Conduit Holdings Annual Report 2022

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FY2022 Annual Report · Conduit Holdings

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Building resilience
in a changing world

Conduit Holdings Limited Annual Report and Accounts 2022

Conduit Holdings Limited Annual Report 2022

About us

Conduit Re is a
pure-play global
reinsurance business.

We have proven experience
across our business to make
dynamic decisions throughout
the market cycle.

We have a disciplined and
collaborative culture,
underwriting in a single
location on a legacy-free
balance sheet.

We use differentiated
technology to provide insight
and bespoke solutions to
support our clients.

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

Conduit Holdings Limited Annual Report 2022

In this report

Case Study – Capacity
Operational capacity and a strong capital
base provide the resilient foundation to
execute our plan and operate as a
responsible public company

Find out more on page 29

Case Study – The Conduit
Foundation
As a responsible company Conduit
supports the local community

Find out more on page 35

Strategic report

Key performance indicators

Executive Chairman's statement

CEO's report

CUO's report

CFO's report

Business review – finance

Enterprise risk management report

ESG summary

Section 172 statement and
stakeholder engagement

Governance
Board of Directors

Executive Chairman's introduction to
corporate governance

Corporate governance and compliance
with the UK Corporate Governance
Code 2018

Nomination Committee report

Audit Committee report

Directors' remuneration report

Directors' Remuneration Policy

Notes to the Director's Remuneration
Policy

Annual report on remuneration

Directors' report

Directors' responsibilities statement

Financial statements
Independent Auditor's report

Consolidated statement of
comprehensive loss

Consolidated balance sheet

Consolidated statement of changes
in shareholders' equity

Statement of consolidated cash flows

Notes to the consolidated
financial statements

Additional performance measures

Glossary

Advisers and contact information

5-37

38-84

85-134

135

137

141

Conduit Holdings Limited Annual Report and Accounts 2022

Business model

Our vision is to build Conduit Re as a leading global
reinsurance business, delivering sustainable long-
term returns through the market cycle

We are...

We use...

We embrace...

• a pure-play reinsurer
in a single location
in Bermuda

• a business with no

conflicts of interest
with our cedants

• client, geography and

product neutral

• an open culture where
knowledge transfer is
facilitated and
collaborative challenge
is encouraged

• modern, modular
technology to
provide enhanced
portfolio insight

• a broad view to

exploring solutions in
ever-changing market
conditions, unhindered
by legacy systems
and issues

• an integrated approach
to ESG, building this
into our operations,
underwriting and
investment activities

to enable...

to create...

to deliver...

• fast, flexible and

informed decision
making

• a diverse, inclusive, fun
working environment

• long-term sustainable

benefits for our
stakeholders

Underpinned by our culture:
Transparent, collaborative, responsible, enabled and forward-thinking

Conduit Holdings Limited Annual Report and Accounts 2022

2022 Gross premiums written

$637.5 million
(2021: $458.5 million)

2022 Gross premiums written by class

At a glance

Bermuda-based reinsurer

Class 4

Staff

Financial strength rating (AM Best)

A- (Excellent)

Final dividend for 2022

$0.18 per
common share
($0.36 full year)

Underwriting

Property
Catastrophe and non-
catastrophe property
business lines.

Proportional and non-
proportional

Casualty
Directors and officers liability,
financial institutions liability,
general liability, medical
malpractice, professional liability
and transactional liability.

Proportional and non-
proportional

Specialty
Aviation, energy, marine, political
violence and terrorism, and
whole account.

Proportional and non-
proportional

Conduit Holdings Limited Annual Report and Accounts 2022

At a glance
continued

Our key business objectives

Building a sustainable business
in the long-term interests of
our stakeholders

Delivering on our cross-cycle targets
for profitability and RoE

Why invest in us?
Proactive cycle
management
We are committed to active portfolio
management to optimise returns
through the market cycle.

2 A balanced underwriting

approach
We are committed to creating a
robust and diversified portfolio across
the breadth of property, casualty and
specialty classes.

3 Strong balance sheet

We have a strong capital base to
support our business and maintain our
AM Best A- (Excellent) rating, giving
us the ability to deploy meaningful
capital as opportunities present.

4 A focused growth business

Since our launch in 2020, we have
focused on building out the
foundations for success. Those
foundations are now in place,
providing a platform for significant
scaleability.

5 Multi-skilled team

Our team is drawn from a wide range
of industry skill-sets blended into our
open culture, where knowledge
transfer is highly valued.

7 Low-risk investment

strategy
We maintain a conservative
investment portfolio with high average
credit quality, strong liquidity and low
duration, to protect capital while
generating an income stream.

6 Shareholder return

We are well positioned to deliver
attractive capital gains over time. We
have also paid out a dividend since
inception and we are committed to
maintaining a regular dividend pay-
out.

8 Integrated ESG approach

ESG principles are embedded into our
underwriting and investment
guidelines and into our operational
activities.

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

Key performance indicators

Gross premiums written

$637.5m

(2021: $378.8m)

RoE

(9.1)%

(2021: (4.0)%)

Combined ratio

107.0%

(2021: 119.4%)

Total net investment return

(5.0)%

(2021: (0.3)%)

Total shareholder return

5.5%

(2021: (12.2)%)

Net tangible asset value per share

$5.08

(2021: $5.93)

Gross premiums written: $637.5 million
Gross premiums written is an important metric to
show how the business grows and its size relative
to peers. Conduit Re has grown during our second
year of operations, continuing the excellent
progress made in our first year. Conduit's focus
remains on building and maintaining a balanced and
diversified portfolio, in furtherance of our core
underwriting philosophy.

RoE: (9.1)%
RoE enables Conduit to compare itself against
other peer companies. It is also a key measure
internally and is integral in the performance-related
pay determinations. RoE is calculated as the profit
for the period divided by the opening total
shareholders' equity. RoE for 2022 was negatively
impacted by above-average industry loss events
and unrealised investment losses associated with
increasing interest rates.

Combined ratio: 107.0%
The combined ratio is the sum of the net loss ratio,
net acquisition expense ratio and other operating
expense ratio. The combined ratio for 2022 was
driven by major loss events impacting the industry
during the year.

Total net investment return: (5.0)%
Conduit’s principal investment objective is to
preserve capital and provide adequate liquidity to
support the payment of losses and other liabilities.
In light of this, Conduit looks to generate an
appropriate total net investment return. Conduit
bases its total net investment return on the sum of
non-operating cash and cash equivalents and fixed
maturity securities. Total net investment return is
calculated daily and expressed as a percentage.

The negative performance for 2022 is largely due to
the Federal Reserve raising interest rates and the
resulting negative mark-to-market unrealised loss
booked against the investment portfolio.

Total shareholder return: 5.5%
Total shareholder return allows Conduit to compare
itself against other peer public companies. Total
shareholder return is calculated as the percentage
change in Common Share price over a period, after
adjustment for Common Share dividends. The
Conduit share price at the beginning of 2022 was
433 pence and it closed the year at 428 pence. In
February 2022, Conduit declared a final dividend
relating to 2021 of $0.18 (£0.14) and, in July 2022, an
interim dividend of $0.18 (£0.15) in respect of 2022,
in line with our IPO plans.

Net tangible asset value: $5.08 per share
Year-end shareholders’ equity includes the profit/
(loss) for the financial year and dividends declared.
Intangible assets consist of capitalised costs related
to our internal software development. Intangible
assets are excluded from shareholders’ equity to
calculate the net tangible asset value per share. Net
tangible net assets for Conduit at year-end were
$813.0 million and the number of common shares
outstanding was 165,239,997.

The decrease in net tangible assets per share during
2022 was due to the above-average industry loss
events and unrealised losses on investments, in
addition to the dividends paid by Conduit during
the year.

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

Executive Chairman’s statement

"Our efficient underwriting platform and
strong balance sheet put us in a wonderful
position to continue our growth in exceptional
market conditions"

Having established a high-quality
underwriting platform in our first year,
our focus in 2022 has been on the
continued execution of our vision. In 2022
our team has demonstrated the business’s
operational capabilities in constructing
a high-quality and well-balanced portfolio
while exhibiting the strong, healthy and
inclusive culture which is already a core
element of the Conduit DNA.

In a period that has seen heightened loss activity,
inflation and rising interest rates, we have been able
to focus on underwriting and deploying our capital
into the business which provides the best balance of
risk and reward. It’s this ability to assess the risk and
reward of different types of business, and nimbly
underwrite where we see the best opportunities,
that fills me with so much excitement moving into
2023, where we are well positioned to take
advantage of current exceptional market conditions.

An extraordinary combination of events converged
in 2022 to create the biggest shift in reinsurance
market conditions that I have seen in my career,
significantly beyond what we envisaged when the
IPO plan was written in 2020. Since then, inflation
and increasing interest rates, against a backdrop
of significant losses from Hurricane Ian and other
major events, with an overarching fear of climate
change, have driven a fundamental rebalancing in
the reinsurance market. As a result we are
experiencing very high rate increases, increasing
deductibles, more restrictions in coverage and
a tightening in terms and conditions. This new
environment suits us perfectly, playing to the
strength of our business model to achieve our
target returns.

Climate change is increasingly impacting the
market. The simple facts are that the frequency and
severity of natural peril losses are on the rise. In last
year’s annual report, Trevor wrote about whether
the loss experience of 2017 to 2021 should be
considered the 'new normal'. 2022 loss activity only
serves to reinforce this view and reinsurance pricing
has reacted accordingly.

Exceptional rating environment
While many business sectors will feel recessionary
pressures this year, the reinsurance industry will
benefit from increased demand and strong pricing,
with more stringent terms and conditions. During
the softening phase of the last market cycle,
coverages were bundled and expanded with no
corresponding improvements in price or terms
and conditions. This situation must now reverse.
Even before Hurricane Ian, at the Monte Carlo
Rendezvous and the Baden Baden conference (the

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

Executive Chairman’s statement
continued

two most significant reinsurance market
gatherings), there was much discussion about the
unbundling of coverage in both property and
specialty and the increasing use of 'named peril'
coverage which should enable a more realistic
assessment of natural peril risk. There is plenty
of data around climate change. It is when coverage
is broad and complex that failure occurs.

Conclusion
The sum of the hard work put in by the team is the
pleasing progress we have made against the plan,
strong financial performance and a clear pipeline of
future revenue. On this basis we are pleased to
maintain the final dividend for 2022 at $0.18
(approximately 15 pence) per share, making it $0.36
for the full year (approximately 30 pence).

