional advice at the expense
of the Company in the furtherance of their duties.
Each Director also has access to the General Counsel
and Company Secretary to ensure that good governance
and compliance is implemented throughout the Group.

The division of responsibilities between the Executive
Chairman, CEO and Senior Independent Director is
summarised below and is available in full on the
Company’s website.

Executive Chairman

CEO

Senior Independent Director

Ensures that there is eﬀective
communication by the Group
with its workforce and other
stakeholders, including discussing
governance, remuneration and
strategy with major shareholders,
and that their views are conveyed
to the Board as whole.

Encourages all Directors to engage
in Board and committee meetings
by drawing on their skills, experience
and knowledge.

Leads the executive management
team in the day to day management
of the Group to pursue the Group’s
commercial objectives and execute
and deliver Group strategy, as
approved by the Board.

Ensures that there is a culture of
openness and debate, in particular
by facilitating the eﬀective
contribution of Non-Executive
Directors, and ensuring constructive
relations between Executive and
Non-Executive Directors.

Ensures, with the executive
management team, that Board
decisions are implemented
eﬀectively and that signiﬁcant
decisions made by the executive
management team are
communicated to the Board
in line with granted authority.

Is available to shareholders if
they have concerns that contact
through the normal channels of
the Executive Chairman or other
Executive Directors has failed to
resolve or for which such contact
is inappropriate.

Executive Chairman

CEO

Senior Independent Director

Sets an agenda for the Board
primarily focused on strategy,
performance, value creation, culture,
stakeholders and accountability,
and ensures that issues relevant
to these areas are reserved for
Board decision.

Sets an example to the Company’s
workforce, communicates to them
the expectations in respect of the
Company’s culture, and ensures that
operational policies and practices
drive appropriate behaviour.

Assists in the maintenance of the
stability of the Board and Company,
particularly during periods of stress.

Makes certain that appropriate
standards of governance permeate
through all parts of the organisation.

Manages the Group’s risk proﬁle,
with the CFO, in line with the extent
of risk identiﬁed as acceptable
by the Board and ensures that
appropriate internal controls are
in place.

Acts as a sounding board for the
Executive Chair, providing support
in the delivery of the Executive
Chairman’s objectives.

The Executive Chairman (and in respect of the Executive
Directors, the Senior Independent Director) considers that
(1) each Director is eﬀective, demonstrates commitment
to their role and has suﬃcient time to meet their board
responsibilities and (2) both the Board and its Committees
will provide eﬀective leadership and exert the required
levels of governance and control.

Workforce engagement mechanism

Malcolm Furbert has been appointed as the Company’s
non-executive director responsible for workforce
engagement. Malcolm was appointed to this role in
February 2021 and plans to regularly liaise with employees
through one-to-one meetings with a cross section of
employees, hosting speciﬁc engagement events and
conducting an annual engagement survey. Malcolm will
provide a regular update to the Board on the engagement
activities. A report on the activities undertaken during
2021, and an analysis of how eﬀective the mechanism
is, will be provided in the 2021 Annual Report.

Board activities

The Company was incorporated on 6 October 2020.
The activities of the Board from then on were focused
entirely on administrative aspects of Company and Group
formation and then preparation for the Admission that
occurred on 7 December 2020. Activities included
participation in individual and collective induction
sessions, engagement with ﬁnancial and legal advisors,
regulators, rating agencies, and prospective investors.
Meetings were held in Bermuda to approve all key
actions, documentation and agreements associated
with a new standard listing on the LSE including but
not limited to the Prospectus, the roadshow, the formal
appointment of directors, Company oﬃcers and senior
managers, establishment of the Nomination, Audit
and Remuneration Committees and approval of the
ESG policy.

Board eﬀectiveness

Each year the performance of the Board, its Committees
and the individual Directors will be evaluated. As the
Directors were appointed so recently and there was
a short ﬁrst ﬁnancial period, a performance evaluation
did not take place during the period ending 31 December
2020. However, an internal evaluation, using a
questionnaire approach, will be carried out during the
ﬁnancial year ending on 31 December 2021 and the
outcomes will be reported in the next Annual Report.

26 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 27

Governance
Directors’ report

This section of the Annual Report includes the additional
information required to be disclosed under the
Disclosure and Transparency Rules of the Financial
Conduct Authority.

Certain information required to be included in the
Directors’ Report is included in other sections of this
Annual Report, including:

n The Strategic Report on pages 2 to 19;

n The Corporate Governance Report on pages 20 to 34;

n The Audit Committee Report on pages 31 to 32;

n The Directors’ Remuneration Report on pages 35 to 40;

and

These sections are incorporated by reference into the
Directors’ Report.

Disclosure of information to the auditors

Each of the persons who is a Director at the date
of approval of this Annual Report and Accounts
conﬁrms that:

n So far as the Director is aware, there is no relevant
audit information of which the Company’s auditors
are unaware; and

n The Director has taken all the steps that he or she
ought to have taken as a Director in order to make
himself or herself aware of any relevant audit
information and to establish that the Company’s
auditors are aware of that information.

Dividend policy

The Company may pay dividends at such times (if any)
and in such amounts (if any) as the Board determines
appropriate and subject to the Board being satisﬁed that
to do so will not prejudice CRL’s ability to maintain at
least an A.M. Best A– (Excellent) ﬁnancial strength rating
and subject to applicable law.

The Company expects to generate signiﬁcant returns
for its shareholders and to provide an ongoing and
progressive dividend. The Company is targeting a
dividend as early as during the 2021 ﬁnancial year of
approximately 5 to 6 per cent of equity capital, allocated
between an interim and ﬁnal distribution. However, at
the date of this Annual Report and Accounts, the Board
has not considered the appropriateness of the payment
of a particular dividend.

Depending on the Group’s results and general market
conditions, CHL may also from time to time consider
the payment of special dividends and returns of capital
to shareholders by way of share buybacks. Special
dividends (if any) are likely to vary signiﬁcantly in
amount and timing.

All dividends and returns of capital will be subject to
the future ﬁnancial performance of the Group including
results of operations and cash ﬂows, the Group’s ﬁnancial
position and capital requirements, rating agency
considerations, general business conditions, legal, tax,
regulatory and any contractual restrictions on the
payment of dividends and any other factors the Board
deems relevant in its discretion, which will be taken
into account at the time.

Directors’ interests

The Directors’ beneﬁcial interests in the Company’s
common shares as at 31 December 2020, including
interests held by family members, were as follows:

Common shares held
Directors as at 31 December 2020

Neil Eckert 580,001

Trevor Carvey 180,000

Mark Heintzman 120,000

Brian Williamson 15,000

Elizabeth Murphy 15,000

Malcolm Furbert 8,000

Ken Randall –

Richard Sandor –

As at 31 December 2020 only Neil Eckert was in
compliance with the share ownership guidelines applicable
to Executive Directors and set out in the remuneration
summary on page 38.

Share capital

Details of the structure of the Company’s share capital
and changes in the share capital during the year are
disclosed in note 11 to the consolidated ﬁnancial state-
ments. The common shares of $0.01 par value each are
the only class of shares of the company presently in
issue and carry voting rights. There are no nil or partly
paid shares in issue. All our common shares rank pari passu
in all respects, there being no conversion or exchange
rights attaching thereto and all common shares have
equal rights to participate in capital, dividend and proﬁt
distributions by the Company. Our common shares are
freely transferable and there are no restrictions on transfer,
subject to compliance with applicable securities laws.

Governance
Directors’ report

Major shareholders

Statement of Directors’ responsibility

As at 31 March 2021 the Company was aware of the
following interests of 5% or more in the Company’s
issued share capital:

Percentage of issued
Shareholder Number of Shares share capital

Aviva Investors 25,061,645 15.17%

Fidelity International 15,253,640 9.29%

CI Investments 9,119,583 5.52%

Kames Capital 8,614,729 5.21%

Aegeon NV and aﬃliates 8,388,530 5.21%

Going concern and viability statement

As noted in the Chief Financial Oﬃcer’s report on page
12 the Company raised a total of £790 million ($1,057
million), net of oﬀering expenses, in the IPO in December.
Consequently, the Group has considerable ﬁnancial
resources and, after making enquiries, the Directors have
an expectation that the Company and the Group have
adequate resources to continue in operational existence
for the foreseeable future, a period of at least 12 months
from the date of this report. For this reason they have
adopted the going concern basis in preparing the
consolidated ﬁnancial statements.

The Strategic Overview on page 2 highlights the
importance of risk management to the Group’s strategy.
It is crucial that the Directors manage and monitor
risk, taking into account all key risks the Group faces,
including underwriting risks. Although newly formed, the
Group has appointed an experienced Chief Risk Oﬃcer
and established a group-wide enterprise risk management
framework which will identify, monitor and report on
all risks in the business. The Group is also subject to
extensive regulation and supervision including the BMA’s
BSCR. Against this background, the Directors have
assessed the prospects of the Group in accordance
with provision 31 of the UK Corporate Governance Code
2018, with reference to the Group’s current position and
prospects, its strategy, risk appetite and key risks, as
detailed in the ERM section on page 13, as well as note 3
to the consolidated ﬁnancial statements. The assessment
of the Group’s prospects by the Directors covers the
three years to 2023 and is underpinned by the business
plan set out for shareholders in the IPO prospectus,
which includes projections of the Group’s capital, liquidity
and solvency and reﬂects the Group’s intention to write
a broadly diversiﬁed reinsurance portfolio.

The Board is responsible for ensuring the maintenance
of proper accounting records which disclose with
reasonable accuracy the ﬁnancial position of the Group.
It is required to ensure that the ﬁnancial statements
present a fair view for each ﬁnancial period. The Directors
explain in the Annual Report their responsibility for
preparing the Annual Report and Accounts. We conﬁrm
that to the best of our knowledge:

n The ﬁnancial statements, prepared in accordance
with International Financial Reporting Standards
(IFRS), give a true and fair view of the assets, liabilities,
ﬁnancial position and proﬁt or loss of the Group and
the undertakings included in the consolidation taken
as a whole; and

n The Strategic Report on pages 2 to 19, which serves
as the management report includes a fair review
of the development and performance of the business
and the position of the Group and the undertakings
included in the consolidation taken as a whole,
together with a description of the principal risks
and uncertainties that they face.

Legislation in Bermuda governing the preparation and
dissemination of the consolidated ﬁnancial statements
may diﬀer from legislation in other jurisdictions.
In addition, the rights of shareholders under Bermuda
law may diﬀer from those for shareholders of companies
incorporated in other jurisdictions.

The Directors responsible for authorising the responsibility
statement on behalf of the Board are Neil Eckert and
Elaine Whelan. The consolidated ﬁnancial statements
were approved for issue on 1 April 2021. The Directors
consider that the Annual Report and Accounts, taken
as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders
to assess the Company’s and the Group’s position,
performance, business model and strategy.

By order of the Board
Greg Lunn
Company Secretary
1 April 2021

28 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 29

Governance
Nomination committee report

The nomination committee is chaired by Ken Randall,
and its other members are Elizabeth Murphy, Sir Brian
Williamson, Malcolm Furbert and Dr. Richard Sandor.
The nomination committee will meet at least twice a year,
or more frequently if required. Executive directors and
senior executives are invited to attend the meetings
by invitation, as required, but do not do so as of right.

Appointments to the nomination committee are made
for a period of three years (subject to the Company’s
Bye-laws and the director remaining a member of the
Board) which may be extended for up to two further
periods of three years, provided the director whose
appointment is being considered still meets the criteria
for membership. The Chair of the nomination committee
shall review membership of the committee annually.

Key responsibilities

The responsibilities of the nomination committee
include: (1) reviewing the size, structure and composition
of the Board and ensuring that the Board comprises
the right balance of skills, knowledge, diversity and
experience; (2) identifying and nominating for approval
candidates to ﬁll any vacancies on the Board; (3) giving
full consideration to succession planning for the Group;
and (4) making recommendations to the Board
concerning membership of the audit committee and
the remuneration committee in consultation with the
chairs of those committees.

Activities

Given the start-up nature of the Company, in the run-up
to the IPO on 7 December 2020 and with only a few
weeks of operations in 2020, the committee itself did
not meet and nomination matters were dealt with at
Board level.

Board appointments

While the Board acknowledges that open advertising
and/or an external search consultancy should generally
be used for the appointment of the Chair and
Non-Executive Directors, an external search ﬁrm was
not used during the initial start-up phase of the business.
The Nomination Committee will use open advertising
and/or an external search consultancy for subsequent
appointments or it will explain clearly why it has not.