I would like to thank all of my Board colleagues
and all the Conduit team, led by Trevor, for their
tremendous efforts, which have taken us so far in
a very short space of time. I would also like to thank
the broking community and our customers for their
continued support. We are all looking forward to
the future with confidence and enthusiasm.

Neil Eckert
Executive Chairman
3 March 2023

Culture and sustainability
Our successful journey throughout the start-up
phase in 2021 can be directly attributed to the
strong culture we have created and to the hard
working, high-performing team that we have built: a
team with a very clear sense of purpose and
mission. Over half of our employees and a third of
our board are female. The culture at Conduit Re is
transparent, collaborative, responsible, enabling and
forward thinking. All this, coupled with our flat
structure, has a lot of advantages, not the least of
which is the agility to adapt, without legacy
constrictions, to market conditions. These strengths
have been put to good use in 2022, as we have
responded to a highly evolving market, and will
stand us in good stead going into 2023 and beyond.

As a Bermuda-based reinsurer, we were always
going to run the business from a single location.
This comes with several social responsibilities
which we continue to address as part of our
charitable and social goals as overseen by our ESG
Committee. We are grateful for the work carried out
by the ESG Committee and the Board in overseeing
the process and ensuring the integration of ESG
into our underwriting, investments and also the
fabric of our business and culture. There is still work
to be done, but we have made significant progress
as evidenced by our improving score in the
ClimateWise annual survey.

In summary, operationally and financially Conduit is
in a wonderful position for significant growth and
has a capital base to comfortably carry us through
our original IPO plan.

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

CEO’s report

"Our key differentiator as a pure-play global reinsurer
is our unwavering commitment to allocate capital
efficiently and effectively to where the most
attractive opportunities lie"

Reflections on 2022
We launched Conduit Re in December
2020, with a five-year business plan
centred on building a robust business
with a diversified portfolio. The industry
developments we have seen since 2020
now present a 2023 landscape that is
well beyond those original expectations.
Our team, pulling together from
one location, is ideally positioned
to respond to this.

Throughout our first two years, we remained
focused on our approach and plan, pursuing our
core underwriting philosophy: to identify the
relative value in the reinsurance product chain and
technically underwrite a balanced and diversified
portfolio. Across our target classes, we have been
able to build scale and presence – key elements in
establishing Conduit’s footprint, resilience
and relevance.

The heightened extent of industry natural-
catastrophe losses in 2022 is being described as
an ‘above average’ year with estimated loss figures
in excess of $120.0 billion. Increasing frequency
and scale of natural-catastrophe losses are factors
for which the industry should be prepared.
Responsible deployment of capital in catastrophe-
exposed classes should remain a key focus of
portfolio construction.

2022 performance
In 2022, our gross premiums written have grown
68.3% to $637.5 million and, on an estimated
ultimate premiums written basis, by 43.9% to
$659.9 million. While our overall result for our
second full year of operations was a comprehensive
loss of $89.7 million or $(0.55) per share, the pure
underwriting result was a profit of $0.3 million and
a combined ratio of 107.0%. This is a commendable
outcome by the team in only our second year, given
the significant claims and other challenges that
impacted the industry in 2022. It goes , long way to
validating our focus on underwriting a balanced and
diversified portfolio through careful risk selection
across our target classes.

Beyond underwriting, the 2022 results were
affected by the impact of the increased interest
rates on our invested assets, with an investment
return of (5.0)% mostly driven by a mark-to-market
effect over the 12 months of $(67.8) million. Our
principal approach remains to actively monitor and
position the duration of our investments, to
accumulate cash and reinvest when opportunities
present themselves, and to avoid realising losses
unnecessarily. We have always said that our
strategy is to assume risk in our underwriting and
to seek to protect our asset base to maximise our

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

CEO’s report
continued

solvency capital and, consequently, we will continue
to deploy our investments conservatively,
maintaining a lower-risk profile with high average
credit ratings (AA at the end of 2022).

Our operational set-up and efficiencies are already
producing $11.8 million of gross premiums written
per employee through year-end 2022 – a figure that
we expect to increase significantly as we develop
and deliver on our five-year plan. Within that plan,
we set out a glide path towards our other operating
expense ratio target of 5% to 6% and, at 7.1% for
2022, we are well on the way to achieving the
target set, given the evolution of the expected
earned premium base.

The more than $120.0 billion insured losses in the
year impacted several regions, with North America
alone incurring circa $90.0 billion of losses.
Hurricane Ian comprises a significant element of
this number (up to $55 billion according to some
estimates) with our estimated net loss exposure
to this storm being $45.4 million ($40.9 million net
of reinsurance recoveries and reinstatement
premiums).

In building a balanced view of risk, we continue
to have the majority of our premium dollars
emanating from non-catastrophe-exposed classes.
This has enabled us not only to establish a great
pipeline of margin-healthy, more predictable
business but also to continue to grow through 2022
while still retaining the important balance in the
overall portfolio.

The impact on Conduit Re from the Ukraine-Russia
conflict is a good example of our underwriting
philosophy, which is focused on achieving
consistent technical profitability. Given the typical
structure of the reinsurance treaty contracts that
we underwrite, with event and aggregate limitations
in place for the relatively small number of contracts
that have exposure to the conflict, the ultimate
impact from the event has been estimated at
$24.6 million net of reinsurance recoveries and
reinstatement premiums. Our approach is to be as
transparent as possible with our disclosures and we
believe that this is shown in our estimated ultimate
net loss to the ongoing crisis being across the whole
portfolio – primarily our property and specialty
reinsurance books, via classes such as aviation,
war on land and marine war – in both Ukraine
and Russia.

While we plainly had no crystal ball prior to the
Ukraine-Russia conflict, the loss impact on the
Conduit portfolio from it was limited since it was
clear to us some time ago that contract pricing in
certain specialty areas did not reflect the underlying
risk, causing us to decline many specialty
submissions.

Underwriting view
As 2022 progressed into the fourth quarter beyond
Hurricane Ian, it became apparent that a major re-
forming of the marketplace was under way, with the
supply versus demand imbalance starting to take
real effect. A fundamental shift in the rating of
property catastrophe risk was occurring, driving the
market to embrace both a significant increase in
premium rates and, crucially an improvement in the
terms and conditions being offered.

The positive momentum behind the improvements
in the pricing and terms and conditions of
catastrophe-exposed property business has also
been driving improvements in our margin
expectations in the non-catastrophe-exposed
business. This is enabling us to build upon our
significant existing non-catastrophe-exposed
property book.

We have spoken several times about the differing
product forms – quota share or excess of loss –
available to a reinsurer when accepting risks and the
fundamental differences between them. Both forms
have merit at differing points of the cycle and we
see both as being able to contribute in the present
market environment. However, in 2021 and 2022 our
strategy was to lean away from the greater volatility
we saw in the catastrophe-exposed excess of loss
product and we focused more of our attention on
the more predictable earnings stream available in
writing the quota share product showing attractive
margins with lower inherent volatility. We are now
seeing the benefits of the quota share earnings
stream coming through, which gives us an excellent
base on which to grow. Going forward as the
market dynamics change we will of course keep this
product mix under review as evidence of pricing
improvement emerges in the various excess of
loss classes.

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

CEO’s report
continued

The casualty business, in our experience through
the year, remained on a relatively stable track with
the underlying insurance market continuing to
behave responsibly in managing and pricing for
claims inflation. We have been very selective in
underwriting the casualty book and we have a high
renewal retention here with the business in our view
being well risk managed by the client base. The data
and analysis shared with us informs our decisions to
deploy or not in any one casualty class, occupancy,
or indeed geographic region. Where the
submissions have not met our risk appetite we have
not written the business. This was often the case
with European and broader non-USA casualty risks.
Overall, however, the longer-tail casualty business
that met our underwriting criteria continues to be
a valuable contributor to our overall broad risk
diversification strategy.

Turning to the specialty reinsurance market, our
experience has been that it has been a tough place
to find consistently good quality business with
adequate embedded margins. There has been an
increasing trend to bundle different classes of risk
into broad composite covers, with minimal
transparency on underlying risk and exposure
profiles and consequently this has inhibited the
ability of reinsurers to price the risks satisfactorily.
Starting in 2022 and continuing into 2023 we have
seen the specialty market change behaviour and
loss-impacted classes are seeing a significant uplift
in rates. Those risks previously lost in a bundled
approach are now in the open, to be evaluated on a
class-by-class and client-by-client basis. The recent
renewal season was in our opinion the real start of
this process and, alongside the growth in our
property book, the specialty classes offer a
significant opportunity for us to deploy more capital
into the space. Specialty reinsurance remains an
attractive proposition overall for Conduit, especially
when the natural-catastrophe correlations with our
property classes remain at lower levels, enabling us
to capture attractive technical margin from
premium flows that are not predominantly
associated with natural-catastrophe risks.

As regards distribution, the excellent support that
we have received from clients and brokers in this,
our second year of trading, is very much
appreciated. The channels that we have established
to access business are deep in all of our product
lines and our strong capital position will enable us
to continue to grow. To that end, the 1 January
2023 renewal period did indeed deliver exceptional
business growth, both in renewing and new
business for us and on the back of continued
improvements in pricing and terms and conditions.
We see this as an enduring environment, creating

the opportunity for improved margins in our
business throughout 2023 and beyond.

Conduit Re's key differentiators
Though we may no longer be considered a start-up,
we have retained several key differentiators from
our first days in operation. Over and above the
energy and forward-facing mindset that comes with
launching a new business, we have none of the
legacy issues of more established businesses. Given
the market’s re-calibration on prior year reserves in
this new inflationary environment, these legacy
issues are now very much front and centre in the
broader industry cross hairs and we are pleased not
to be impacted by such distractions.

On the asset side of the industry the combination
of heightened catastrophe losses, mark-to-market
impacts on investments and the legacy reserving
issue has had a significant impact on capital
management and the ability to deploy capital
optimally to take advantage of fast-emerging
opportunities. At this point in the cycle a freedom
to deploy capital is crucial, as is being able to lean
swiftly into a significantly improving market.

Along with a strategic approach to capital
deployment goes the need for efficiency and quality
of decision making in the business. Our experience
continues to show the clear advantages to having
a localised ‘hands on’ control of business being
written. This is especially so at the moment, where
the pace of change in the market has been rapid.

People
Our progress over the last 24 months would not
have been possible without the hard work,
application and passion of our teams. We have been
committed from day one to build our own culture,
by seeking out and attracting high-quality people.
We are now at 54 employees and in 2022 we
conducted our first in-house employee engagement
survey. I was very pleased with the positive results
and feedback. One final comment: in the post-
COVID world we have already adopted a return to
‘in office’ working as our norm and we believe both
the business and our employees benefit from this
approach as it improves the information flow and
knowledge ‘pass down’ through the entire
organisation.

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

CEO’s report
continued

Outlook
When Conduit Re was formed it was against
a backdrop of several years of industry
underperformance including the impact of the
COVID-19 pandemic. We were quietly confident
that, over the next two to three years, we would
experience a broad reinsurance market correction,
and what we are witnessing now is a fundamental
shift in risk versus return metrics presenting
opportunities to accelerate our growth plans.

Our underlying book of business remains on track
to deliver a mid-80s combined ratio in the medium
term and benefits from an efficient and effective
business model here in Bermuda.

I have witnessed several moments of significant
market disruption in my career and what we are
experiencing in the industry right now is one of the
most dramatic in scope and impact. In my view, it is
at these moments that the greatest opportunities
present themselves and I firmly believe that Conduit
Re is extremely well positioned to respond to these
opportunities as we continue to grow.

Trevor Carvey
CEO
3 March 2023

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

CUO's report

"By design, we have built an underwriting team
with a thorough understanding of the underlying
insurance classes – they are best placed, in our view,
to identify and respond to both key emerging trends
and specific risk opportunities"

Our underwriting approach
A team is only as strong as its component
parts and, in that respect, we have been
committed to targeting underwriters with
both a strong understanding of the
underlying insurance business and a solid
technical background.

Deliberately, we have sought out individuals with
a broader grasp of the reinsurance value chain and
the various products within it. It has been a clear
objective of the underwriting approach at Conduit
Re from day one that we should remain
geographically impartial and also largely product
neutral between quota share and excess of loss,
with the goal being to optimise our returns class-
by-class and region-by-region.

Key to this ground-up approach is a strict focus on
active cycle management and the steep changing
shape of returns seen in the market when measured
over time. We believe the resulting portfolio is
therefore robust and has greater ability to
withstand shocks.

As a reinsurer, we have invested in processes
enabling access to an enormous level of underlying
insurance information that then informs the
reinsurance contracts that we either bind or decline
– we seek to put our reinsurance underwriters in the
shoes of the insurer when considering the interplay
of risk transfer from the underlying insurance
business to the reinsurance contract.

Ultimately, however, success boils down to the
breadth and depth of talent and experience we
have to make the best of the opportunities we are
presented with and I am delighted to have recently
brought in the very experienced Peter Kiernan as
Head of Property, bringing more depth and support
to the team. We are a dynamic, evolving business,
and I anticipate fully that, as we grow, we will add
to the team's experience while continuing to
support, invest in and nurture our existing talent.

Maturing relationships
The relationships we now enjoy with brokers and
intermediaries are testament to our strategy. Our
presence is very relevant in the marketplace and
our approach is understood. The market certainly
understands the dimensions of our risk appetite,
our view of risk and, indeed, our approach to
risk pricing.

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

CUO's report
continued

What that means for Conduit Re is that we are now
being presented with a very large number of
opportunities from which to select. At this evolving
point in the cycle, that is a good place to be.

Market conditions
Both Neil and Trevor have already provided their
views as to where we are in the cycle. I endorse
their positive outlook as we are seeing a
fundamental and ongoing correction in response
to a combination of several factors, both economic
and related to specific loss events.

In 2022, across the board, we saw a move towards
greater transparency and clearer definitions in
the reinsurance treaty market, driven by the impact
of incurred claims on the horizon and perhaps the
benefit of hindsight. What we have observed in
the last 12 months is that there has been a
narrowing of coverage terms, and a real willingness
to sell that coverage in a more specifically defined
manner. In addition we have seen a far greater
degree of discipline within the market in
demanding that information necessary for
reinsurers to calculate an appropriate price for
the risk being assumed.

From the launch of our business, outwards
reinsurance has been a core part of our risk
management strategy. The outwards reinsurance
contracts were placed in 2022 with our incumbent
partners, while also broadening our panel with some
new markets. The programme is actively managed
in line with our plan.

Underwriting
Overall, for the year ended 31 December 2022
our estimated ultimate premiums written were
$659.9 million (2021: $458.5 million), after
adjustments. This planned growth has been
achieved by both expanding our current positions
and developing new relationships.

Conduit Re's overall risk-adjusted rate change
across the portfolio, net of claims inflation, in 2022
was 4%.

Property
Estimated ultimate premiums written in the
property book for the year ended 31 December
2022 were $319.3 million (31 December 2021: $205.0
million). Gross premiums written for the same
period were $299.6 million (31 December 2021:
$183.4 million).

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

CUO's report
continued

In 2021 and 2022, the market experienced some of
the largest catastrophe losses ever. In these initial
24 months of our business existence, we have been
tested against $240.0 billion or more of estimated
insurance industry natural-catastrophe losses.

Conduit Re’s portfolio has natural-catastrophe
exposure but, where such exposure does exist, we
price in a consistent and, we think, robust manner.
In constructing the property portfolio we have
resisted the somewhat easy practice of loading with
large amounts of low probability risk, which would
have produced a huge strain and demand on our
balance sheet, for return levels outside of our plan.
We consider tail risk or remote risk as a scarce
resource, structuring transactions to simplify the
management and quantification of these exposures.
This consistent approach allows the underwriting
team to constantly monitor the market value of
natural-catastrophe pricing.

The pricing metrics of volatility contracts improved
throughout 2022. The significant loss activity
across the class, from building collapse, a European
war and traditional natural-catastrophes, put
increasing upwards pressure on prices. Hurricane
Ian made landfall in Florida at a time when natural-
catastrophe excess of loss contracts had not
experienced the risk-adjusted rate increases
captured from the quota share placements.
A significant portion of the excess of loss capacity
is bought by the personal lines carriers, which sits
conversely to the more commercial lines-driven
quota share purchases. This was one of the factors

in our favourable consideration towards writing
structured quota share contracts.

Hurricane Ian is currently reported by PCS (an
industry provider of estimates of catastrophic
insured property losses) as a $52.9 billion loss
event, including loss adjustment expenses.
However, our estimated net loss of $40.9 million
(net of reinsurance recoveries and reinstatement
premiums) demonstrates our portfolio’s balanced
texture and robustness to significant natural-
catastrophe loss activity. I believe that the
characteristics of Hurricane Ian, the quantum of loss
it caused coupled with its physical parameters
(particularly radius to maximum winds and wind
speeds) will cause insurance carriers to reassess
their protection levels. For this reason, I expect to
see further demand for natural-catastrophe
capacity, albeit in differing forms by the insurance
market at nominally higher margin levels for sellers
of reinsurance.

While there were a number of other smaller
catastrophe events which gave further tests to
Conduit Re’s growing and diversified portfolio, such
as European storms Eunice and Dudley, hailstorms
in France, floods in Australia and South Africa, and
winter storm Elliott in the United States, none of
these had a material impact on our 2022 results. It is
accurate to say that our appetite for European
exposure was limited due to both the margins and
the terms and conditions of reinsurance contracts.

Here again the blend and texture of our portfolio
has served us well. We have continued to sit
alongside our quota share partners in the improving
original rating environment, with both attrition and
natural-catastrophe premiums increasing in margin.
I am certain that the risk-reward balance in respect
of reinsurance volatility products will develop
favourably for us.

Our risk-adjusted rate change in our property
segment, net of claims inflation, in 2022 was 7%.

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

CUO's report
continued

Casualty
Estimated ultimate premiums written in our casualty
book for the year ended 31 December 2022 were
$234.4 million (31 December 2021: $182.4 million).
Gross premiums written for the same period were
$236.7 million (31 December 2021: $129.0 million).

Our risk-adjusted rate change in our casualty
segment, net of claims inflation, in 2022 was 1%.

During 2022, we benefited from further
improvement in underlying casualty loss ratios,
which are, arguably, the best for a very long time.
We remain focused on professional/financial lines
and general liability casualty, continuing to avoid
motor. This, together with compound rate increases,

puts the underlying business in a much healthier
position and I don’t see a reversion of this in the
short term. The biggest challenge we faced in
casualty was a mismatch between our view of
inflation and that of many of our clients. There are
differing opinions in the market on the longevity of
the current heightened inflationary environment.
However, Conduit Re has the advantage of having
been established in a high inflation environment so
the concept of inflation is firmly embedded in how
we think about risk. Our most successful client
relationships have taken and will continue to take
a similar view and this is clearly visible in the data
they share with us. This partnership and cycle
management creates the discipline that
reverberates through the risk transfer chain,
creating consistency between business objectives.

There are certainly some significant themes in
the commercial casualty market, with sub-classes
such as workers' compensation and public D&O
evidencing signs of slowdown in rate increases. This
is the point at which an insurance partner underlines
to us their strategy to manage this phase of the
cycle. Though loss ratios have been improving due
to rate increases, reaction to and management of a
prolonged period of both core and social inflation
requires reinsurance structure rebalancing,
particularly when considering quota share
placements. As a general observation, best-in-class
casualty partners responded with reductions in
ceding commissions or simply shared less of the
more difficult sub-classes.

The underwriting team continues to monitor the
industry behaviour post COVID, continually testing
our views on trend and inflation. Despite evidence
of softening of primary rate increases, our partners
show the drive for rate increases in excess of
trend, tighter terms and conditions and discipline
in capacity deployment. During 2022 global
exposures began accelerating once again, and
in the context of insurance offering wealth and
business interest protection, there is an increasing
demand for our product.

We continue to watch with interest the
development of the cyber class market and the
rapidly evolving changes to structures, coverage
and rating. In 2022 we did not write any
standalone cyber risks, with exposure limited to that
assumed as part of the broader coverage contracts
that we write.

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

CUO's report
continued

Specialty
Estimated ultimate premiums written in our
specialty book for the year ended 31 December
2022 were $106.2 million (31 December 2021:
$71.1 million). Gross premiums written for the
same period were $101.2 million (31 December 2021:
$66.4 million).

Our risk-adjusted rate change in our specialty
segment, net of claims inflation, in 2022 was 2%.

The specialty segment contains a variety of
differing product classes, with each of them at
differing points in their own self-contained market
cycles and therefore requiring specific attention
from our pricing and underwriting teams. Within the

broad range of specialty classes there are several
which, although we monitor them, have continued
to fall outside our risk appetite, such as mortgage,
trade credit, surety and motor.