The Company has a succession planning process in place
that will be executed from 2021 onwards.

Diversity and inclusion

The Company considers diversity in broader terms than
just gender and believes it is also important to reach
the correct balance of skills, knowledge, experience and
independence on the board.

Conduit is committed to recruit, retain and develop
people with diverse backgrounds and experiences at
all levels of our business, in a truly inclusive environment.
As an equal opportunities employer, Conduit does not
tolerate discrimination or harassment of any kind in
any aspect of employment. Conduit fully supports and
celebrates diﬀerences, which could include but are not
limited to race, age, gender, sexual orientation, disability,
beliefs, background (except as may be pertinent to the
requirements of a role, such as educational qualiﬁcations
or prior employment experience) socio-economic group
or nationality.

As at the end of the period ended 31 December 2020,
the Board comprised one woman (12.5%) and seven men
(87.5%). Following the appointment of Elaine Whelan
in January 2021, the Board now comprises two women
(25%) and six men (75%). As at 31 December 2020,
the senior management team and their direct reports
comprised one woman (11%) and 8 men (89%).
However, this has since increased and as at 31 March,
2021 it comprises 4 women (22%) and 14 men (78%).

In accordance with the Code, the Company will report
on the implementation of the Board’s policy on diversity,
including gender, in its next annual report.

Board evaluation

As the Board has been so recently appointed, an
evaluation did not take place in the year ended 31
December 2020. However, an evaluation will take place
next year and the Committee will consider its outcomes,
actions and how it will inﬂuence board composition.

Ken Randall
Chair, nomination committee
1 April 2021

Governance
Audit committee report

Elizabeth Murphy was appointed as Chair of the audit
committee in November 2020, in the run up to the
Admission. The other member of the committee is
Ken Randall.

In accordance with the UK Corporate Governance Code,
both Elizabeth and Ken are independent Non-Executive
Directors with competence relevant to the reinsurance
sector in which the Company operates, and both have
recent and relevant ﬁnancial experience and competence
in accounting and/or auditing. Further details of the
experience of each of the members is set out in the
Directors’ biographies on pages 21 to 23.

The audit committee will meet formally at least three
times a year, and more frequently if required. The quorum
necessary for the transaction of business at any meeting
of the audit committee is two members.

During the period from its appointment to 31 December
2020 the members of the committee met once to receive
proposals from potential providers of internal audit
services to the Group and to decide on the provider.
Both members attended the meeting, as set out in the
board meetings and attendance table on page 25.

The committee also reviews the Annual Report &
Accounts and advises the Board on whether taken
as a whole, it is fair, balanced and understandable.

During the period ended 31 December 2020, the
committee was primarily focused on the IPO, including
the summary of the committee’s role contained in the
prospectus and adopting the terms of reference.

The committee has established a work plan for the
remainder of 2021 to ensure that it covers comprehensively
its duties and responsibilities as set out in the committee’s
Terms of Reference which are available on the company’s
website.

Internal control and risk management

In the run-up to the IPO a comprehensive memorandum
on the ﬁnancial position and prospects procedures
was prepared and reviewed by the Board, to support
the statement made in the Prospectus that the Directors
had established procedures which provide a reasonable
basis for the Directors to make proper judgements as
to the ﬁnancial position and prospects of the Company
and the Group.

As the Board and its committees were only constituted
in November 2020, shortly before Admission, a
performance evaluation was not undertaken in the period
ending 31 December 2020. It is proposed that an internal
performance evaluation will be undertaken in 2021
and this will be reported on in the 2021 Annual Report.

The Company continues to build on the procedures
outlined in the memorandum on the ﬁnancial position
and prospects procedures. The Company’s CRO and
internal auditor were appointed prior to 31 December
2020 and in 2021 the committee will receive aﬃrmations
and reports from both of these functions.

Role and responsibilities

The audit committee’s role is to assist the Board with
the discharge of its responsibilities in relation to:

n Financial reporting, including reviewing the Group’s
consolidated ﬁnancial statements and accounting
policies,

n Internal and external audit controls,

n Reviewing and monitoring the scope and eﬀectiveness
of the annual audit and the extent of the non-audit
work, if any, undertaken by the external auditors,

n Advising on the appointment of external auditors and

assessing their independence and objectivity,

n Reviewing the eﬀectiveness of the internal audit

function and

n Internal controls, whistleblowing, anti-money

laundering, anti-bribery and anti-fraud systems
in place within the Group.

As the Company was not actively engaged in operating
activities in the period ended 31 December 2020, the
full suite of material controls were not fully built out.
The committee was therefore not in a position to review
the eﬀectiveness of the company’s risk management
and internal controls systems. As the Company builds
the business and control environment from 1 January
2021, the committee will monitor the implementation
and evaluation of these controls over time. This includes
policy review, oversight of the Group’s implementation
of whistleblowing arrangements, and other systems
and controls for the prevention of fraud, bribery and
money laundering which have already been adopted
by the Group.

Internal audit

In December 2020 the committee selected EY Bermuda
Ltd. (EY) as the Company’s outsourced internal auditors.
EY has extensive and current relevant experience providing
outsourced and co-sourced internal audit services to
reinsurance businesses in Bermuda and internationally.
In February 2021 the internal audit charter was approved
along with the internal audit work plan for 2021.

30 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 31

Governance
Audit committee report

Governance
Section 172 statement

Financial statements

Auditor independence and objectivity

The committee will assess the external auditor’s
independence annually. To assist in maintaining the
external auditor’s independence and objectivity, the Group
has adopted a formal policy governing the engagement
of the external auditor to provide non-audit services,
taking into account the relevant ethical guidance on
the matter. The implementation of this policy will be
reviewed annually by the committee, which describes the
circumstances in which the auditor may be engaged to
undertake non-audit work for the Group. The committee
will oversee compliance with the policy, and will consider
and approve requests to use the auditor for non-audit
work when they arise. The non-audit services policy is
available on the Company’s website.

Elizabeth Murphy
Chair, audit committee
1 April 2021

The committee met with the Group’s external auditors,
KPMG Audit Limited (KPMG), and reviewed the external
audit work plan for the period ending on 31 December
2020. The committee subsequently reviewed the Group’s
consolidated ﬁnancial statements for the period from
incorporation to 31 December 2020. A paper was
presented by management to the committee detailing
key issues and judgements. The only area of any signiﬁcant
judgement and estimation was the valuation of the
MIP. The committee noted management’s appointment
of an expert to carry out the valuation and the sensitivity
analysis that demonstrated varying the assumptions
used would not result in a materially diﬀerent outcome.

Annual Report & Accounts

The committee reviewed and approved the Group’s
preliminary results issued on 23 February 2021 and early
drafts of the Annual Report & Accounts and reviewed
the ﬁnal draft on 1 April 2021, together with the external
auditor’s report. The committee advised the Board that,
in its view, the 2020 Annual Report & Accounts, taken
as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to
assess the Group’s position and performance, business
model and strategy.

Auditor re-appointment

The committee having formally reviewed the
independence of the Group’s external auditors, KPMG,
considers that KPMG is independent and has concluded
that their appointment as auditors for the forthcoming
year continues to be in the best interests of the Company
and its shareholders. The resolution to appoint KPMG
will propose that it holds oﬃce until the conclusion
of the next Annual General Meeting at which accounts
are laid before the Company, at a level of remuneration
to be determined by the audit committee. The lead
external audit partner is James Berry who was appointed
in December 2020, at the same time as KPMG was
appointed as the Company’s ﬁrst auditor.

Provision 5 of the UK Code notes that the Board should
understand the views of the Company’s key stakeholders
and describe in the Annual Report and Accounts how
their interests and the matters set out in section 172 of
the Companies Act 2006 have been considered in board
discussions and decision making. The Company is a
Bermudian incorporated issuer and the Board is obliged
to follow comparable Director duties under Bermuda
company law. Although the Company is not required
by law to prepare a section 172 statement it has chosen
to do so as a matter of best corporate governance.

Section 172 requires a director to have regard, amongst
other matters, to the:

n Likely consequences of any decision in the long term;

n Interests of the company’s employees;

n Need to foster the company’s business relationships

with suppliers, customers and others;

n Impact of the company’s operations on the community

and environment;

n Desirability of the company maintaining a reputation

for high standards of business conduct; and

n Need to act fairly as between members of the company.

Stakeholder engagement

As a newly incorporated and listed entity, the Company
is just beginning the process of engaging with
stakeholders. Details of our stakeholders and how we
engaged with them are set out below.

Shareholders

As a newly listed entity, we recognise the role our
shareholders have played in helping us to grow our
business. As the Company’s IPO was only completed
in December 2020, the engagement mechanisms that
one would expect to see in an established company
are still being established. However, in the period prior
to the IPO we engaged with our potential shareholders
and worked with them to ensure that the Company
addressed the issues that mattered to them. Going
forward we will be engaging with our shareholders
regularly, including by face to face communications,
investor days and the AGM. The Executive Chairman
and the Head of Investor Relations will be responsible
for leading the shareholder engagement programme
and shareholders are always welcome to contact them
directly. The key priority for our shareholders is that
we deliver sustainable, proﬁtable growth over the
longer term.

Employees

Our employees have only recently joined the business
and we value the faith that they have in the Company’s
business.

At the time of IPO, Conduit did not have its employee
engagement mechanism in place. However, as noted
on page 19, Malcolm Furbert has been appointed as
our Non-Executive Director responsible for engagement
with our workforce. As our workforce grows during 2021,
Malcolm looks forward to gathering their views and
working with them to shape the culture of the Group.

We intend to regularly engage with our employees and,
with a relatively small number, the Board is accessible
to all employees and we welcome their views. We may
utilise employee surveys to gain feedback.

As further detailed in the Environmental, Social
and Governance Report, the Company is an equal
opportunities employer.

Brokers and customers

Brokers are key to our business and they are the focus
of so much of what we do. To be successful with our
initial underwriting on 1 January 2021, we had to be
actively engaged with the brokers. Despite the very short
time frame from conclusion of the IPO on 7 December
2020 we received positive feedback both from brokers
and cedants, where we are seen as an attractive partner
oﬀering added value immediately. We are building strong
relationships with brokers and customers in various
jurisdictions and, as we depend on these relationships
to make our business a success, we will continue to
develop them over the coming months and years.

Government and regulators

In an industry that is subject to strict regulatory supervision
and oversight, the Board recognises the need to work
closely and openly with all relevant regulatory bodies.
We recognise the importance of these relationships and
engage actively with regulators, particularly at this early
stage with the BMA, whether that is through meetings,
reporting or routine regulatory reviews. The Board is
also kept apprised of communications with regulators
and supervisors and, together with management,
closely monitors changes in regulatory and supervisory
requirements. In addition, the Group intends to maintain
proactive relationships with relevant tax authorities
in order to achieve compliance with all its tax obligations.
This requires us to keep abreast of developments in
tax legislation and to work with the tax authorities to
manage our tax risk.

32 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 33

Governance
Section 172 statement

Remuneration
Statement from the chairman of the remuneration committee

Rating agencies

Principal decision

Dear Shareholders,

The Group is building its relationships with rating agencies
and in December 2020 A.M. Best assigned a Financial
Strength Rating of A– (Excellent) and a Long-Term Issuer
Credit Rating of “a-” to Conduit Reinsurance Limited. In
order to maintain and in time seek to improve this rating,
we will be in regular contact with A.M. Best to keep them
apprised of our business performance and prospects.

Community and environment

As set out in the Environmental, Social and Governance
Report, the community and environment are a key focus
for the Company. We are strongly committed to achieving
and maintaining net-zero-carbon and to giving back
to the community via initiatives such as the Conduit
Foundation.

Key suppliers

We have established strong working relationships
with our key service providers, who include our landlord,
our IT service and data suppliers, outsourced service
providers, auditors, investment managers and ﬁnancial
advisors. We expect the same professional and ethical
standards to exist in those organisations as we would
expect from ourselves.

As the ﬁnancial period ending on 31 December 2020
was so short, and the Company was newly incorporated,
the principal decision made by the Board was whether
or not to proceed with the IPO.