The main specialty classes of business we write
include aviation, energy, marine, renewables,
political violence and terrorism and are offered
on both a specific and a whole account basis.
Estimated ultimate premiums written grew almost
50% year-on-year and we continued to have
some success in the quota share support of those
clients where embedded technical margins
remain attractive.

In the marine classes, the market for hull and cargo
required a significant degree of risk selection on our
part as the relative profitability of these classes
within different regions of the world vary
enormously. While the North America region tends
to be where our property and casualty capacity can
be extensively deployed, when it comes to the
marine classes there exists a more heavy supply of
reinsurance capacity and this has the obvious effect
of dampening margin on the treaty reinsurance
being presented. This is not a recent trend but
rather a feature that has existed for some time –
prior to the existence of Conduit – and we continue
to tread carefully there.

The offshore energy market continues to be
reasonably balanced in the supply versus demand
equation. The rate change metrics presented by
clients indicated that the non-capacity projects
showed signs of rate improvement in the primary
insurance markets. The rates on capacity
installations held firmer, we believe, as they often
have insurance demands still running beyond
$5.0 billion in limit or more and therefore rely to
a greater extent on the treaty reinsurance market
for continued capacity and support.

The onshore energy market has continued to
produce reasonably solid results in the broader
marketplace and as such has warranted our support
over the last two years. Rates have moved up
significantly in previous years and have either held
firm or deteriorated slightly over the year but, from
a technical margin standpoint, the class continues
to offer attractive overall returns. The catastrophe
exposure remains relatively well controlled in this
class, and data modelling is readily available, giving
us more comfort in allocating capacity to it.

In the political violence and terrorism class, we
continue to allocate more capacity to contract
forms where the exposure is specifically detailed for
these risks rather than being covered in a broader

Conduit Holdings Limited Annual Report and Accounts 2022

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CUO's report
continued

bundled treaty type. The market has embraced this
transparent unbundling of risks more since the
Ukraine-Russia conflict and consequently, we think,
it continues to offer a reasonable technical margin.
The issue in writing this class is around the need to
manage the potential for contract accumulations
and this was a feature in limiting our exposure to
events such as the Ukraine-Russia conflict.

We remain a very small participant in the aviation
specialty classes but we saw evidence in the second
half of 2022 of rate increase and terms and
condition improvement. In response we were able
to increase the flow of business in the class over this
period. We saw evidence of initial rate increases in
the primary markets. The reinsurance capacity has
also been attracting higher rates and better terms
and conditions, which is encouraging.

In summary, we view the specialty lines as very
much complementary to our property and casualty
offerings. Recognising the breadth of knowledge
and experience that needs to be employed in
evaluating the differing specialty submission types,
we endeavour to bring the resources of the entire
underwriting and pricing team to bear, to arrive at
a team consensus approach to contracts written.
Given that many of the specialty lines have limited
exposure to natural-catastrophe loss events, the
class can often present an attractive proposition
with lower embedded volatility – always providing
of course that technical margin is present.

Greg Roberts
CUO
3 March 2023

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

CFO’s report

"Our performance, given the extent of this year’s
market-loss events, was a pleasing affirmation
of our strategy"

We have come a long way in the past two
years and the decisions that we made in
the pursuit of high-quality earnings and
lower investment risk are starting to bear
fruit. As a relatively young business, it
naturally takes some time to build the
book and for earnings to mature,
particularly given our deliberate bias
towards quota share over excess of
loss contracts.

That bias towards quota share, driven by market
dynamics, has stood us in good stead over the last
two years. With those years both bringing higher-
than-average industry natural-catastrophe losses,
plus an extreme outlier event in the Russian invasion
of Ukraine, we believe our strategy, approach and
risk selection has allowed us to contain the financial
impact of those events on Conduit Re. Despite
Hurricane Ian looking like it could be the second
largest catastrophe event ever, behind only
Hurricane Katrina in 2005, Conduit Re produced a
small underwriting profit for the year. In only our
second year, and a year where current industry loss
estimates for natural-catastrophes are as much as
$120 billion, this is a significant achievement.

We have continued to grow the business, largely in
line with the IPO plan for ultimate premium, and
over our first two years of operation we have bound
$1,118.4 million of ultimate premiums versus the IPO
plan of $1,098 million. While there is a higher
acquisition cost in doing quota share business, this
is partially offset in a lower loss ratio, albeit not on a
1:1 basis, but also in lower volatility around that loss
ratio. This has been borne out in our performance in
the losses of the last two years. Going forward, in
potentially the best market conditions for decades,
we are exceptionally well placed to build from here
with both our broad existing relationships and new
business opportunities. Our lack of prior year legacy
means that, with no need to consider material
inflationary increases on back year reserves, the
capital raised in our five-year plan is more than
adequate to deploy to meet our underwriting goals.

There have been two major events that have
impacted the business this year. On Hurricane Ian,
we incurred $40.9 million of net losses, after
reinsurance recoveries and reinstatement premiums.
That equates to 4.2% of our opening shareholders’
equity. While there is potential variability in any loss
estimate, we believe the range around our Hurricane
Ian loss is relatively small given how our reinsurance
programme operates.

On the Ukraine crisis, we have recorded $24.6
million of net losses, after reinsurance recoveries
and reinstatement premiums. That equates to 2.5%

Conduit Holdings Limited Annual Report and Accounts 2022

2023, finally, brings IFRS 17 implementation. With
that, other than presentational differences, we
expect the biggest impact to Conduit to be from
discounting our liabilities. That brings greater
matching with the asset side of our balance sheet.
While we have not fully deployed our capital, and
our asset duration of 2.2 years is shorter than our
gross reserve duration of 2.9 years in the current
environment, a degree of mismatch remains. We do
expect that to lessen over time as we continue to
deploy our capital. Our IFRS 17 implementation
project is relatively advanced, with our system
development substantially complete and entering
the testing and parallel running phases of the
project. We expect to be able to provide more
detail on the financial impacts ahead of our interim
reporting at the half year.

Elaine Whelan
CFO
3 March 2023

Strategic report

CFO’s report
continued

of our opening shareholders’ equity. With the war
ongoing, humanitarian aspects aside, there is clearly
considerable uncertainty around the impact of this
event. That is especially true for the industry and
even more so for the aviation sector. For us, with a
relatively small number of contracts exposed – and
with caps on exposure in place – we have been able
to come up with what we believe is a robust
assessment of our ultimate potential loss.

On the other side of the balance sheet, Conduit
has clearly been impacted by rising rates and rising
rate expectations, as other companies in our sector
have been. Our investment return for the year
was (5.0)%, driven largely by unrealised losses of
$67.8 million. With a short duration, highly liquid,
high-quality portfolio and with no risk-assets -
meaning no equities, high yield or alternative
investments – we have no concerns around defaults
and impairments. For the most part, we will allow
our existing portfolio to mature – albeit with some
rebalancing – and reinvest proceeds and new cash
flows cautiously. We will therefore see some benefit
from rising rates but, as ever, our primary aim is
capital preservation and liquidity to support our
underwriting. Markets remain volatile and uncertain,
so we will ensure that we have more than adequate
liquidity available in these challenging times.

We have continued to investigate funds or other
investments that meet our risk appetite, while also
having a positive impact from an ESG perspective,
but we have not yet found opportunities that have
the right fit. We have, however, taken further steps
to avoid exposure to investments that contribute to
identified types of environmental or social damage,
as detailed in our ESG Report, published on our
website. We will continue our research in this area.

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

Business review – finance

Premiums
We have continued to build a balanced and
diversified portfolio with the focus on high-quality
quota share business, allowing us to benefit from
the improving pricing and terms and conditions in
the primary markets. We consider quota share
business to have provided the best balance
between price and risk as we build out our
underwriting portfolio, and we will continue to have
an increased weighting towards quota share
contracts versus excess of loss business in the near
term. This sets up an embedded pipeline of
premium, which will flow through to income. While
quota share contracts typically have higher
acquisition costs associated with them, there tends
to be less volatility in the underlying loss ratio,
which we've experienced first hand with the
elevated loss events of 2022.

During 2022, Conduit Re continued to show
growth across all segments, benefiting from new
business, high retention of renewal business and
improving rates. Client count and submission
numbers have increased in line with Conduit Re's
growth strategy. Rate change continues to be
positive, outpacing inflation.

Ultimate premiums written
For the year ended 31 December:

Segment

Property

Casualty

Specialty

Total

2022
$m

319.3

234.4

106.2

2021
$m

Change
$m

Change
%

205.0

182.4

71.1

114.3

52.0

35.1

55.8

28.5

49.4

43.9

659.9

458.5

201.4

Gross premiums written
For the year ended 31 December:

Segment

Property

Casualty

Specialty

Total

2022
$m

299.6

236.7

101.2

2021
$m

183.4

129.0

66.4

Change
$m

Change
%

116.2

107.7

34.8

63.4

83.5

52.4

68.3

637.5

378.8

258.7

As Conduit concludes its second year of operations,
and as its earnings mature, the ratio of net
premiums earned to net premiums written was
83.0% for the year ended 31 December 2022
compared with 56.1% for the prior year.

Pricing
Pricing and terms and conditions continued to
improve in the markets we targeted. We were
presented with an increasing number of
opportunities to deploy our capital into the areas
and products which we know well, and where both
renewal and new prospects met our profitability
requirements.

Conduit's overall risk-adjusted rate change, net of
claims inflation, in 2022 was 4%, and by segment
was:

Property

Casualty

Specialty

Premiums ceded
Ceded reinsurance premiums for the year ended 31
December 2022 were $56.6 million compared to
$32.6 million for the year ended 31 December 2021.
The increase in cost relative to the prior period
reflects additional limits purchased as the inwards
portfolio and exposures grew over the period.

Losses
Both 2021 and 2022 were characterised by higher-
than-average natural-catastrophe losses for the
industry, with 2022 also experiencing losses from
the crisis in Ukraine. The Group's net loss ratio was
71.7% compared with 73.2% for 2021. The accident
year loss ratio for 2022, including the impact of
foreign exchange revaluations, was 72.9% compared
to 73.2% for 2021.

Hurricane Ian made landfall in Florida as a strong
Category 4 hurricane on 28 September 2022,
resulting in estimated industry losses of
approximately $55 billion. It continued its path
north-east across Florida before making a second
landfall in South Carolina. Our ultimate loss
estimate, net of reinsurance recoveries and
reinstatement premiums, for Hurricane Ian is
$40.9 million, which is in line with previously
reported estimates, and contributed 8.8% to the net
loss ratio. Our net loss ratio for the year, absent the
impact of Hurricane Ian, was 62.9%.

As regards the ongoing conflict in Ukraine resulting
from the Russian invasion commencing on 24
February 2022, Conduit has potential exposure
across its property and specialty reinsurance books,
via classes such as aviation, war on land and marine
war. There is significant uncertainty in estimating
losses emanating from the conflict, not least as it is
an ongoing event. Based on current information,
Conduit's previously announced estimated ultimate
loss, net of reinsurance recoveries and
reinstatement premiums, in relation to the conflict

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

Business review – finance
continued

is unchanged at $24.6 million, which represented
5.1% of the net loss ratio. Our net loss ratio for 2022,
absent the impact of the Ukraine conflict, would
have been 66.6%.

While there were a number of other smaller
catastrophe events, such as European storms
Eunice and Dudley, hailstorms in France, floods in
Australia and South Africa, and winter storm Elliott
in the United States, none of these had a material
impact on our 2022 results.

During 2021, we experienced net losses from the
significant events of Hurricane Ida and the
European floods of $27.1 million, net of reinsurance
recoveries and reinstatement premiums. Absent
these events our loss ratio would have been 58.8%.

Our ultimate loss estimates, net of reinsurance
recoveries and reinstatement premiums, for the
previously reported 2021 loss events remain
relatively stable.

Our loss and reserve estimates have been derived
from a combination of reports from brokers and
cedants, modelled loss projections, pricing loss ratio
expectations and reporting patterns, all
supplemented with market data and assumptions.
We will continue to review these estimates as more
information becomes available.

Investments
We continue to maintain our conservative approach
to managing our invested assets, with a strong
emphasis on preserving capital and liquidity.

Our strategy remains maintaining a short duration,
highly creditworthy portfolio, with due
consideration of the duration of our liabilities. Our
portfolio mix shows our conservative philosophy
(more information on the portfolio mix is set out
in the risk disclosures on page 111). Our asset
allocation is dictated by our approved investment
guidelines. There are currently no risk assets held
in the portfolio. Risk assets will generally only be
considered to diversify and protect the portfolio,
and where the risk return profiles are appropriate.

We currently have two portfolio categories – short-
tail and long-tail – to match our underwriting
categories and the differing obligations associated
with different classes of business across our
property, casualty and specialty divisions. Liquidity
preferences are monitored for each.

Conduit’s cash inflows are primarily derived from
net premiums received (including reinstatement
premiums), losses recovered from reinsurers and
net investment income, plus the sale and
redemption of investments. Cash outflows are
primarily the settlement of claims, the payment
of ceded reinsurance premiums (including
reinstatement premiums), payment of other
operating expenses, the purchase of investments
and the distribution of dividends or other forms
of capital returns. Excess funds are invested in
the investment portfolio.

As part of our investment strategy, we seek to
maintain a level of liquidity that we believe to be
adequate to meet our foreseeable payment
obligations. We believe that our liquid investments
and cash flow will provide us with sufficient liquidity
to meet our obligations to settle losses. However,
the timing and amounts of actual claims payments
vary based on many factors, including large
individual losses, changes in the legal environment
and general market conditions.

Investment performance
The Federal Reserve raised rates seven times in
2022, and has indicated further increases going
forward. As a result, the portfolio return is negative
5.0% for the year ended 31 December 2022, mostly
due to unrealised losses. Conduit recorded a small
loss on the investment portfolio in the year ended 31
December 2021 due to rising yields in the fourth
quarter of the year. While we expect market
volatility to remain elevated in the near term,
Conduit expects to be able to reinvest at higher
rates as the existing portfolio matures.

Net investment income, excluding realised and
unrealised losses, was $17.8 million for 2022
compared to $5.5 million for 2021. Total investment
return, including net investment income, net realised
gains and losses, and net change in unrealised gains
and losses, was a loss of $52.8 million for 2022
compared to a gain of $3.1 million in 2021.

The breakdown of the managed investment
portfolio as at 31 December is as follows:

Fixed maturity securities

Cash and cash equivalents

2022

91.3%

8.7%

2021

95.3%

4.7%

Total

100.0%

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

Business review – finance
continued

Key investment portfolio statistics for our fixed
maturities and managed cash as at 31 December
were:

Other operating expenses contributed 7.1% to
Conduit’s combined ratio in 2022 compared with
15.8% for the same period of 2021.

Duration

Credit quality

Book yield

Market yield

2022

2021

2.2 years

2.4 years

2.4%

5.2%

AA-

0.9%

1.2%

ESG considerations are incorporated into our
individual portfolio investment guidelines. We
believe that, all other things being equal, it is less
risky to own securities with strong ESG ratings.
More information about the ESG approach to our
investments is contained in the CFO’s report on
page 18 and in the ESG summary on page 30.

Other operating expenses and equity-
based compensation
Other operating expenses were $34.3 million for
the year ended 31 December 2022 compared with
$30.6 million for the prior year, while our equity-
based incentives expense was $2.1 million compared
with $0.3 million.

The prior year ratio was a reflection of our start-up
nature with earnings yet to mature but with
employment costs and technology platform
development costs incurred upfront.

Capital and dividends
Conduit remains well capitalised to achieve its
objectives with a legacy-free balance sheet. Total
capital and tangible capital available to Conduit was
$0.81 billion at 31 December 2022 (31 December
2021: $0.98 billion). Further information on capital
management is set out in the risk disclosures on
page 118 and in the financing arrangements
on page 130.

During 2022, Conduit continued on-market
purchases of its shares under a share purchase
programme announced on 29 December 2021,
where shares may be repurchased pursuant to
authority obtained at Conduit's most recent Annual
General Meeting. Shares repurchased by Conduit
and Conduit's EBT during 2022 amounted to $19.9
million and will be held in treasury and/or trust to
meet future obligations under Conduit's variable
incentive schemes.

Further details of the share repurchase scheme are
set out in the Directors’ report on page 81 and in
note 18 to the consolidated financial statements
on page 131.

On 22 February 2023 Conduit’s Board of Directors
declared a final dividend of $0.18 (approximately
15 pence) per common share, resulting in an
aggregate payment of $28.8 million. The dividend
will be paid in pounds sterling on 21 April 2023
to shareholders of record on 24 March 2023
(the “Record Date”) using the pound sterling/
US dollar spot exchange rate at 12 noon BST
on the Record Date.

Conduit previously declared and paid an interim
dividend during 2022 of $0.18 (approximately
15 pence) per common share. Consequently, the
full 2022 dividend dividend is $0.36 (approximately
30 pence) per common share in line with our stated
dividend policy. Conduit’s dividend policy and
information on the final dividend declared in respect
of 2022 can be found on page 44.

There is no debt and there are no off-balance sheet
forms of capital.

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

Enterprise risk management report

"Our risk profile reflects our freedom from legacy
constraints and organisational complexity. As we
transition from the start-up phase, at this time of
enhanced opportunity, we have established a
business that is ready to grow"

Enterprise risk management in a modern, legacy-
free environment
At launch in December 2020, Conduit
set out to be a modern, forward-
looking organisation where risk
management is integral to our culture,
guiding strategic and operational plans.

The Company's increasing maturity in 2022 was
such that we have been able to revisit and evolve
key policies with minor refreshes to the Risk Policy,
Stress and Scenario Testing Policy and Commercial
Insurer’s Solvency Self-Assessment Policy, alongside
the evolution of the Underwriting Guidelines and
formalisation of our Pricing Policy. I'm happy to
report that our objective to have risk management
integral to what we do is being delivered upon.

The risk function has provided quarterly reporting
to the Board and/or Board Committees addressing
our response to risk, compliance with risk appetite
and tolerance statements, key risk indicators, and
the response to any risk events or near-misses.

Our deployment of portfolio management tools
gained pace and robustness in 2022, across both
underwriting and investments, with analysis also
supported by the maturing and increased
adoption of our underwriting pricing tool
which provides rich data for the analysis of rate
adequacy and movement.

Similarly, our toolset to manage operational cyber
threats also matured during the year, working in
collaboration with our cloud-based system
providers and technology partners. Our work on
key risk indicators progressed during the year,
but further work remains.

Emerging risk has also been a consideration during
2022, with an emerging risk register maintained and
substantive discussions held on this topic as part of
the strategy sessions of the Board, notably
including various considerations associated with
climate risk and cyber risk.

Our risk profile reflects our freedom from legacy
constraints and relative organisational simplicity,
with systems developed to ensure transparency
and auditability in all our activities. This, together
with our limited appetite for investment risk,
allows a focus on underwriting, which is the core
of our business.

Conduit Holdings Limited Annual Report and Accounts 2022

We buy high-quality outwards reinsurance to
manage peak exposures and use reinsurers who
are individually approved by our Counterparty
Security Committee.

We seek to minimise other risks including
investment risk, where our primary aim is to protect
capital, and operational risk, where our simple
corporate and organisational structure supports
risk containment.

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 focused on long-term
performance and building our business in a way that
is sustainable and compatible with our responsible
ESG values.

The overall risk policy and enterprise risk framework
have remained relatively stable during 2022, with
continued work on tools, risk indicators and the
commencement of work on our internal
capital model.

Our summary risk appetite and exposures are set
out on the next pages.

Strategic report

Enterprise risk management report
continued

Risk profile
Conduit Re is well capitalised and has now
completed the baseline operational build-out,
with staffing increasing from 41 to 54 during 2022,
as it transitions from start-up to being an
established business. Further operational growth
is now expected to be supportive of organic
business growth.

Underwriting risk is the risk that we seek and
is our primary risk. During 2022, we increased
the operational and modelling support to our
underwriters. We conducted a proof of concept
on a more advanced approach to casualty
accumulations. We plan to further advance this
in 2023 with potential to expand to certain
specialty classes. This will bring a similar level of
sophistication as our aggregation control toolset
for property, and natural-catastrophe-exposed
specialty business.

Conduit Re maintains a balanced portfolio of
reinsurance classes, geographical exposures
and strict limits on our exposures to natural-
catastrophe s and man-made loss events.
Recognising the current favourable market
conditions, we have accelerated our exposure
appetite growth, to be deployed if market
conditions support.