In making its decision to proceed with the IPO the Board
considered its consequences and the beneﬁts of the
ﬁnancing and liquidity opportunities to the Company’s
stakeholders. As a result of that consideration the Board
ensured that governance processes were introduced
to help protect the interests of shareholders and that
the Management Promote programme was implemented
to provide opportunities for our employees to share in
the success of the Company and to align them with the
interests of shareholders. The Board also noted that the
IPO would increase the ﬁnancial strength of the Group
and allow it to obtain the desired rating to commence
underwriting business and would enable it to build
its relationships with regulators and other governmental
agencies, brokers, rating agencies and other stakeholders.

The Board determined that the IPO was in the best
interests of all its stakeholders and that it would enable
the Company to develop better relationships with each
of them over the longer term.

On behalf of the Board, I am pleased to present the ﬁrst
Directors’ Remuneration Report.

The other members of the remuneration committee are
Ken Randall, Malcolm Furbert and Richard Sandor, all
of whom are independent Non-Executive Directors. I also
have been adjudged by the Board to be independent,
and separately I have served on another remuneration
committee for at least 12 months, including as chair of
the remuneration committee of NYSE Euronext.

The responsibilities of the remuneration committee
include determining and monitoring the strategy
and policy on remuneration, termination, performance
related pay, pension arrangements, reporting and
disclosure, share incentive plans and whether or not
to consult with remuneration consultants. In discharging
its responsibilities, the committee will bear in mind the
alignment of incentives and rewards with the Group’s
strategy and culture. The committee’s terms of reference,
which are available on the Company’s website, also set
out the reporting obligations and the authority of the
remuneration committee to carry out its responsibilities.

Given the start-up nature of the Company, in the run-up
to the IPO on 7 December and with only a few weeks
of operations in 2020, remuneration matters were dealt
with at Board level and there were no meetings of the
Remuneration Committee in 2020. In the weeks prior
to the IPO, there was substantial engagement with
prospective investors and eventual shareholders of the
Company which included discussion of remuneration and
MIP arrangements. The Company’s initial remuneration
policy and the remuneration of Directors, as disclosed
in our IPO Prospectus, were approved by the whole
Board of the Company. The remuneration committee
held its ﬁrst meeting on 12 January 2021 and has met
twice subsequently. The Company has not to date
consulted with specialist remuneration advisors and the
committee determined that remuneration consultants
were not required for the development and presentation
of this initial remuneration report. We will keep the
appointment of remuneration consultants under review
as the Company evolves and creates its operating history.

This inaugural Annual Report and Accounts covers
the Group’s ﬁrst ﬁnancial period from incorporation to
31 December 2020, during which time the Group did
not write any reinsurance business. Consequently, there
is no useful information that could be disclosed in this
remuneration report to show how the Company’s
remuneration policy was implemented in this very short
ﬁnancial period. However, the remuneration policy and
the remuneration of Directors are as set out in the IPO
Prospectus. The Board has therefore determined that
it will not serve a useful purpose to put this Directors’
remuneration report to an advisory vote of the Company’s
shareholders, or the remuneration policy to a binding
vote of shareholders, at the forthcoming Annual General
Meeting in May 2021, although as a Bermuda-incorporated
Company we are not subject to the UK Companies Act
and related secondary legislation. Instead, we disclose
here the remuneration approach we intend to implement
for 2021 which we regard as the Group’s foundation year,
to recognise the special circumstances of the Company’s
creation, listing and the eﬀort put in to establish a
regulated and rated reinsurance Group.

The Company will continue to develop further its
Directors’ remuneration policy, with a full disclosure
in the 2021 Annual Report & Accounts. The Directors
are acutely aware that they must work with investors
and be responsive in all key aspects of remuneration.
Through 2021 the Company will continue to engage with
shareholders, consider other relevant aspects as to how
its Directors are to be remunerated post-foundation
of the Group and, where necessary, consult with external
remuneration consultants. By the time of the 2022
Annual General Meeting, our shareholders will be able
to see the impact of the ﬁrst full year of trading will have
had on the Directors’ remuneration.

The Company is committed to engaging extensively with
shareholders on remuneration matters.

Sir Brian Williamson
Chair, remuneration committee
1 April 2021

34 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 35

Remuneration
Remuneration summary

This section summarises the Directors’ remuneration
for the period ending on 31 December 2020. The
remuneration below is based upon the remuneration
strategy set out in the IPO prospectus:

n Balancing short- and long-term goals – provide
a package with an appropriate balance between
shortand longer-term performance targets linked
to the delivery of the Company’s business plan and
the generation of sustainable long-term returns for
shareholders;

n Shareholder alignment – ensure alignment of the

interests of the executive directors, senior management
and employees to the long-term interests of
shareholders;

n Competitive remuneration – maintain a competitive
package in order to attract, retain and motivate high
calibre talent to help ensure the Company performs
successfully;

n Fairness – take an active interest in the development
of good practices to deliver fair remuneration at all
levels of the organisation; and

n Performance-focussed compensation – encourage

and support a sustainable, high-performance culture
in line with the build plan and with the agreed risk
proﬁle of the business.

Director’s remuneration

Executive Directors

On 18 November 2020, each of Neil Eckert, Trevor
Carvey and Mark Heintzman (CHL’s former CFO) entered
into a service agreement with CHL. Under their respective
agreements, Neil Eckert and Trevor Carvey are each
entitled to receive an annual salary of $530,000 and
$800,000 respectively. Mark Heintzman was entitled
to receive a salary of $425,000. In recognition of the work
performed by each of Neil Eckert and Trevor Carvey
from 31 March 2020 establishing CHL, CHL made a
one-oﬀ payment of $357,000 and $539,000 respectively.
A similar one-oﬀ payment of $72,000 was made to
Mark Heintzman in respect of his work performed from
1 October 2020 through Admission.

The table below sets out the single ﬁgure of total
remuneration for Executive Directors for the ﬁnancial
period ending 31 December 2020. There were no variable
remuneration amounts paid to any of the Directors
in 2020. Other than the MIP (described below), there
was no long term incentive plan for Directors.

No pension beneﬁt was paid to Directors in 2020.
The Company will be putting in place a pension plan
in 2021 and any pension payments (or cash in lieu) paid

by CHL will be paid at market rates and reported in the
2021 annual report and accounts.

Additional beneﬁts for Bermuda-based Executive
Directors comprised or will comprise Bermuda payroll
taxes, social insurance, medical, dental and vision
coverage, life insurance, housing and other allowances
paid or to be paid by CHL. Given the short period of
the Group’s existence in December 2020 post-IPO, there
was insuﬃcient time to put all these beneﬁts in place
and so payments were not actually made in 2020.
A full report of beneﬁts payments made in 2021 will be
reported in the 2021 annual report and accounts.

One-oﬀ compensation
for work done to set up
Fixed pay: salary CHL prior to the IPO
Executive director $’000 $’000

Neil Eckert 44 357

Trevor Carvey 67 539

Mark Heintzman 35 72

As the Group was capitalised and commenced operations
only in December 2020, the basic information above
reﬂects the short operational period and it is not possible
to include certain comparative information from year
to year that would be required to be included for a UK
incorporated listed company. However, we expect
to report such metrics as if we were a UK incorporated
company for future ﬁnancial periods.

Non-Executive Directors

The amount of any remuneration payable to Non-Executive
Directors shall be determined by the Board save that
under the Bye-laws, unless otherwise approved by the
Members, the aggregate remuneration by way of fee of
all the Non-Executive Directors of CHL shall not exceed
$1.3 million per annum.

The Non-Executive Directors’ basic fee is $75,000,
with additional fees payable in respect of membership
of Board Committees of $15,000 per committee
and $25,000 for appointment as Chair of a committee
(and $15,000 for appointment as senior independent
director). As at 31 December 2020 under the terms of
their appointments as Non-Executive Directors of CHL,
Sir Brian Williamson, Elizabeth Murphy, Ken Randall,
Malcolm Furbert and Dr. Richard Sandor were entitled
to an annual fee of $130,000, $115,000, $130,000,
$105,000 and $105,000 per annum respectively.

In addition, in February 2021 Malcolm Furbert, Ken
Randall and Elizabeth Murphy were appointed as
Non-Executive Directors of CRL, for which appointment
they will each receive a ﬂat fee of $25,000 per annum.
The aggregate remuneration anticipated in 2021 by way

of fee of all the Non-Executive Directors as of the date
of this report is therefore $585,000 ($660,000 including
the CRL fees).

have been exchanged will not be exchanged and will
automatically exchange at the next anniversary date
on which the Performance Condition is satisﬁed.

For their work done in the fourth quarter of 2020,
in connection with the start-up of CHL and its IPO, each
Non-Executive Director will receive a payment of $18,750
being equivalent to one quarter of the annual basic fee.
This amount is in respect of work done in 2020 and
is not included in the aggregate $585,000 CHL fees
for 2021 noted above.

If the Performance Condition is satisﬁed, any MIP Shares
that have not automatically been exchanged for common
shares of CHL before that date will on the eﬀective date
of any takeover of CHL or sale or liquidation of CML be
exchanged (delivering the remainder of the 7.5 per cent.
of Growth for each of the USD MIP Shares and the GBP
MIP Shares).

Management Incentive Plan

Incentives have been put in place for Neil Eckert and
Trevor Carvey (the founders of Conduit) and other senior
managers who are expected to make key contributions
to the success of the Group from Admission (the MIP).
Success will be measured by share price performance
and investor returns and the MIP arrangements reﬂect
these key metrics. The MIP has been facilitated by the
subscription for shares in CML (a direct subsidiary of
CHL which is an intermediate holding company of CRL).

Under the MIP, Neil Eckert and Trevor Carvey and
other senior managers invited to participate subscribed
for shares or will be issued nil cost options in CML
(“MIP Shares”). Half of the MIP Shares are denominated
in sterling (“GBP MIP Shares”) and half in U.S. dollars
(“USD MIP Shares”).

Subject to Vesting in the hands of the relevant holder
of MIP Shares, if the Performance Condition is satisﬁed
at the relevant time, the MIP Shares will be automatically
exchanged for common shares of CHL for an aggregate
value equivalent to up to 15 per cent. of the excess
of the Market Value of CHL over and above the Invested
Equity (the “Growth”) (7.5 per cent. of the Growth based
on calculations in sterling for the GBP MIP Shares and
7.5 per cent. of the Growth based on calculations in
U.S. dollars for the USD MIP Shares).

If (1) the Performance Condition is satisﬁed for either
or both of the GBP MIP Shares or the USD MIP Shares
on each of the fourth, ﬁfth, sixth and seventh anniversaries
of Admission and (2) no takeover of CHL or sale or
liquidation of CML has taken place before any of those
dates, one quarter of the relevant MIP Shares (delivering
1.875 per cent. of the Growth to the relevant shares)
(each a “Tranche”) will be automatically exchanged
for such number of common shares of CHL as have
an aggregate value (at the closing share price for the
trading day immediately prior to the date of the exchange)
equal to 1.875 per cent. of the Growth at the date of the
exchange. Whenever the Performance Condition has not
been satisﬁed on the relevant anniversary date in respect
of a Tranche, those MIP Shares which might otherwise

If on the seventh anniversary of Admission, the
Performance Condition is not satisﬁed, all MIP Shares
to be exchanged for commons shares of CHL on that
date will be redeemed for 1 pence (sterling) in aggregate.
Similarly, on a takeover of CHL or sale or liquidation
of CML, if the Performance Condition is not satisﬁed,
all of the MIP Shares will be redeemed for 1 pence
(sterling) in aggregate.

For Neil Eckert and Trevor Carvey, 20 per cent. of their
MIP shares vested on Admission. The remainder of the
their MIP Shares and those for other senior managers
will vest on a per diem basis in the period between
Admission and the date of the relevant Tranche’s
automatic Exchange.

Leaver provisions and Lock-up arrangements

MIP Shares are subject to customary leaver provisions
and malus / clawback principles. Lock-up arrangements
also apply post-exchange of the MIP Shares into common
shares of CHL.

Other/miscellaneous

The reason for issuing USD MIP Shares and GBP MIP
Shares is to provide some hedging for participants
in the MIP against the impact of ﬂuctuations in the US
dollar-sterling exchange rate. CHL’s share price and,
therefore, its market capitalisation, will be reported in
sterling but the majority of the business’ assets, liabilities
and cashﬂows will be denominated in US dollars.

The issue of CHL common shares upon an exchange of
MIP Shares will not impact the Invested Equity calculation
for future Tranches. Any issue of Shares will dilute
shareholders’ returns.

Anti-dilution protections are in place such that a
proportion of existing holders of MIP Shares will be
required to consent to the issuance of additional MIP
Shares but not, for the avoidance of doubt, the
allocation of the shares held by CHL.

36 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 37

Remuneration
Remuneration summary

Remuneration
Remuneration for 2021 and beyond

MIP contributions

On 17 November 2020, Neil Eckert, Trevor Carvey
and Mark Heintzman, each entered into a MIP
subscription agreement with CML, which provide
for their participation in the MIP.

The table below sets out the respective MIP Share
allocations and subscription moneys for each of the
Executive Directors as at 31 December 2021.

Name USD MIP Shares USD subscription GBP MIP Shares GBP subscription Percentage of MIP

Neil Eckert 45,000 101,815 45,000 77,379 45.0%

Trevor Carvey 30,000 67,877 30,000 51,586 30.0%

Mark Heintzman¹ 3,000 6,788 3,000 5,159 3.0%

Total 78,000 $176,480 78,000 £134,124 78.0%

1. Mark Heintzman’s MIP Shares were repurchased at the time
of his resignation on 13 January 2021. Elaine Whelan was
appointed as Executive Director and CFO on 13 January
2021. Elaine’s allocation of the MIP is 5%.

Given that CHL only completed its IPO on 7 December
2020, a graph showing total shareholder returns for a
holding of CHL’s shares and a hypothetical comparator
holding of shares is not included in the report.

Share ownership guidelines

As stated in the IPO prospectus each of the Executive
Directors is required to build and maintain a shareholding
in the Company of 300% of salary whilst in post. Where
not met at Admission, future bonuses which are paid
in Shares and other share awards will accumulate until
this requirement is met. In addition, post-cessation
shareholding requirements apply which will require
Executive Directors to retain for two years following
cessation of their employment by the Company the lower
in value of (1) such number of Shares on cessation that
have a market value equal to the shareholding guideline
in place at that time (i.e. 300% presently) and (2) the
number of Shares they hold at that time. Shares that are
acquired by the Executive Director out of their own
funds will be excluded from this post-cessation holding
requirement. The remuneration committee can relax the
share ownership requirement in exceptional circumstances
and may alter the operation of the guidelines to reﬂect
changing market practice, the expectations of institutional
shareholders and/or such other matters as the
remuneration committee considers appropriate.

As at 31 December 2020 only Neil Eckert met the
shareholding requirement. The other Executive Directors
have seven years to meet the requirement.

We disclose here the remuneration approach we intend
to implement for Executive Director remuneration in
2021 which we regard as the Group’s foundation year,
to recognise the special circumstances of the Company’s
creation, listing and the eﬀort put in to establish a
regulated and rated reinsurance Group. In the ﬁrst year
of operations, while a signiﬁcant eﬀort is involved in
setting up the Group for the future and building the book,
RoE will be minimal. The approach set out in this report
is designed to ensure that remuneration at this stage
of the Group’s evolution is aligned to, and supportive
of, the build plan and strategy post-IPO.

Pension and beneﬁts

The Executive Directors’ pension provision for 2021
is aligned to that of the rest of the workforce, at 10%
of pensionable earnings. Executive Directors may elect
to take cash in lieu of pension, subject to compliance
with applicable law.

Other market-typical beneﬁts for Executive Directors
working in Bermuda have been provided including normal
health and welfare beneﬁts, and travel and housing
allowances (including Bermuda payroll taxes and social
insurance).

Remuneration for 2021

Base salary

Base salaries for Neil Eckert ($530,000) and Trevor
Carvey ($800,000) were set and approved by the
Board at the time of the IPO in 2020. Elaine Whelan’s
salary ($585,000 per annum) was approved by the
Remuneration Committee and the Board at the time
of her appointment as Executive Director and CFO
on 13 January 2021. There will be no change to these
salaries in 2021.

Bonus

For the Group’s foundation year (2021), annual bonuses
for the Executive Directors will be based on the ﬁnancial
performance of the Group, the creation of the foundation
of the organisation and the personal contributions
of each Executive Director, with the ﬁnancial component
making up 25% of the overall opportunity, the foundational
element making up 50%, and 25% based on personal
contribution and/or meeting strategic objectives.

The ﬁnancial measure for 2021 is RoE.

The remuneration committee will determine the actual
bonus awards for each Executive Director, based on
these criteria.

Bonuses will be subject to a maximum of 300% of base
salary. 50% of any bonus earned will be payable as
a deferred share award of an equivalent value (with the
number of shares calculated using the average of the
share price at the close of the market over the ﬁve days
prior to the day that the award is granted) which vests
(unless the individual is dismissed for gross misconduct)
over three years with one third of the award vesting
(including dividend equivalence) in each of the following
three years. The Company considers this to be a more
appropriate structure with the deferral serving as a better
retention mechanism over the longer term than the 50%
deferral with a two-year cliﬀ vest that was noted in the
IPO prospectus. Deferral over three years is also more in
line with the expected duration of the Group’s reserves.

Long term incentives

Executive Directors participate in the MIP (as described
on page pages 37 and 38).

Malus and clawback

Consistent with best practice, malus and clawback
provisions will be operated at the discretion of the
remuneration committee in respect of both the annual
bonus and the MIP. The remuneration committee
will have the discretion to reduce an award (malus)
or require repayment of an award (clawback) where
it considers that there are exceptional circumstances.
Such exceptional circumstances are limited to (1) material
misstatement of results, (2) material breach of any post
termination employment covenants, or (3) fraud or a
ﬁnancial criminal act which aﬀects the Group and carries
a custodial sentence during the course of employment.
Clawback will apply for a period of three years following
vesting/payment of an award.

Non-Executive Director remuneration

See the disclosure set out in the remuneration summary
on page 36 above.

Service contracts – Non-Executive Directors

Non-Executive Directors are typically expected to
serve two three-year terms but may be invited by
the Board to serve for an additional period. Any term
renewal is subject to Board review and AGM re-election.
Notwithstanding any mutual expectation, there is
no right to re-nomination by the Board, either annually
or after any three-year period.

Elizabeth Murphy, Ken Randall, Malcolm Furbert and
Brian Williamson were all appointed on 13 November
2020. The unexpired portion of their ﬁrst three-year terms
ends on 13 November 2023. Richard Sandor was
appointed on 24 November 2020 and his ﬁrst three
year term ends on 24 November 2023.

38 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 39

Remuneration
Remuneration for 2021 and beyond

Financial statements
Independent auditor’s report to the Shareholders and Board
of Directors of Conduit Holdings Limited

Service contracts – Executive Directors

The Company’s policy is for Executive Directors
to have service agreements which may be terminated
by the Company for breach by the executive or with
no more than six months’ notice from the Company to
the Executive Director and six months’ notice from the
Executive Director to the Company. If notice is served
by either party, the Executive Director can continue to
receive base salary, beneﬁts and pension for the duration
of their notice period during which time the Company
may require the individual to continue to fulﬁl their
current duties or may assign a period of garden leave.
Service contracts do not contain liquidated damages
clauses.

The Company may elect to make a payment in lieu of
notice equivalent in value to a maximum of six months’
base salary and beneﬁts including pension contribution
but excluding bonus, payable in monthly instalments,
which would be subject to mitigation if alternative
employment is taken up during this time. Alternatively,
the remuneration committee retains discretion to provide
this payment as a lump sum. In the event of termination
for cause (e.g. gross misconduct) neither notice nor
payment in lieu of notice will be given and the Executive
Director will cease to perform their services immediately.

In addition, and consistent with market practice, the
Company may pay a contribution towards the Executive
Director’s legal fees for entering into a statutory
agreement, may pay a contribution towards fees for
outplacement services as part of a negotiated settlement,
or may make a payment to settle claims the Executive
Director may have. There is no provision for additional
compensation on termination following a change
of control. Payment may also be made in respect of
accrued beneﬁts, including holiday not taken.

Remuneration post 2021

Building on the key principles and remuneration
strategy set out in the IPO prospectus, with due regard
to the UK Corporate Governance Code and also taking
due account of best practice, in 2021 the Company will
develop its Directors’ Remuneration Policy to govern
future payments that will be made to Directors for the
2022 ﬁnancial year onwards. We anticipate the policy
will be based on a combination of ﬁnancial and personal
performance, and that the foundational element will
cease. There will be greater focus on ﬁnancial as
opposed to personal performance. On implementation
the weightings will be 75% and 25% respectively.
The Company will engage extensively with shareholders
prior to publishing its 2021 remuneration report.

Key audit matters

Key audit matters are those matters that, in our
professional judgement, were of most signiﬁcance
in our audit of the consolidated ﬁnancial statements
of the current period. These matters were addressed
in the context of our audit of the consolidated ﬁnancial
statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion
on these matters.

The key audit matter that arose is as overleaf:

Report on the audit of the consolidated ﬁnancial
statements

Opinion

We have audited the consolidated ﬁnancial statements
of Conduit Holdings Limited (the “Company”) and
its subsidiaries (the “Group”), which comprise the
consolidated balance sheet as at 31 December 2020 and
the consolidated statements of comprehensive income,
changes in equity and cash ﬂows for the period from
6 October 2020 (date of incorporation) to 31 December
2020, and notes, comprising signiﬁcant accounting
policies and other explanatory information.

In our opinion, the accompanying consolidated ﬁnancial
statements present fairly, in all material respects,
the consolidated ﬁnancial position of the Group as
at 31 December 2020 and its consolidated ﬁnancial
performance and its consolidated cash ﬂows for the
period from 6 October 2020 (date of incorporation)
to 31 December 2020 in accordance with International
Financial Reporting Standards (IFRS).

Basis for opinion

We conducted our audit in accordance with International
Standards on Auditing (ISAs). Our responsibilities under
those standards are further described in the Auditor’s
responsibilities for the Audit of the Consolidated Financial
Statements section of our report. We are independent
of the Group in accordance with International Ethics
Standards Board for Accountants International Code
of Ethics for Professional Accountants (including
International Independence Standards) (IESBA Code)
together with the ethical requirements that are relevant
to our audit of the consolidated ﬁnancial statements
in Bermuda and we have fulﬁlled our other ethical
responsibilities in accordance with these requirements
and the IESBA Code. We believe that the audit evidence
we have obtained is suﬃcient and appropriate to
provide a basis for our opinion.

40 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 41

Financial statements
Independent auditor’s report to the Shareholders and Board
of Directors of Conduit Holdings Limited

Equity based
compensation
expense

(2020: $312k)

Refer to the
Audit committee
report on page
32 and the
following in the
notes to the
consolidated
ﬁnancial
statements: note
2 signiﬁcant
accounting
policies and note
6 disclosures
on employee
beneﬁts.

The risk

Our response

Subjective valuation

Our procedures included:

The Group currently operates a Management
Incentive Plan (MIP) under which shares
are subscribed for or nil cost options will be
granted. The value of the services received
in exchange for the equity based incentives
is measured by reference to the estimated
fair value of the incentives at their grant
date. 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.
The fair value was estimated using a
stochastic Monte Carlo model which required
the Group to select their best estimates
of assumptions used in the model. These
assumptions are highly judgmental and
input from independent experts was sought
by the Group. Accordingly, there is a risk
that the fair value of the equity based
incentive is not appropriately estimated
at the grant date.

Disclosures

In addition, there is a risk that the disclosures
related to equity based compensation
arrangements are inadequate or not fairly
presented in line with relevant accounting
standards.

Control design and observation:

n We evaluated the design and

implementation of the Group’s control
regarding review and approval of
the independent expert’s valuation
of the equity based compensation.
We performed the tests below rather
than seeking to rely on any of the Group’s
controls because the nature of the
balance is such that we would expect
to obtain audit evidence primarily
through the detailed procedures
described.

Assessing valuer’s credentials:

n We evaluated the competence,

capabilities and objectivity of the
Group’s independent expert;

n We (together with our own valuation
specialists) performed enquiries of the
independent expert to understand
their process and model.

Our valuation expertise:

n We used our own valuation specialists
in assessing the reasonableness of
the methods and assumptions utilised
by the Group’s independent expert.

Assessing observable inputs:

n We agreed certain inputs into the equity
based compensation valuation model
to the MIP agreements.

Assessing transparency:

n We evaluated the adequacy of the

Group’s disclosures on equity based
compensation in accordance with the
requirements of relevant accounting
standards.

Our results:

The results of our testing were satisfactory
and we considered the expense recorded
to be reasonable.