Our target gross exposure, per our 2023 business
plan and 2022 business plan, for our largest single
peril/region combinations at the 1 in 100 and 1 in
250 return periods increased from $131.2 million
to $190.3 million and from $202.2 million to
$249.0 million respectively. The same combinations
on a net basis increased from $54.2 million to
$65.0 million and from $77.9 million to $98.7 million.
These targets are calibrated to 1 July viewpoints,
for a first occurrence, and may change. Our actual
gross modelled exposures at 1 July 2022 were
broadly in line with plan while our net exposure
was lower, due to the availability of competitive
outwards reinsurance.

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

Enterprise risk management report
continued

Risk category

Relative appetite/preference

Trend

Commentary

Overall –
capital
adequacy

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
by the BMA.

Underwriting
– premium

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.

Underwriting
– exposure
and
aggregations

Underwriting
– reserve

Medium
We underwrite catastrophe-exposed reinsurance
through our property and specialty classes, 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.

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.

Investment –
market
and liquidity

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.

AM Best affirmed our A–
rating and we have
substantial capital to
deploy. The value of our
available assets has been
reduced by mark-to-
market losses but is
expected to recover as
held assets approach
maturity.

After a market-loss heavy
2022, industry capacity is
expected to be
constrained and this can
lead to greater volatility.
There is opportunity to
take on the same, or
greater, risk at improved
rate.

Overall, our portfolio has
been slightly less exposed
to catastrophe losses
than we initially planned,
but a volatile market and
decreased market risk
capacity increase risk.

Our current reserves have
been impacted by
elevated catastrophe
losses, but the absence of
legacy means the impact
of inflation is limited. The
volatility of reserve risk
reduces as our overall
book grows.

Our limited risk portfolio
has meant that our
investment performance
has performed favourably
in comparison to peers.
Our strategy remains
unchanged with mark-to-
market losses expected
to substantially unwind
over time.

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

Enterprise risk management report
continued

Risk category

Relative appetite/preference

Trend Commentary

Credit

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

Operational
and systems

Strategic

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.

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

Reputational Low

A focus on maintaining and enhancing brand and
franchise value with support from the ESG
Committee, established by the holding
company board.

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.

All retrocessionaires
continue to be high
quality and approved
by the Counterparty
Security Committee.

Our operational risks have
continued to decrease as
we transition from the
start-up phase and we
expect this to continue
as we mature.

We have executed on
strategy to date and
favourable market
conditions further reduce
strategic risk.

Public coverage is
favourable to date and
good progress is being
made on transparency
on ESG-related matters,
with our first ESG Report
to be published alongside
this Annual Report
and Accounts.

The initial period of
elevated risk during start-
up phase has passed. The
rate of change on global
fiscal initiatives and
political volatility in key
locations we are exposed
to appear to have
reduced, providing a
more stable environment.

Conduit Holdings Limited Annual Report and Accounts 2022

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Enterprise risk management report
continued

Conduit Holdings Limited Annual Report and Accounts 2022

function’s own reports and those of other
independent third parties.

The capital management aspects of the risk
framework have, to date, focused primarily on
rating agency and regulatory requirements, with
significant buffers being held. Development of our
own internal capital model commenced in late 2022
and is expected to continue through 2023.

Conclusion
Overall, I remain confident that the management
of risk is progressing in line with the initial vision
set out with first-line ownership of risks: a small,
focused risk team working closely with, now
deepened, actuarial, modelling and data resources.

During 2022, my own responsibilities were
expanded to also specifically address how we
respond to climate and sustainability across our
operations. This is very much complementary to my
existing role as CRO, with our approach to climate
and sustainability, like risk, being integral to how we
work on a day-to-day basis.

Looking ahead to 2023, I expect a continuation of
the market volatility we have seen in 2022. My view
is that our now well-established operational
capability and growing portfolio are well positioned
to carefully embrace the market opportunity.

Andrew Smith
CRO
3 March 2023

Strategic report

Enterprise risk management report
continued

Risk governance
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 tolerance 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, four
CHL independent Non-Executive Directors also
serve as Directors on the CRL Board.

CRL operates under a ‘three lines of defence’ risk
management model, with the CRO 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, key risk indicators 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 CEO and the Executive 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
into the overall risk assessment. Regular meetings
between the second-line functions and Internal
Audit commenced during 2022. Outputs from all
such functions may be used, where appropriate, to
support independent validation, alongside the risk

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

Enterprise risk management report
continued

Case study

Capacity

To grow a successful and sustainable
business we need both the operational
capacity to analyse, price, manage and
administer our underwriting portfolio; and
the capital base to back the risks that we
assume and to operate as a responsible
public company.

Over the first two years of operation, our headcount
has grown from nine at the close of the IPO in
December 2020 to 54 at year-end 2022. We have
a buzzing office in the heart of Bermuda’s business
district, and we have implemented a myriad of
computer systems.

From a capital perspective, the current drivers
of our capital requirements, on both a regulatory
and a rating agency basis, are premium risk and
catastrophe risk. Reserve risk will become an
increasing feature as our book matures, with
diversification being a growing offset to our overall
capital needs. Other risk categories such as
investment, market and credit have a limited impact
on our required capital. AM Best affirmed Conduit
Re’s Financial Strength Rating of A- (Excellent) in
December 2022, noting Conduit Re’s “conservative
investment strategy focused on debt securities and
a reinsurance programme of excellent credit
quality”.

AM Best added: “Conduit Re’s balance sheet
strength is underpinned by the strongest level of
risk-adjusted capitalisation, as measured by Best’s
Capital Adequacy Ratio (BCAR). BCAR scores are
expected to remain comfortably in excess of the
strongest threshold as the company executes its
business plans and grows its reinsurance portfolio.”

We have an efficient, well-capitalised underwriting
business which is delivering a high-quality portfolio
in increasingly favourable market conditions. It is an
exciting time for Conduit Re, as we seek to deliver
a sustainable phase of profitable growth.

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

ESG summary

Introduction by the Chairman of the ESG
Committee, Lord Soames
When Neil asked me to chair Conduit’s
ESG Committee before the launch in
2020 I was impressed, but not surprised,
as to the thought that had gone in to
embedding ESG principles into Conduit
from day one. What I’ve seen over the
first two full years of operation is
testament to that commitment.

Throughout the year, I’ve been particularly
delighted seeing the mission of the Conduit
Foundation start to deliver on its objectives more
substantially for the local community. Building on
the initial donations and support it made during
2021, in 2022 it has provided a total of nearly
$300,000 of donations across more than a dozen
charities, including additional support for charitable
events and via a matched staff giving programme.

What has struck me is the real interest and
engagement of all members of the ESG Committee
in the actions being taken to have impact in the
community, led by the CEO and Deputy CEO. I can
see that the few individuals who moved to Bermuda
to launch Conduit feel as much part of the
community as the majority who joined the team
with existing strong local connections.

More broadly, as I reflect on the progress and
achievements during 2022, I remain confident that
as a small, young company Conduit continues to
have a strong ESG focus and is playing its part in
supporting the transition to a more
sustainable world.

Key highlights include a few ‘firsts’:

Standalone ESG Report produced for year-
end 2022, providing a greater level of insight
and transparency as to Conduit’s actions.

Independently conducted ESG materiality
assessment that spoke with a range of
stakeholders to understand their ESG
priorities.
Public disclosure of ClimateWise reports for
2021 and 2022.

4. Participation in an organised internship

programme.

5. Multi-year funding commitments to

select charities.

From a governance perspective, I’ve seen the
operation of the ESG Committee and its interactions
with executive management and the boards of both
the holding company and the operating company
evolve. The Committee was further strengthened
when Heather Mello, Head of HR, and Andrew
Smith, in his expanded role as Chief Risk and
Sustainability Officer, joined.

Finally, last year in this section of the Annual Report
and Accounts, Neil commented on the need to
“walk the walk” and on his personal passion for ESG
matters. Neil does ‘walk the walk’ and I congratulate
him on his recognition through the ESG Insurer
Lifetime Achievement Award, which I was honoured
to be with him when he received. I am also very
much encouraged by seeing that same passion that
Neil has in the wider team.

Nicholas Soames
Chairman, ESG Committee

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

ESG summary
continued

Summary
As mentioned in the introduction by Lord Soames,
recognising the importance of clear and transparent
ESG reporting, we have produced a standalone ESG
Report, which can be found on our website. Thus, in
this Annual Report and Accounts, we draw
attention to specific matters of note and signpost
our wider Task Force on Climate-related Financial
Disclosures (TCFD) reporting as we deliver on our
ESG ambitions:

1. positively impacting our stakeholders;
2. supporting the transition to a sustainable world;

and

3. minimising our negative impact on the

environment.

We remain a relatively small company and enjoy the
benefits of being legacy-free in all its forms. This
means we can take deliberate, purposeful and
impactful steps as we seek to deliver on those
ambitions. In 2022 key milestones have included:

1. becoming a signatory to the UN’s Principles for

Sustainable Insurance;

2. being an inaugural signatory to the Sustainable
Markets Initiative, Insurance Task Force, Supply
Chain Pledge;

3. making the commitment to be a Beyond Plastics

Bermuda Champion;

4. making our first detailed public ESG disclosures.

For our public disclosures we have produced an
ESG Report, which incorporates a stakeholder
materiality assessment conducted by H/Advisors,
and a more structured, ClimateWise report which
focuses on our response to the risks and
opportunities of climate change. Additionally, in this
Annual Report and Accounts, we summarise our
carbon emissions for 2022.

ClimateWise represents a growing global network
of leading insurance industry organisations.
ClimateWise provides a framework developed by
the University of Cambridge Institute for
Sustainability Leadership to support insurers and
reinsurers with meeting their TCFD reporting
obligations using a consistent framework. The
process of ClimateWise reporting also involves
each report being independently assessed and we
seek to have year-on-year improvements in the
assessment of our report, which we have seen from
2020 to 2021.

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

ESG summary
continued

Carbon emissions
We have included in the table below our Scope 1 to 3 emissions for our first two years of operations. As we
are a new company, we look to grow as sustainably as possible, with a focus on the average emissions per
employee. For details on our methodology, to see our five-year emissions plan and details on our carbon
offsets, please refer to section 4 of our ClimateWise report.