Other information

Management is responsible for the other information.
The other information comprises the Annual Report (but
does not include the consolidated ﬁnancial statements
and our auditor’s report thereon).

Except as described in the Report on Other Legal and
Regulatory Requirements section of our report, our
opinion on the consolidated ﬁnancial statements does
not cover the other information and we do not express
any form of assurance conclusion thereon.

In connection with our audit of the consolidated ﬁnancial
statements, our responsibility is to read the other
information and, in doing so, consider whether the other
information is materially inconsistent with the consolidated
ﬁnancial statements or our knowledge obtained in the
audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude
that there is a material misstatement of this other
information, we are required to report that fact. We have
nothing to report in this regard.

Responsibilities of management and those charged with
governance for the consolidated ﬁnancial statements

Management is responsible for the preparation and fair
presentation of the consolidated ﬁnancial statements
in accordance with IFRS, and for such internal control
as management determines is necessary to enable the
preparation of consolidated ﬁnancial statements that are
free from material misstatement, whether due to fraud
or error.

In preparing the consolidated ﬁnancial statements,
management is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using
the going concern basis of accounting unless management
either intends to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for
overseeing the Group’s ﬁnancial reporting process.

Auditor’s responsibilities for the audit of the
consolidated ﬁnancial statements

Our objectives are to obtain reasonable assurance
about whether the consolidated ﬁnancial statements as
a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report
that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs will always detect
a material misstatement when it exists.

Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate,
they could reasonably be expected to inﬂuence the
economic decisions of users taken on the basis of these
consolidated ﬁnancial statements.

As part of an audit in accordance with ISAs, we exercise
professional judgment and maintain professional
skepticism throughout the audit. We also:

n Identify and assess the risks of material misstatement
of the consolidated ﬁnancial statements, whether due
to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence
that is suﬃcient and appropriate to provide a basis
for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations,
or the override of internal control.

n Obtain an understanding of internal control relevant
to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the eﬀectiveness
of the Group’s internal control.

n Evaluate the appropriateness of accounting policies

used and the reasonableness of accounting estimates
and related disclosures made by management.

n Conclude on the appropriateness of management’s use
of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that
may cast signiﬁcant doubt on the Group’s ability
to continue as a going concern. If we conclude that
a material uncertainty exists, we are required to
draw attention in our auditor’s report to the related
disclosures in the consolidated ﬁnancial statements
or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause
the Group to cease to continue as a going concern.

n Evaluate the overall presentation, structure and content
of the consolidated ﬁnancial statements, including the
disclosures, and whether the consolidated ﬁnancial
statements represent the underlying transactions and
events in a manner that achieves fair presentation.

We communicate with those charged with governance
regarding, among other matters, the planned scope
and timing of the audit and signiﬁcant audit ﬁndings,
including any signiﬁcant deﬁciencies in internal control
that we identify during our audit.

42 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 43

Financial statements
Independent auditor’s report to the Shareholders and Board
of Directors of Conduit Holdings Limited

Financial statements
Consolidated statement of comprehensive income
For the period from 6 October to 31 December 2020

Notes $’000

Net investment income 51
Net foreign exchange gains 151

Total net revenue 202

Equity based compensation expense 6 312
Other operating expenses 6 4,507

Total expenses 4,819

Operating loss 5 (4,617)

Loss for the period (4,617)

Income tax expense (beneﬁt) 7 –
Loss after tax (4,617)
Other comprehensive income (loss) –

Total comprehensive loss for the period (4,617)

Loss per share
Basic and diluted 14 (0.03)

n The directors’ explanation in the Longer term viability
statement on page 29 as to how they have assessed
the prospects of the Group, over what period they
have done so and why they consider that period to
be appropriate, and their statement as to whether they
have a reasonable expectation that the Group will
be able to continue in operation and meet its liabilities
as they fall due over the period of their assessment,
including any related disclosures drawing attention
to any necessary qualiﬁcations or assumptions.

n The related going concern statement made in

conformity with the Listing Rules set out on page 29.

The purpose of our audit work and to whom we owe
our responsibilities

This report is made solely to the Company’s shareholders
and Board of Directors, as a body. Our audit work has
been undertaken so that we might state to the Company’s
shareholders and Board of Directors those matters we
are required to state to them in an auditor’s report and
the further matters we are required to state to them
in accordance with the terms agreed with the Company
and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility
to anyone other than the Company’s shareholders and
Board of Directors, as a body, for our audit work, for this
report, or for the opinion we have formed.

The Engagement Partner on the audit resulting in this
independent auditor’s report is James Berry.

KPMG Audit Limited
Chartered Professional Accountants
Hamilton, Bermuda
1 April 2021

We also provide those charged with governance with
a statement that we have complied with relevant ethical
requirements regarding independence, and communicate
with them all relationships and other matters that may
reasonably be thought to bear on our independence,
and where applicable, related safeguards.

From the matters communicated with those charged
with governance, we determine those matters that were
of most signiﬁcance in the audit of the consolidated
ﬁnancial statements of the current period and are
therefore the key audit matters. We describe these
matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when,
in extremely rare circumstances, we determine that
a matter should not be communicated in our report
because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest
beneﬁts of such communication.

Report on other legal and regulatory requirements

Corporate governance statement

We have been engaged to review the part of the
corporate governance statement on pages 24 to 27
relating to the Group’s compliance with the provisions
of the United Kingdom Corporate Governance Code that
would be speciﬁed by the Listing Rules of the United
Kingdom’s Financial Conduct Authority for our review
if the Group had a premium listing on the London Stock
Exchange. We have nothing to report in this respect.

In addition, the Directors have engaged us to review
their statements on going concern and the longer-term
viability on page 29 as if the Company was a United
Kingdom registered company with a premium listing
on the London Stock Exchange. Our review was
substantially less in scope than an audit and only
consisted of making inquiries and considering the
Directors’ process supporting their statements.

Based on the knowledge we acquired during our audit
of the consolidated ﬁnancial statements, we have nothing
material to add or draw attention to in relation to:

n The directors’ conﬁrmation within the Longer term

viability statement on page 29 that they have carried
out a robust assessment of the emerging and principal
risks facing the Group, including those that would
threaten its business model, future performance,
solvency or liquidity;

44 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 45

Financial statements
Consolidated balance sheet
As at 31 December 2020

Financial statements
Statement of consolidated cash ﬂows
For the period from 6 October to 31 December 2020

Notes $’000

Assets
Cash and cash equivalents 8 1,054,046
Other assets 1,081
Right-of-use lease assets 10 11
Intangible assets 9 169

Total assets 1,055,307

Liabilities
Other payables 2,512
Lease liabilities 11

Total liabilities 2,523

Shareholders’ equity
Share capital 11 1,655
Other reserves 12 1,055,746
Retained loss (4,617)

Total shareholders’ equity 1,052,784

Total liabilities and shareholders’ equity 1,055,307

Cash ﬂows used in operating activities
Loss before tax (4,617)
Net investment income (51)
Net foreign exchange gains (161)
Equity based compensation expense 6 312
Change in operational assets and liabilities 1,436

Net cash ﬂows used in operating activities (3,081)

Cash ﬂows used in investing activities
Purchase of intangible assets 9 (169)
Interest received 51

Net cash ﬂows used in investing activities (118)

Cash ﬂows from ﬁnancing activities
Proceeds from issue of share capital, net of issuance costs 11, 12 1,057,089

Net cash ﬂows from ﬁnancing activities 1,057,089

Net increase in cash and cash equivalents 1,053,890
Cash and cash equivalents at beginning of period –
Eﬀect of exchange rate ﬂuctuations on cash and cash equivalents 156

The consolidated ﬁnancial statements were approved by the Board of Directors on 1 April 2021 and signed on its behalf by:

Cash and cash equivalents at end of period 8 1,054,046

Elaine Whelan Trevor Carvey
Chief Financial Oﬃcer Chief Executive Oﬃcer

46 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 47

Financial statements
Consolidated statement of changes in shareholders’ equity
For the period from 6 October to 31 December 2020

Financial statements
Notes to the consolidated ﬁnancial statements
For the period from 6 October to 31 December 2020

Share Other Retained Total shareholders’
capital reserves loss equity
Notes $’000 $’000 $’000 $’000

1 General information

Total comprehensive loss for the period – – (4,617) (4,617)
Issue of share capital 11, 12 1,655 1,100,938 – 1,102,593
Issuance costs 12 – (45,504) – (45,504)
Equity based compensation expense 6, 12 – 312 – 312

Balance as at 31 December 2020 1,655 1,055,746 (4,617) 1,052,784

Conduit Holdings Limited (the “Company”) was incorporated under the laws of Bermuda on 6 October 2020 and listed
on the London Stock Exchange on 7 December 2020. The registered oﬃce is Clarendon House, 2 Church Street, Hamilton
HM 11, Bermuda.

The Company’s consolidated ﬁnancial statements for the period ended 31 December 2020 include the Company’s
subsidiaries (together referred to as the ‘Group’). A full listing of the Group's related parties can be found in note 15.

2 Signiﬁcant accounting policies

The basis of preparation, use of estimates, consolidation principles and signiﬁcant accounting policies adopted in the
preparation of these consolidated ﬁnancial statements are set out below.

Basis of preparation
The consolidated ﬁnancial statements are prepared on a going concern basis in accordance with IFRS. The Directors
performed an assessment of the Group’s ability to continue as a going concern and have a reasonable expectation that
the Group has adequate resources to continue in operational existence for the foreseeable future.

Where IFRS is silent, as it is in respect of certain aspects relating to the measurement of insurance products, the IFRS
framework allows reference to another comprehensive body of accounting principles. In such instances, the Group’s
management determines appropriate measurement bases, to provide the most useful information to users of the
consolidated ﬁnancial statements, using their judgement and considering US GAAP. In the course of preparing the
consolidated ﬁnancial statements, no judgements have been made in the process of applying the Group’s accounting
policies, other than those involving estimations as noted in the ‘Use of estimates’ section on page 49, that have had a
signiﬁcant eﬀect on amounts recognised in the consolidated ﬁnancial statements.

The consolidated balance sheet is presented in order of decreasing liquidity. All amounts, excluding share data or where
otherwise stated, are in thousands of US dollars.

Future accounting changes
Standards and interpretations which are issued but not yet eﬀective and have not been early adopted by the Group are
summarised in the table below.

Standard Amendment Eﬀective Date

Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 & IFRS 16 Interest Rate Benchmark Reform – Phase 2 1 January 2021

Amendments to IAS 37 Onerous Contracts – Cost of Fulﬁlling a Contracts 1 January 2022

Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use 1 January 2022

Amendments to IAS 1 Classiﬁcation of Liabilities as Current or Non Current 1 January 2023

IFRS 17, Insurance Contracts, issued in May 2017, speciﬁes the ﬁnancial reporting for insurance contracts by an insurer.
The new standard is likely to be eﬀective for accounting periods beginning on or after 1 January 2023. The standard
includes a number of signiﬁcant changes regarding the measurement and disclosure of insurance contracts both in
terms of liability measurement and proﬁt recognition. The Group will assess the impact that the new standard will have
on its results and its presentation and disclosure requirements.

Use of estimates
The preparation of ﬁnancial statements in conformity with IFRS requires the Group to make estimates and assumptions
that aﬀect the reported and disclosed amounts at the balance sheet date and the reported and disclosed amounts of
revenues and expenses during the reporting period. Actual results may diﬀer materially from the estimates made.

48 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 49

Financial statements
Notes to the consolidated ﬁnancial statements
For the period from 6 October to 31 December 2020

2 Signiﬁcant accounting policies

The most signiﬁcant estimate made by management is in relation to the estimated fair value of the MIP. This is discussed
in note 6.

While not signiﬁcant, estimates are also used in the valuation of intangible assets.

Consolidation principles
The consolidated ﬁnancial statements comprise the ﬁnancial statements of the Company and its subsidiaries as at and
for the period ended 31 December 2020. Subsidiaries are fully consolidated from the date on which the Group obtains
control, and continue to be consolidated until the date when such control ceases. Intercompany balances, proﬁts and
transactions are eliminated. Control is achieved when the Group 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.

Subsidiaries’ accounting policies are generally consistent with the Group’s accounting policies. Where they differ,
adjustments are made on consolidation to bring accounting policies in line.

Foreign currency
The functional currency, which is the currency of the primary economic environment in which operations are conducted,
for Group entities is US dollars. Items included in the ﬁnancial statements of each of the Group’s entities are measured
using the functional currency. The 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, or at the average rate for the period when this is a reasonable approximation. Monetary
assets and liabilities denominated in foreign currencies are revalued at period end exchange rates. The resulting exchange
diﬀerences on revaluation are recorded in the consolidated statement of comprehensive income within net foreign
exchange gains. 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 estimated fair value was determined.

Cash and cash equivalents
Cash and cash equivalents are carried in the consolidated balance sheet at amortised cost and include cash in hand,
deposits held on call with banks 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.

Interest income earned on cash and cash equivalents is recognised on the eﬀective interest rate method. The carrying
value of accrued interest income approximates estimated fair value due to its short-term nature and high liquidity.

Property, plant and equipment
Property, plant and equipment is carried at historical cost, less accumulated depreciation and any impairment in value.
Depreciation is calculated to write oﬀ the cost over the estimated useful economic life on a straight-line basis as follows:

IT Equipment 3 years

The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each balance
sheet date.

An item of property, plant or equipment is derecognised on disposal or when no future economic beneﬁts are expected
to arise from the continued use of the asset.

Gains and losses on the disposal of property, plant and equipment are determined by comparing proceeds with the
carrying amount of the asset, and are included in the consolidated statement of comprehensive income. Costs for repairs
and maintenance are charged to proﬁt or loss as incurred.

Intangible assets
Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring into use the
speciﬁc software. An intangible asset with a ﬁnite useful life is amortised on a straight line basis over the useful life. An
intangible asset with an indeﬁnite useful life is not amortised, but is tested annually for impairment. When an intangible
asset is disposed of, the gain or loss on disposal is included in proﬁt or loss.

Leases
At the inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use of an identiﬁed asset for a period of time in exchange for
consideration.

The Group 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 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,
the Group’s incremental borrowing rate.

Lease payments included in the measurement of the lease liability comprise the following:

n Fixed payments, including in-substance ﬁxed payments;
n Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the

commencement date.

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. The Group 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 the Group 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.

The Group presents right-of-use assets and lease liabilities as a separate ﬁnancial statement line item on the consolidated
balance sheet.

Employee beneﬁts

Equity compensation plans
The Group currently operates a MIP under which shares are subscribed for or nil cost options will be 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.

At each balance sheet date, the Group 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 compensation expense
in the consolidated statement of comprehensive income, and a corresponding adjustment is made to other reserves in
shareholders’ 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 the Group, if any, is transferred to other reserves in shareholders’ equity.

50 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 51

Financial statements
Notes to the consolidated ﬁnancial statements
For the period from 6 October to 31 December 2020

2 Signiﬁcant accounting policies

3 Risk disclosures

Tax
Income tax represents the sum of tax currently payable and any deferred tax. The tax payable is calculated based on
taxable proﬁt for the period using tax rates and tax laws enacted or substantively enacted at the year end reporting
date and any adjustments to tax payable in respect of prior periods. Taxable proﬁt for the period can diﬀer from that
reported in the consolidated statement of comprehensive income due to non-taxable income and certain items which
are not tax deductible or which are deferred to subsequent periods.

Deferred tax is recognised on all temporary diﬀerences between the carrying value of the assets and liabilities in the
consolidated balance sheet and their tax base, except when the deferred tax liability arises from the initial recognition
of goodwill. Deferred tax assets or liabilities are accounted for using the balance sheet liability method. Deferred tax
assets are recognised to the extent that realising the related tax beneﬁt through future taxable proﬁts is probable and
are reassessed each year for recognition.

Deferred tax assets and liabilities are oﬀset when there is a legally enforceable right to oﬀset current tax assets against
current tax liabilities and when the deferred income taxes relate to the same ﬁscal authority.

Where the current estimated fair value of equity based compensation awards diﬀers from the estimated fair value at
the time of grant, adjusted where applicable for dividends, the related corporation tax and deferred tax charge or credit
is recognised directly in other reserves.

Own shares
Own shares include shares repurchased under share repurchase authorisations and held in treasury, plus shares
repurchased and held in trust, for the purposes of employee equity based compensation schemes. Own shares are
deducted from shareholders’ 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.

The risk function is responsible for supporting the Board, and the CRL board, with the day-to-day oversight of the risks
that the Group seeks or is exposed to in pursuit of its strategic objectives, and the satisfaction of certain regulatory risk
management expectations relevant to CRL. The framework under which risks are managed contemplates risk appetite
and tolerance constraints, prescribed by the Board and reviewed at least annually, with consideration of the ﬁnancial and
operational capacity of the Group. The use of ﬁnancial capacity in this context relates to calculated or modelled capital
requirements, based on residual unmitigated risk exposures. Current capital requirements are determined by reference
to rating agency and regulatory capital requirements, with an internal capital model to be developed in due course.

Day-to-day management of risk is the responsibility of management, operating within the deﬁned appetite and tolerances
and Board, or the CRL board, approved delegations of authority. The risk framework prescribes a standardised approach
to the management of risk, oversight and challenge by the risk function and independent assurance provided by the
internal audit function. The risk framework also addresses the reporting of risks, risk events and compliance with risk
appetite and tolerance statements to executive management and the boards, and relevant board sub-committees, of
CRL and CHL. To ensure transparency and accountability of the business to the independent non-executive directors,
three 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.

Market risk
The Group is at risk of loss due to movements in market factors. The main risks include:

i. Insurance risk;
ii. Investment risk;
iii. Debt risk; and
iv. Currency risk.

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 to share premium.

As the Group was not engaged in any active business for the reporting period, the only relevant market risk for the
period was currency risk. Following the successful IPO, and translation of the pounds Sterling funds raised into US
dollars, there was no signiﬁcant currency exposure to the Group.

3 Risk disclosures

Introduction
For the period ending 31 December 2020, the Group was not engaged in any active business and was therefore exposed
to limited risks, being market risk, operational risk and strategic risk.

From 1 January 2021, the Group will be exposed to risks from several sources, classiﬁed into six primary risk categories.
These are insurance risk, market risk, liquidity risk, credit risk, operational risk and strategic risk. The primary risk to the
Group will be insurance risk. These risks will be discussed, along with the appropriate disclosure, within the Group’s
unaudited condensed interim consolidated ﬁnancial statements when issued later in 2021.

The Board is responsible for determining the nature and extent of the principal risks the Group is willing to take in
achieving its strategic objectives and should maintain sound risk management and internal control systems. To this end,
for the period ending 31 December 2020, the Board established initial governance arrangements and delegated certain
limited authorities to oﬃcers of CHL and CRL to facilitate the establishment of operating capabilities ahead of the 1
January 2021 reinsurance renewal period. Baseline risk appetites were deﬁned and these remain under review as the
Group develops. Initially certain non-underwriting activities were outsourced to, or supported by, specialist providers
with the intent of reducing short-term execution risk.

Operational risk
Operational risk is the risk of loss resulting from inadequate or failed internal processes, personnel, systems or external
events. During the reporting period, which primarily involved the establishment of operations, various operational risks
were identiﬁed and steps were taken to manage or mitigate these risks.

The risk framework addresses the identiﬁcation, assessment and management of operational risks. This process involves
the use of risk registers to identify inherent risk and residual risk after the application of controls. The management of
individual risks is the responsibility of management, with independent challenge and oversight provided by the risk
function. The results of compliance reviews and independent internal audits provide an additional level of review and
veriﬁcation. The Audit Committee has selected a reputable provider to serve as outsourced internal auditors.

Strategic risk
The Group has identiﬁed several strategic risks. These include:

n 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;

n The risks of the failure to maintain adequate capital, accessing capital at an inﬂated cost or the inability to access
capital. This includes 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

n The risks of succession planning, staﬀ retention and key man risks.

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Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 53

Financial statements
Notes to the consolidated ﬁnancial statements
For the period from 6 October to 31 December 2020

3 Risk disclosures

4 Segmental reporting

Business plan risk
The Group’s business plan, as included in the IPO prospectus, was evaluated and approved by the Board. Actual versus
planned results will be monitored regularly.

Capital management risk
The total tangible capital of the Group is as follows:
$’000

As at 31 December 2020
Shareholders’ equity 1,052,784
Intangible assets (169)

Total tangible capital 1,052,615

Risks associated with the eﬀectiveness of the Group’s capital management are mitigated as follows:

n Regular monitoring of current and prospective regulatory and rating agency capital requirements;
n Oversight of capital requirements by the Board;
n Ability to purchase suﬃcient, cost-eﬀective reinsurance;
n Maintaining contact with vendors, regulators and rating agencies in order to stay abreast of upcoming developments and;
n Future participation in industry groups such as the Association of Bermuda Insurers and Reinsurers.

The Group reviews the level and composition of capital on an ongoing basis with a view of:

n Maintaining suﬃcient capital for underwriting opportunities and to meet obligations to policyholders;
n Maximising the risk-adjusted return to shareholders within the context of the deﬁned risk appetite;
n Maintaining adequate ﬁnancial strength rating; and
n Meeting 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 the Group
may also be utilised. All capital actions require approval by the Board.

The primary source of capital used by the Group is equity shareholders’ funds. As a holding company, CHL relies on
dividends from its operating entity to provide the cash ﬂow required for dividends to shareholders. The ability of the
operating entity to pay dividends and make capital distributions is subject to the legal and regulatory restrictions of the
jurisdiction in which it operates.

CRL is regulated by the BMA and is required to monitor the ECR under the BMA’s regulatory framework, which has been
assessed as equivalent to the EU’s Solvency II regime. CRL’s regulatory capital requirement is calculated using the BSCR
standard formula. For the period ended 31 December 2020, CRL was more than adequately capitalised on this basis.

Retention risk
Risks associated with succession planning, staﬀ retention and key man risks are mitigated through a combination of
resource planning processes and controls, including:

n The identiﬁcation of key personnel with appropriate succession plans;
n The identiﬁcation of key team proﬁt generators and function holders with targeted retention packages;
n Documented recruitment procedures, position descriptions and employment contracts;
n Resource monitoring and the provision of appropriate compensation, including equity based compensation which

vests over a deﬁned time horizon, subject to achieving certain performance criteria; and

n Training schemes.

There is no active business in the period ending 31 December 2020. Underwriting commenced on 1 January 2021. With
no operating income, the Group did not have any reportable operating segments during the period. The Group’s principal
operating segments will be determined as business develops through 2021 and will reﬂect how the business is reviewed
and monitored by Management and the Board.

5 Results of operating activities

Results of operating activities are stated after charging the following amounts:
$’000

Auditor’s remuneration: audit fees 110

6 Employee beneﬁts

The aggregate remuneration comprised:
$’000

Wages and salaries 2,432

Total cash compensation 2,432

Total equity based compensation 312

Total employee beneﬁts 2,744

Equity based compensation
The Group’s equity based compensation incentive scheme is its MIP. 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.

100,000 A1 shares and 100,000 A2 shares were issued by CML during the period at a subscription price of £1.72 and
$2.26 respectively. There have been no exercises during the period.

The following table lists the assumptions used in the stochastic model for the MIP awards granted during the period
ended 31 December 2020:

Assumptions

Dividend Yield 0%
Expected Volatility¹ range from 17.6% – 18.1%
Risk-free interest rate² range from 0.29% – 0.61%
Expected life of instruments range from 4 to 7 years

1. The expected volatility was calculated based on a comparator group of companies.
2. The risk-free interest rate is based on the yield on a US government bond on the date of grant.

The instruments 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
are highly judgmental and input from advisors was sought. Management also considered alternative assumptions and
concluded there was not a material impact on the estimated valuation selected.

54 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 55

Financial statements
Notes to the consolidated ﬁnancial statements
For the period from 6 October to 31 December 2020

6 Employee beneﬁts

8 Cash and cash equivalents

The calculation of the equity based compensation expense assumes no forfeitures due to employee turnover, with
subsequent adjustments to reﬂect actual experience.

Conditions of the MIP are as follows:

The MIP instruments vest over a four to seven year period with speciﬁc measurement dates of 7 December 2024, 7
December 2025, 7 December 2026 and 7 December 2027. The instruments will vest only after an IRR of 10% is achieved.
As noted above, a maximum of 15% of the growth in market value will be available to each tranche at the vesting date.
If the hurdle is not achieved at the ﬁrst vesting date, the instruments will roll over until the ﬁnal vesting date.

The incentives are to be equity-settled and have therefore been accounted for in accordance with IFRS 2.