Emission type

Activity

Basis of measurement

Quantity

tCO2e Quantity

tCO2e

2022

2021

Scope 1

Direct

Scope 2

None

Indirect energy

Electricity

kWh

– location based

– market based

95,712

67,153

Scope 3

Indirect other

Business travel
Hotels1
Staff commuting2

Kilometres
Nights
Kilometres

1,545,335
256

188 708,575
150

163,867

18 96,711

Total gross emissions from our operations

Gross emissions (location based)

Gross emissions (market based)

Carbon offset applied

Net carbon impact from operations

Gross emissions per average employee

Average number of employees

Location based

Market based

Gross emissions including our share of suppliers' emissions

Total gross emissions as per above market-based approach

Share of suppliers' emissions

Grand total

292

289

(289)

289

747

1,036

86
18

155

151

(151)

In 2021, our estimated emissions for hotel nights were based on a five-star hotel in Bermuda, with usage driven primarily by COVID. The lower
emissions per night in 2022 reflect the use of lower hotel classes internationally.
During 2022, we changed our source for petrol vehicle emissions to UK Government-issued data. To support comparability, we have shown the
associated 2021 emissions using that source. This reduces our 2021 reported emissions by 2.2 tCO2e from that reported in the 2021 Annual
Report and Accounts. Further details of this change can be found in section 4 of our ClimateWise report.

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

ESG summary
continued

TCFD reporting
Below is a summary of our TCFD disclosures, which are intended to provide context alongside a reference
to where each topic is explored in more depth. ClimateWise provides an industry-specific framework for
TCFD reporting and is most meaningfully read as a standalone document, so has not been reproduced in
full in the Annual Report and Accounts. Our ESG Report is a free-form disclosure in which we add additional
context and commentary, notably in relation to our ESG metrics and the relevance of climate to each
member of executive management. Both documents can be found on our website.

TCFD pillars

TCFD recommended disclosures

Governance
Disclose the organisation's
governance around climate-
related risks and opportunities.

A
Describe the Board’s oversight
of climate-related risks and
opportunities.

Strategy
Disclose the actual and
potential impacts of climate-
related risks and opportunities
on the organisation’s
businesses, strategy and
financial planning where such
information is material.

B
Describe management’s role in
assessing and managing climate-
related risks and opportunities.

A
Describe the climate-related risks
and opportunities the organisation
has identified over the short,
medium and long term.

B
Describe the impact of climate-
related risks and opportunities on
the organisation’s businesses,
strategy and financial planning.
C
Describe the resilience of the
organisation’s strategy, taking into
consideration different climate
related scenarios, including a 2°C
or lower scenario.

Disclosure status and reference to
where disclosures have been made
See section 1.1 of our
ClimateWise report.
The Board has held strategy
sessions that have considered
climate-related risks and
opportunities and have established
parameters within which
management can operate. It
receives regular reports and is also
supported by the ESG Committee.

See section 1.2 of our ClimateWise
report and the governance section
of our ESG Report.
Climate-related risk is integrated
into various management policies.
Each Executive Committee member
has specific climate responsibilities
set out in our ESG Report.

See sections 2.1 and 2.2 of our
ClimateWise report.
Climate-related risks and
opportunities exist across our
underwriting, investments and
operations.

See section 2.3 of our
ClimateWise report.

See the environment section of our
ESG report, where we describe the
Board’s strategic discussion on
climate scenarios. Our current
processes do not yet fully comply
with the guidance for insurance
companies and asset owners, given
scale and availability of information.

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

ESG summary
continued

TCFD pillars

TCFD recommended disclosures

Risk management
Disclose how the organisation
identifies, assesses and
manages climate-related risks.

A
Describe the organisation’s
processes for identifying and
assessing climate-related risks.

B
Describe the organisation’s
processes for managing climate-
related risks.

C
Describe how processes for
identifying, assessing and managing
climate-related risks are integrated
into the organisation’s overall risk
management.

A
Disclose the metrics used by the
organisation to assess climate-
related risks and opportunities in line
with its strategy and risk
management process.
B
Disclose Scope 1, Scope 2 and, if
appropriate, Scope 3 greenhouse
gas (GHG) emissions, and the
related risks.
C
Describe the targets used by the
organisation to manage climate-
related risks and opportunities and
performance against targets.

Metrics and targets
Disclose the metrics and
targets used to assess and
manage relevant climate-
related risks and opportunities
where such information is
material.

Disclosure status and reference to
where disclosures have been made
See section 3.1 of our
ClimateWise report.
Our processes are very much
integrated with our wider risk
management framework described
in the ERM Summary in the Annual
Report and Accounts and in our
Financial Condition Report.

See section 3.1 of our
ClimateWise report.
Our processes are very much
integrated with our wider risk
management framework described
in the ERM section of the Annual
Report and Accounts and in our
Financial Condition Report.

See the environment section
of our ESG Report.
Our metrics relate primarily to
carbon neutrality and to our
business partners’ commitment
to climate matters.

Disclosed in this section of the
Annual Report and Accounts.
Further detail can also be found
in our ESG Report.

See the environment section
of our ESG Report.
Our metrics relate primarily to
carbon neutrality and to our
business partners’ commitment
to climate matters.

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

ESG summary
continued

Case study

The Conduit Foundation

The Conduit Foundation was established
in 2021, recognising the important part
that companies – such as Conduit Re –
play in Bermuda’s society.

The Conduit Foundation supports local charitable
causes in Bermuda as we believe this enables us
to have the greatest impact in our community.
The charities selected for support are typically
suggested by employees, and after initial
consideration by the Head of Human Resources a
formal proposal from each charity is considered by
the Foundation’s Protector Committee. During 2022
more than 80% of total Foundation disbursements
were to charities initially recommended by
Conduit’s staff. The Foundation seeks to align its
contributions both to its objectives and the UN
Sustainable Development Goals. During 2022 it
supported 15 of the 17 UN categories.

The Foundation had an active year in 2022, making
donations to more than a dozen local charities.
Details of the donations made can be found in our
standalone ESG Report, published on our website.

Additionally, the Foundation supported more
than half a dozen charitable events with financial
contributions and made more than ten
contributions under the staff matched giving
programme. The supported charitable events
included the Bermuda Youth Climate Summit and
various seasonal campaigns to provide food or
other essentials to families in need.

Conduit Re staff with representatives of Bermuda Sloop
Foundation, Big Brothers Big Sisters of Bermuda, Friends of
Christchurch, Tomorrow’s Voices, SCARS, Bermuda College
Foundation, Home, Bermuda Red Cross, Living Reefs Foundation,
Vision Bermuda, Waterstart Ltd.

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

Section 172 statement and stakeholder engagement

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 UK Companies Act 2006
have been considered in Board discussions and
decision making. The Company is a Bermuda-
incorporated issuer and the Board is obliged to
follow 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,
among other practical matters, to the:
• likely consequences of any decision in the

long term;

• interests of the company’s employees;
• need to foster the company’s business
relationships with suppliers, customers
and others;

• impact of the company’s operations on the

community and environment;

• desirability of the company maintaining

a reputation for high standards of
business conduct;

• need to act fairly between members of

the company.

Stakeholder engagement
In our second year of operations, Conduit continued
to expand its efforts in engaging with its key
stakeholders, to understand perspectives and the
potential long-term consequences of decisions and
matters of strategic importance to Conduit.

The Board discussed broker and client relationships,
shareholder and employee engagement,
government and regulator engagement, rating
agency interaction, environmental matters, and
Conduit’s impact on, and relationship with, the local
community, and considered these matters in its
decision making.

Brokers and clients
• Relationships with the reinsurance broking

remuneration. Meetings were held one-on-one
with investors and via group calls. Feedback from
these meetings was presented to the Board on a
regular basis and informed Board debate and
decision making on strategy and business
planning. Some of our larger shareholders were
also consulted as part of the materiality
assessment carried out as part of our ESG
Report.

• Our Directors and management recognise the

benefits that come from dialogue with
shareholders and we have embraced an active
engagement strategy to discuss with our
shareholders the issues that are important to
them, hear their expectations of us and share our
views.

• The Board strives to be proactive, transparent

and interactive with shareholders, who are always
welcome to ask questions. For further
information, and contact details, see Investor
Relations and Regulatory News Service on the
Conduit Re website (conduitreinsurance.com).

Employees
• Malcolm Furbert continued as the Company's

Non-Executive Director responsible for
engagement with Conduit’s workforce.

• Malcolm met with our COO and Head of HR

regularly to discuss employee engagement for
Conduit. The Board received reports of Malcolm's
and HR's activities, ensuring workforce views
were considered in Board and management
decision making.

• During 2022, the Head of HR conducted

a detailed review of Conduit's HR policies and
procedures to ensure that those in place remain
robust and competitive within the market. Having
a supportive and inclusive culture is important to
us and we track how employees feel about
working at Conduit. In 2022, we conducted our
first annual employee engagement survey. The
results were shared with Malcolm who provided
his own observations on the findings to the
Board, which also received a summary of the
revised policies which were approved during
2022 to support employees.

community and cedants are key to Conduit’s
success. In considering Conduit Re’s strategy and
business planning, the Board received reports on,
and noted the extent of, the broker and cedant
support received by Conduit Re.

• The Board was kept apprised of Conduit's

recruitment activities throughout 2022, during
which time headcount grew from 41 to 54 people
as at 31 December 2022.

• In 2022 all staff participated in compliance

Shareholders
• The Executive Chairman, the CEO, the CFO and

the Head of Investor Relations regularly met with
shareholders throughout the year, both quarterly
to review trading results and on an ad-hoc basis
to discuss various matters, including

training which covered key compliance topics
including sanctions, information security and
cyber risk, anti-money laundering, anti-terrorist
financing, anti-bribery and corruption, conflicts of
interest, and compliance with tax and regulatory
operating guidelines. Training was also provided

Conduit Holdings Limited Annual Report and Accounts 2022

Strategic report

Section 172 statement and stakeholder engagement
continued

Principal decision
The principal decision made by the Board in 2022
was to affirm the current strategy, covering a three-
to-five-year horizon. The Board determined that this
approach continues to validate and build on the
original strategy as set out in the IPO prospectus.

The Board participated in a two-day strategy
session before making its decision not to change
the current strategy. Our strategic aims continue
to focus on building out our team as appropriate, to
pursue organic growth over the foundations built
in our first year, to review interest rate risk and our
approach to managing it, and to consider our
capital requirements and mix. We still consider
these aims appropriate but would reconsider in the
face of significant or unexpected losses or changes
in the market or our operating environment.

In 2022, the Board also considered and approved,
facilitated by advice from Conduit’s independent
remuneration advisers, the Conduit Remuneration
Policy which was approved by a binding
shareholder vote at the 2022 Annual General
Meeting of shareholders. Refer to details of the
approved Remuneration Policy on pages 60 to 65.

Trevor Carvey
CEO
3 March 2023

Elaine Whelan
CFO
3 March 2023

which covered Conduit’s code of conduct and
whistleblowing procedures.