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. The estimated fair value is recognised in the consolidated statement of
comprehensive income, together with a corresponding increase in other reserves within shareholders’ equity, on a
straight line basis over the vesting period, based on an estimate of the number of shares that will ultimately vest.

$’000

Cash at bank and in hand 54,046
Cash equivalents 1,000,000

1,054,046

Cash equivalents have an original maturity of three months or less. The carrying amount of these assets approximates
their fair value.

9 Intangible assets

Software
$’000

Vesting conditions, other than market conditions, are not taken into account when estimating the fair value. Market
conditions are those conditions that are linked to the share price of the Group.

Cost
Additions 169

At the end of each reporting period the Group revises its estimates of the number of shares that are expected to vest
due to non-market conditions. It recognises the impact of the revision to original estimates, if any, in the consolidated
statement of comprehensive income, with a corresponding adjustment to shareholders’ equity.

During the year $312 thousand has been recognised in the consolidated statement of comprehensive income as a charge
in relation to the share based incentives.

Net book value as at 31 December 2020 169

There was no amortisation or impairment recognised for the period ended 31 December 2020 on the basis that the
asset is not ready for use.

7 Tax

Bermuda
CHL, CSL, CML and CRL have received an undertaking from the Bermuda government exempting them from all Bermuda
local income, withholding and capital gains taxes until 31 March 2035. At the present time no such taxes are levied in
Bermuda.

United Kingdom
CRSL is subject to normal UK corporation tax on all of its taxable proﬁts. For the period ended 31 December 2020 a tax
loss arose. Deferred tax assets are recognised to the extent that realising the related tax beneﬁt through future taxable
proﬁts is likely. It is currently anticipated that there will not be suﬃcient taxable proﬁts in 2021 and subsequent years to
utilise the deferred tax asset, therefore no deferred tax has been recognised.

$’000

Current tax expense –
Deferred tax expense –

Total tax expense –

Reconciliation of eﬀective tax rate
Loss for the year before tax (4,617)

Tax using the Bermuda corporation tax rate of 0% –
Tax using the UK corporation tax rate of 19% 88
Tax beneﬁt not recognised (88)

Total tax expense –

10 Right-of-use lease assets

$’000

Cost
Additions 11

Balance and net book value as at 31 December 2020 11

11 Share capital

Number $’000

Authorised share capital as at 31 December 2020
Authorised common shares of $0.01 each 10,000,000,000 100,000
Authorised A1 shares of £0.01 each 100,000 2
Authorised A2 shares of $0.01 each 100,000 1

As at 31 December 2020 10,000,200,000 100,003

Allotted, called-up and fully-paid as at 31 December 2020
Common shares issued 165,239,997 1,652
A1 shares issued 100,000 2
A2 shares issued 100,000 1

As at 31 December 2020 165,439,997 1,655

The number of common shares in issue with voting rights as at 31 December 2020 was 165,239,997. The A1 and A2
shares have no voting rights attached. Subject to vesting conditions, discussed in note 6, the shares will be automatically
exchanged for ordinary shares of CHL.

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Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 57

Financial statements
Notes to the consolidated ﬁnancial statements
For the period from 6 October to 31 December 2020

12 Other reserves

15 Related party disclosures

Other reserves consist of the following:
Other reserves Share premium Total other reserves
$’000 $’000 $’000

The consolidated ﬁnancial statements include CHL and the entities listed below:

Subsidiary undertakings Domicile Principal business

Issue of shares – 1,100,938 1,100,938
Issuance costs – (45,504) (45,504)
Equity based compensation expense 312 – 312

As at 31 December 2020 312 1,055,434 1,055,746

Other reserves includes an equity based compensation expense.

Share premium includes any premiums received on issue of share capital. The transaction costs that are attributable to
the issuance of new shares incurred in forming the Group are treated as a deduction from share premium.

13 Contingencies and commitments

During the period ended 31 December 2020, the Company entered into contracts to purchase software licenses. These
commitments are expected to be settled in the ordinary course of business.

Legal proceedings and regulations
The Group operates in the re/insurance industry and is subject to legal proceedings in the normal course of business.
While it is not practicable to estimate or determine the ﬁnal results of all pending or threatened legal proceedings,
management does not believe that such proceedings (including litigation) will have a material eﬀect on its results and
ﬁnancial position.

14 Loss per share

The following reﬂects the loss and share data used in the basic and diluted loss per share computations:

$’000

Loss for the year attributable to equity shareholders of CHL (4,617)

Number

Basic & diluted weighted average number of shares 165,239,997

Basic & diluted loss per share (0.03)

Equity based compensation 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. Unvested restricted shares without performance
criteria are therefore included in the number of potentially dilutive shares.

Incremental shares from ordinary restricted share options where relevant performance criteria have not been met are
not included in the calculation of dilutive shares.

CHL Bermuda Holding company, Ultimate parent
CRL Bermuda General insurance business
CRSL England & Wales Support services
CML¹ Bermuda Support services
CSL Bermuda Support services

Unless otherwise stated, the Group owns 100% of the share capital and voting rights in its subsidiaries listed.

1. CML is part-owned by members of management. Management’s share ownership in CML exists solely for the purposes of the Group’s
management share incentive scheme for attracting and retaining talent. Management’s shares in CML have no voting power or control
in respect of CHL’s ownership of CRL via CML’s ownership of CRL.

Key management compensation
Remuneration for key management, the Group’s Executive and Non-Executive Directors, was as follows:
$’000

Cash compensation 1,115
Directors fees and expenses 188

Total 1,303

Non-Executive Directors do not receive any beneﬁts in addition to their agreed fees and expenses and do not participate
in any of the Group’s incentive, performance or pension plans.

16 Subsequent events

For the period ending 31 December 2020, the Group was not engaged in any active business. Underwriting commenced
on 1 January 2021.

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Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 59

Appendix
Glossary

The following deﬁnitions apply throughout the Annual
Report unless the context otherwise requires:

1-in-100 A catastrophe loss event with a 1-in-100
probability of occurring in any given year.

1-in-250 A catastrophe loss event with a 1-in-250
probability of occurring in any given year.

Net acquisition cost ratio Ratio, in percent, of net
insurance acquisition expenses to net premiums earned

Admission The admission of all of CHL’s common
shares (1) to the standard listing segment of the Oﬃcial
List of the UK Financial Conduct Authority, and (2) to
trading on the London Stock Exchange’s main market
for listed securities which occurred on 7 December 2020.

AEP (aggregate exceedance probability) An AEP curve
describes the probability that various levels of loss will
be exceeded based on an aggregation of a particular
group of losses. For example, the RDS in the company
business plan provide 1 in 30 year loss levels for the
aggregation of losses for a particular peril. The loss ﬁgure
provided can be read as the loss level that is estimated
to be exceeded every 1 in 30 years (i.e. has a 3.3%
probability of being exceeded).

AFS Available for sale.

Aggregate excess of loss (XoL) reinsurance A form
of excess of loss reinsurance in which the excess and
the limit of liability are expressed as annual aggregate
amounts.

A.M. Best A.M. Best is a full-service credit rating
organisation dedicated to serving the ﬁnancial services
industries, focusing on the insurance sector.

A.M. Best rating A forward-looking, independent,
and objective opinion issued by A.M. Best regarding
an insurer’s, issuer’s, or ﬁnancial obligation’s relative
creditworthiness.

AGM Annual General Meeting.

Best Capital Adequacy Rating Depicts the quantitative
relationship between a rating unit’s balance sheet strength
and key ﬁnancial risks that could impact such strength.

BMA Bermuda Monetary Authority.

Board of Directors; Board Unless otherwise stated
refers to the CHL Board of Directors.

Book value per share Calculated by dividing the value
of the total shareholders’ equity by the sum of all
common voting shares outstanding.

Broker An intermediary who negotiates contracts
of insurance or reinsurance, receiving a commission
for placement and other services rendered, between
(1) a policyholder and a primary insurer, on behalf
of the policyholder, (2) a primary insurer and a reinsurer,
on behalf of the primary insurer, or (3) a reinsurer and
a retrocessionaire, on behalf of the reinsurer.

Brokerage The commission that is payable to a broker
for placing an insurance or reinsurance contract with an
insurer or a reinsurer.

BSCR Bermuda Solvency Capital Requirement.

California quake A Californian earthquake catastrophe
event.

BI Business interruption: insurance coverage that
replaces income lost in the event that business is halted
due to direct physical loss or damage.

Capacity The percentage of surplus that an insurer
or reinsurer is willing or able to place at risk or the dollar
amount of exposure it is willing to assume. Capacity may
apply to a single risk, a programme, a line of business
or an entire book of insurance or reinsurance business.
Capacity may be constrained by legal restrictions,
corporate restrictions, or indirect ﬁnancial restrictions
such as capital adequacy requirements.

Carrier An insurer or reinsurer.

Casualty or liability insurance The type of insurance
that is primarily concerned with losses caused by injuries
to persons and legal liability imposed upon the insured
for such injury or for damage to property of others.
Primarily concerned with the losses caused by injuries to
third persons (persons other than the policyholder) and
the legal liability imposed on the policyholder resulting
therefrom. This includes, but is not limited to, workers’
compensation, automobile liability, and general liability.

Cedant or customer or client A ceding insurer or a
reinsurer. A ceding insurer is an insurer that writes and
issues an original, primary policy to an insured and
contractually transfers (cedes) a portion of the risk to
a reinsurer. A ceding reinsurer is a reinsurer that transfers
(cedes) a portion of the underlying reinsurance to a
retrocessionnaire.

CD Communicable disease insurance.

Cede When a party reinsures its liability to another
party, it “cedes” business to the reinsurer and is referred
to as the “customer,” “ceding party” or “cedant.”

CEO Chief Executive Oﬃcer.

CFO Chief Financial Oﬃcer.

Appendix
Glossary

CHL Conduit Holdings Limited.

Claim A request by an insured or reinsured for
indemniﬁcation by an insurance or reinsurance company
for loss incurred from an insured peril or event.

CML Conduit MIP Limited.

Company Conduit Holdings Limited.

Coverholder A coverholder is a company or partnership
authorised by a managing agent to enter into a contract
or contracts of insurance to be underwritten by the
members of a syndicate managed by it in accordance
with the terms of a binding authority.

Conduit The brand for Conduit Holdings Limited and
all associated group companies.

Conduit Re The brand for all the group’s reinsurance
business.

CRL Conduit Reinsurance Limited.

CRSL Conduit Reinsurance Services Limited (previously
named Conduit Marketing Limited).

CSL Conduit Services Limited.

CUO Chief Underwriting Oﬃcer.

Cyber Cyber insurance (or cyber risk or cyber liability
insurance) is a form of cover designed to protect
businesses from digital threats, such as data breaches
or malicious cyber hacks.

Losses Demand by an insured for indemnity under
an insurance contract.

Combined ratio The ratio, in percent, of the sum
of net insurance losses, net acquisition expenses and
other operating expenses to net premiums earned.

Consortium underwriting Underwriting on the part
of a group of either companies or insurers, where risks,
premiums and costs are split proportionately between
the participants. If a consortium member fails, losses
do not fall back on the other capital providers.

CRO Chief Risk Oﬃcer.

Deductible or excess or retention The amount of the
loss which is retained net by the insured (i.e. prior to the
inception of a reinsurance programme). Also known as
an “excess” or “retention”. The amount that is deducted
from some or all claims arising under an insurance or
reinsurance contract. The practical eﬀect is the same as
an excess: the insured or reassured must bear a proportion
of the relevant loss. If that loss is less than the amount
of deductible/excess then the insured or reassured must
bear all of the loss (unless there is other insurance in
place to cover the deductible). An increase in deductible
should result in a reduction in premium.

Deferred acquisition costs Costs incurred for the
acquisition or the renewal of insurance policies (e.g.
brokerage and premium taxes) which are deferred and
amortised over the term of the insurance contracts
to which they relate.

Directors’ & Oﬃcers’ (D&O) A specialised form of
professional liability coverage for legal expenses and
liability to shareholders, bondholders, creditors or others
owing to actions or omissions by a director or oﬃcer
of a corporation or non-proﬁt organisation.

Dividend yield Calculated by dividing the annual
dividends per share by the share price on the last day
of the given year.

Earned premium The proportion of written premium
that relates to a used period of cover.

Earnings (loss) per share (EPS) Calculated by dividing
net proﬁt (loss) for the year attributable to shareholders
by the weighted average number of common shares
outstanding during the year, excluding treasury shares.

ECR Enhanced capital requirement. Under the BSCR
Model, the reinsurer’s minimum required statutory
capital and surplus is referred to as the enhanced capital
requirement (“ECR”). The ECR is the greater of the
calculated BSCR and the minimum solvency margin
(“MSM”).

ERM Enterprise risk management is the process of
assessing the risk of an organisation’s activities in order
to minimise the eﬀects of those risks.

Errors and Omissions (E&O) A form of professional
indemnity insurance. Errors and omissions insurance
protects business professionals whose clients could
claim damages as a result of the business professional’s
faulty performance.

European Economic Area or EEA The member states
of the European Union plus Norway, Iceland and
Liechtenstein.

European Union or EU The European Union is made up
of 27 member states: Austria, Belgium, Bulgaria, Croatia,
Cyprus, Czech Republic, Denmark, Estonia, Finland,
France, Germany, Greece, Hungary, Ireland, Italy, Latvia,
Lithuania, Luxembourg, Malta, Netherlands, Poland,
Portugal, Romania, Slovakia, Slovenia, Spain, and Sweden.

Excess of loss (XOL, XL) or non-proportional
Reinsurance cover provided to an insured in excess of a
speciﬁed deductible level. This business is usually written
on a layer by layer basis. Reinsurance that indemniﬁes
the reinsured against all or a speciﬁed portion of losses
on an underlying insurance policy in excess of a speciﬁed
currency value or percentage loss ratio amount.

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Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 61

Appendix
Glossary

Exclusion A provision in a policy that excludes the
insurer’s liability in certain circumstances or for speciﬁed
types of loss. A term in an insurance or reinsurance
contract that excludes the insurer or reinsurer from liability
for speciﬁed types of loss. An exclusion may apply
throughout a policy or it may be limited to speciﬁc
sections of it. In certain circumstances an exclusion may
be limited or removed altogether following the payment
of an additional premium.

Facultative A reinsurance risk that is placed by means
of a separately negotiated contract as opposed to one
that is ceded under a reinsurance treaty. In pro rata
reinsurance, the reinsurance of part or all of the insurance
provided by a single policy, with separate negotiation
for each policy cession of insurance – for sharing liability,
premium and loss. In excess of loss reinsurance, the
reinsurance of each policy, with separate negotiation for
each – for indemnity of loss in excess of the reinsured’s
loss retention. The word “facultative” connotes that both
the primary insurer and the reinsurer usually have the
faculty or option of accepting or rejecting the individual
submission (as distinguished from the obligation to cede
and accept, to which the parties agree in most treaty
reinsurance).

Financial strength rating The opinion of rating agencies
regarding the ﬁnancial ability of an insurance or
reinsurance company to meet its ﬁnancial obligations
under its policies.

Florida wind A Florida hurricane catastrophe event.

FVTPL Fair value through proﬁt or loss.

GPW or gross premiums written Amounts payable
by the insured, excluding any taxes or duties levied on
the premium, including any brokerage and commission
deducted by intermediaries.

Gross claims Claims under contracts of insurance
underwritten by a carrier plus internal and external claims
settlement expenses less salvage or other recoveries,
but before the deduction of reinsurance recoveries.

ICE Intercontinental Exchange Group: An Atlanta-based
global exchange, clearing, ﬁnancial data and technology
company, operating multiple markets and services
across nine diﬀerent asset classes.

IFRS International Financial Reporting Standard(s).

Incurred losses Claims under contracts of insurance
underwritten a carrier plus internal and external claims
settlement expenses less salvage or other recoveries,
but before the deduction of reinsurance recoveries.

Incurred but not reported (IBNR) Anticipated or likely
losses that may result from insured events which have
taken place, but for which no losses have yet been
reported. IBNR also includes a reserve for possible
adverse development of previously reported losses.

International Accounting Standard(s) (IAS) Standards
created by the IASB for the preparation and presentation
of ﬁnancial statements.

International Accounting Standards Board (IASB)
An international panel of accounting experts responsible
for developing IAS and IFRS.

Incurred loss ratio Paid claims and known outstanding
claims as a percentage of the premiums underwritten
by the company. These can be on a gross or net basis,
i.e. before or after reinsurance recoveries and costs.

IPO Initial public oﬀering.

IRR Internal rate of return.

Invested equity Means the aggregate of initial equity
invested in CHL on Admission and equity invested
pursuant to any future equity raises by the Company,
with the US dollar value of Invested Equity for the USD
MIP Shares being calculated at the spot rate at the time
the relevant proceeds of the equity raise were received
by the Company.

Long tail business A type of liability that carries a long
settlement period. Long-tail liabilities are likely to result in
high incurred but not reported (IBNR) claims, because it
may take a long period of time for the claims to be settled.

Lloyd’s The Society of Lloyd’s.

Loss adjustment expenses The expenses of settling
claims, including legal and other fees and the portion
of general expenses allocated to claim settlement costs.
Also known as claim adjustment expenses.

Losses occurring business Business where the wording
stipulates that claims against liability policies can be
notiﬁed to the company at any time following the issue
of the policy.

Loss reserve development The diﬀerence between
the amount of reserves for losses and loss adjustment
expenses initially estimated by an insurer or reinsurer and
the amount re-estimated in an evaluation at a later date.

LSE London Stock Exchange.

Margin (reinsurance) As a pricing factor (along with
expenses and losses), the proﬁt the reinsurer expects
to earn.

Appendix
Glossary

Market value Means (1) the market capitalisation
of CHL calculated by reference to the six month average
closing share price prior to the date of the relevant
exchange of MIP Shares for common shares of CHL
(adjusted to take into account any capital events
or distributions during that period); or, (2) in the case
of a takeover of CHL, the value of the consideration for
the takeover, or (3) in the case of a sale of CHL, the net
sale consideration, or (4) in the case of the liquidation
of CHL, the amount available for distribution in the
liquidation, in each case taking into account any prior
dividends, returns of capital or other distributions. The
Market Value for the USD MIP Shares will be calculated
in US dollars based on the prevailing spot rate on the
date of the relevant share price and in the case of a
takeover of CHL, or sale or liquidation of CML the latest
reasonably practicable spot rate prior to the date of
the exchange of MIP Shares for common shares of CHL
as determined by the Remuneration Committee of CHL.

MSM Minimum solvency margin. The minimum excess
unimpaired surplus as a percent of outstanding loss
reserve as set by regulators.

MIP Management incentive plan.

Net loss ratio A ratio, in percent, calculated by dividing
net insurance losses by net premiums earned.

Net premiums earned Net premiums earned is equal
to net premium written less the change in unearned
premiums and change in unearned premiums on
premiums ceded.

Net premiums written Net premiums written is equal
to gross premiums written less outwards reinsurance
premiums written.

Nat Cat Natural catastrophe.

Overriding commission A commission that is paid by a
reinsurer to the reassured to cover the latter’s overheads
in administering the reinsurance.

Performance condition Is that the compound annual
growth rate achieved by CHL’s shareholders on the date
of the relevant exchange of MIP Shares for common
shares of CHL is equal to or greater than ten per cent.
per annum. The Performance Condition is measured by
reference to (1) any growth in CHL’s market capitalisation,
(2) any dividends paid to common shareholders, and
(3) any other returns of value to common shareholders.
The Performance Condition is calculated from admission
of its common shares to trading on the London Stock
Exchange on 7 December 2020 on the initial capital
raised then (and from the date of any future equity
investment in the Company on that equity) to the date
of the relevant exchange. It also takes into account the
timing of any prior returns to common shareholders.

The Performance Condition will be calculated separately
in US dollars for the USD MIP Shares and sterling for the
GBP MIP Shares.

Prior years or back years Earlier years of underwriting
prior to the current year.

Probable maximum loss (PML) The anticipated maximum
loss that could result from a single given event, as
opposed to MFL (Maximum Foreseeable Loss), which
would be a similar valuation, but on a worst case basis.

Proﬁt commission A commission that is payable
according to a pre-determined formula as an incentive
and reward for proﬁtable underwriting.

Programme business A package of small to medium
property and liability business favoured by a number
of non-marine underwriters.

Property reinsurance Reinsurance exposures that are
exposed to losses from damage or theft to buildings and
their contents
money and securities, records, inventory,
–
furniture, machinery, supplies and even intangible assets
such as trademarks.

Pro-rata reinsurance or proportional reinsurance
All forms of reinsurance in which the reinsurer shares
a proportional part of the original premiums and losses
of the reinsured. Frequently referred to as quota share
reinsurance.

Quota share reinsurance A form of proportional
reinsurance in which the reinsurer assumes an agreed
percentage of each underlying insurance contract being
reinsured.

Reserves; claim reserves; loss reserves; loss adjustment
expense reserves Liabilities established by insurers
and reinsurers to reﬂect the estimated cost of claims
payments and the related expenses that the insurer
or reinsurer will ultimately be required to pay in respect
of insurance or reinsurance contracts it has written.
Reserves are established for claims, losses and for loss
adjustment expenses, and consist of reserves established
with respect to individual reported claims and incurred,
but not reported losses.

Retrocession; retrocessional coverage A transaction
in which a reinsurer transfers risks it has reinsured
to another reinsurer, commonly referred to as the
retrocessionaire. Retrocessional reinsurance does not
legally discharge the ceding reinsurer from its liability
with respect to its obligations to the reinsured.

ROE Return on equity. Proﬁt for the period divided by
the adjusted opening total equity.

RPI Renewal price index.

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Conduit Holdings Limited conduitreinsurance.com Annual Report 2020 63

Underwriting cycle Market-wide ﬂuctuations in the
prevailing level of insurance and reinsurance premiums.
A soft market, i.e., a period of increased competition,
depressed premiums and excess capacity, is followed
by a hard market – a period of rising premiums and
decreased capacity.

UNL Ultimate net loss.

US United States of America.

US GAAP Accounting principles generally accepted
in the United States.

Vesting The MIP Shares will vest on: (1) a takeover
of CHL; or (2) a sale or liquidation of CML; or (3) the
relevant vesting period has elapsed for that Tranche
of the MIP Shares.

W&I Warranty and Indemnity insurance: coverage
usually for losses arising from a breach of a warranty
and claims under a tax indemnity (and, in certain cases,
other equivalent provisions) in connection with a
corporate merger or acquisition transaction.

All references to legislation in this document are to
the legislation of England and Wales unless the contrary
is indicated. Any reference to any provision of any
legislation shall include any amendment, modiﬁcation,
re-enactment or extension thereof.

Words importing the singular shall include the plural
and vice versa, and words importing the masculine
gender shall include the feminine or neutral gender.

Appendix
Glossary

Risk transfer The transfer of all or a part of a risk to
another party.

Risk adjusted return A concept that reﬁnes an
investment’s return by measuring how much risk is
involved in producing that return, which is generally
expressed as a number or rating.

Short tail business This is business which normally
settles during the three year term of a Lloyd’s year of
account. Motor, property, aviation hull and short-term
life are all examples of short-tail business.

Rate on line The ratio of premium paid to loss recoverable
in a reinsurance contract.

Specialty This is a generic term used by companies to
indicate classes of business that fall outside the norm of
property and casualty. However, it is open to interpretation
with diﬀerent companies using the term to describe
diﬀerent classes of business. For some it relates to
marine, energy and aviation business whereas some
describe casualty as speciality business.

Surplus The amount by which an insurer’s assets exceed
its liabilities. It is the equivalent of “owners’ equity”
in standard accounting terms. The ratio of an insurer's
premiums written to its surplus is one of the key measures
of its solvency.

The UK Code The UK Corporate Governance Code,
monitored by the UK Financial Reporting Council.

Total shareholder return The percentage of the
increase/(decrease) in share price over a period, stated
in percentages, after adjustment for dividends.

Treaty reinsurance This is usually reinsurance business,
which is written on a proportional or quota share basis.
A form of reinsurance in which the ceding company
makes an agreement to cede certain classes of business
to a reinsurer. The reinsurer, in turn, agrees to accept all
business qualifying under the agreement, known as the
“treaty.” Under a reinsurance treaty, the ceding company
is assured that all of its risks falling within the terms
of the treaty will be reinsured in accordance with treaty
terms.

UK United Kingdom.

Ultimate loss ratio The ratio of ultimate total paid claims
to total premiums received for all policies written in a
given period.

Unearned premium The portion of premium income
that is attributable to periods after the balance sheet
date that is deferred and amortised to future accounting
periods.

64 Conduit Holdings Limited conduitreinsurance.com Annual Report 2020

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