Government and regulators
• The Board recognises the need to monitor
changes in law and regulation, and to work
closely and openly with all relevant regulatory
and supervisory bodies. Conduit's main operating
subsidiary, CRL, is regulated by the Bermuda
Monetary Authority (BMA). The Board received
regular reports covering governmental, legal,
regulatory and supervisory matters and was kept
apprised of communications with and from
relevant bodies, in particular quarterly meetings
with the BMA, and this information was factored
into strategy and business planning.

• In June 2022, Bermuda's Minister of Economy

and Labour, The Honourable Jason P. Hayward,
JP MP, was welcomed in our offices. During this
meeting, the COO and Head of HR presented
data to the Minister around Conduit's growth and
commitment to Bermuda since inception.

• In late 2022, a successful application was made
to obtain reciprocal jurisdiction reinsurer status
in the State of Louisiana, United States.

Rating agencies
• CRL having and maintaining an AM Best Financial
Strength Rating of A– (Excellent), and a Long-
Term Issuer Credit Rating of “a-” (Excellent) is
critical to Conduit’s success and is factored into
Board decisions with respect to capital adequacy
and risk management.

• Management regularly kept AM Best apprised of
developments within CRL and fed back to the
Board the results of meetings and interactions
with AM Best.

• In December 2022, AM Best reaffirmed CRL's AM
Best Financial Strength Rating of A– (Excellent)
and a Long-Term Issuer Credit Rating of
“a-” (Excellent).

Our community and the environment
• As set out in the ESG summary on pages 30 to
35, environmental matters and the community
are a key focus for the Company.

• Board decision making is influenced by Conduit’s
commitment to achieving and maintaining net-
zero carbon and to giving back to the community
via initiatives such as the Conduit Foundation.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Board of Directors

Neil Eckert
Executive Chairman

Trevor Carvey
Executive Director and
͏icer
Chief Executive Off͏

Appointed to the Board:
7 October 2020

Appointed to the Board:
18 November 2020

Skills and experience:
Neil Eckert is Executive Chairman and an Executive
Director of CHL.

Skills and experience:
Trevor Carvey is Chief Executive Officer and an Executive
Director of CHL.

Neil Eckert is an entrepreneur with four decades of
(re)insurance industry experience and has a proven track
record in the industry having held various roles since 1980,
many of which involved starting new enterprises.

Beginning as a reinsurance broker, he rose through the
ranks to board member at Benfield, Lovick & Rees & Co.
Neil then founded Brit Insurance in 1995 and remained its
CEO until 2005, following which he served as a non-
executive director of the company until 2008. He was co-
founder and CEO of Climate Exchange PLC, and founded
Aggregated Micropower.

External directorships:
Incubex Ltd, Ebix Inc., Boutique Modern Limited,
Chalvington Management Limited, NCX Family Office,
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.

CHL Board Committee memberships:
n/a

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

Trevor has led Conduit since its launch in 2020. As well as
serving on the Board of Conduit Holdings Limited, he is a
director of CRL and chairs the Executive Committee.

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

CHL Board Committee memberships:
n/a

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Board of Directors
continued

Elaine Whelan
Executive Director and
Chief Financial Off͏

͏icer

Appointed to the Board:
14 January 2021

Skills and experience:
Elaine Whelan is the Chief Financial Officer and an
Executive Director of CHL.

Elaine is an accomplished and experienced public
company CFO who has worked in the (re)insurance
industry for over 25 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.

After qualifying as a chartered accountant, Elaine joined
Coopers & Lybrand in Bermuda in 1997.

From 2001 to 2006, she held a number of positions at
Zurich Insurance Company, Bermuda Branch, ultimately
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, is also a Director of
CRL and is a member of the Executive Committee.

External directorships:
n/a

CHL Board Committee memberships:
n/a

Sir Brian Williamson CBE
Senior Independent Director

Appointed to the Board:
18 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, a director of HSBC Holdings PLC,
where he was also Chairman of the Nomination
Committee, and a director of the NYSE Euronext and
Chairman of the Remuneration Committee.

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

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

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

External directorships:
Edenberg Trust Corporation Limited, R.J. Fleming & Co
Limited, Vice Chairman of Bergos Fleming Zurich, Director
Politeia, and Incubex Inc.

CHL Board Committee memberships:
Remuneration Committee (Chair) and Nomination
Committee.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Board of Directors
continued

Elizabeth Murphy
Independent Non-Executive
Director

Ken Randall
Independent Non-Executive
Director

Appointed to the Board:
18 November 2020

Skills and experience:
Elizabeth Murphy 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 an Executive
director of Kiln Limited, Chair of the Compensation
Committee and non-executive 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 Holding Ltd Bernina Re Ltd.

CHL Board Committee memberships:
Audit Committee (Chair) and Nomination Committee.

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 eight 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 and in recent years has also developed
a fast-growing programme management business in
Europe and the US.

Ken retired as a director of Randall & Quilter Investment
Holdings Ltd. and all of its subsidiary companies on
31 March 2021.

External directorships:
Roosevelt Road Ltd, Roosevelt Road Re Ltd, Renaissance
Capital Partners Limited, Financial Guaranty Insurance
Company Ltd Leamington Insurance Advisors Ltd
(Bermuda).

CHL Board Committee memberships:
Audit Committee, Nomination Committee (Chair) and
Remuneration Committee.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Board of Directors
continued

Malcolm Furbert
Independent Non-Executive
Director

Dr. Richard L. Sandor
Independent Non-Executive
Director

Appointed to the Board:
18 November 2020

Appointed to the Board:
26 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).

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 is a member of the Bar of England and Wales and the
Bermuda Bar.

External directorships:
Somers Corporate Services Limited.

CHL Board Committee memberships:
Remuneration Committee and Nomination Committee.

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

Richard 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.

Richard 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 has 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 not-for-profit organisations.

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

CHL Board Committee memberships:
Remuneration Committee and Nomination Committee.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Board of Directors
continued

Michelle Seymour Smith
Independent Non-Executive
Director

Greg Lunn
General Counsel and
Company Secretary

Appointed to the Board:
15 September 2021

Appointed:
3 November 2020

Skills and experience:
Greg Lunn is General Counsel and Company Secretary and
leads the compliance function.

Greg has held various industry roles in Bermuda and
London over the past 25 years, initially with the ACE
Group and later with Lancashire Holdings Limited, where
he was Group General Counsel and Company Secretary.
At Lancashire, in addition to his legal and corporate
governance work, he also had responsibility for the
internal audit function.

Greg is responsible for all legal, compliance and corporate
secretarial aspects of Conduit’s business. Greg serves on
the board of Conduit Reinsurance Limited and is a
member of the Executive Committee.

Skills and experience:
Michelle Seymour Smith has over 20 years of experience in
the insurance and reinsurance industry. During her career,
Michelle has built a reputation of making strategic
initiatives a reality and building effective teams and
operations to support sustained growth in global
organisations.

Michelle began her career with Arthur Andersen in 1995.
She went on to hold positions at Zurich Insurance Global
Energy and XL Capital Ltd. In 2004, she joined Arch
Reinsurance Ltd as Vice President, Controller. She
performed several roles at Arch Re including Chief
Financial Officer and Chief Operating Officer, building and
overseeing the financial operations of the insurance,
reinsurance and mortgage divisions and their international
subsidiary reinsurance division. She served as the Chief
Transformation Officer of Arch Capital Group Ltd until
2019, leading a global programme to grow business and
improve operational efficiency.

Michelle has been named as one of 100 Influential Women
in Insurance and Reinsurance by Intelligent Insurer. She is
a member of the Chartered Professional Accountants of
Bermuda and the Institute of Directors.

External directorships:
Transport Intermediaries Mutual Association Ltd., Bermuda
Public Accountability Board, Muuvment, Association of
Bermuda International Companies, Centennial Foundation,
Friends of Bermuda Railway.

CHL Board Committee memberships::
Audit Committee and Nomination Committee.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Executive Chairman’s introduction to corporate governance

Introduction
Since our inception in 2020, we have built an
effective governance structure that supports our
pure-play reinsurance business operating from a
single location in Bermuda. We measure corporate
governance compliance against the requirements
of The UK Code published by the UK FRC, 2018. The
Company also monitors its compliance with
applicable governance requirements under
Bermuda law and regulations.

In 2022 physical quarterly Board and committee
meetings resumed following the pandemic which
had previously prevented the entire Board from
meeting in person. Information sessions were also
held throughout the year where some directors
participated over Zoom or Teams. Feedback from
the Board performance evaluation is that the
atmosphere in the boardroom allows for open
contribution, constructive debate, candid discussion
and critical thinking, supported by good quality
written presentations.

the brokers’ view of the market;
technology and systems;

In May, the Board met for a full two days to review
Conduit’s strategy and discuss other topics of
relevance to the business, including:
• business objectives;
•
•
• Human resources;
•
• emerging risks;
•
• ESG;
• building business and brand value.

finance and investments;

investor perspectives;

The current strategy, previously approved by the
Board in 2021, covers three-to-five-year horizon that
validates and builds on the strategy we set out in
the IPO prospectus, was affirmed in 2022 by
the Board.

Dividend policy and dividend
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 AM Best A–
(Excellent) Financial Strength Rating and subject
to applicable law and regulations.

The Company expects to generate significant
returns over time for its shareholders and to
provide an ongoing and progressive dividend,
recognising that some earnings fluctuations are to
be expected. The Company is targeting a dividend
of approximately 5% to 6% of equity capital raised
at the IPO, allocated between an interim and final

distribution. On 21 February 2023, the Board
declared a final dividend of $0.18 (approximately
£0.15) per Common Share resulting in an aggregate
payment of $28.8 million. This final dividend
followed an interim dividend of $0.18
(approximately £0.15) per Common Share declared
on 26 July 2022.

Depending on Conduit’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.

During 2022, Conduit continued with on-market
purchases of the Company’s shares under a share
purchase programme. Shares repurchased during
the year will be held in treasury and the EBT to
meet future obligations under CHL’s variable
incentive schemes.

Further details of the share repurchase scheme are
set out in the Directors’ report on page 81 and in
note 18 to the consolidated financial statements
on page 131.

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 Conduit,
including results of operations and cash flows,
Conduit’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.

Opportunities and risks
We launched Conduit Re in favourable market
conditions, which support our vision to establish
Conduit Re as a leading reinsurance underwriting
franchise over the next five years. In our first two
years of operations, we have made enormous
progress towards delivering on this objective.

There are a number of uncertainties underpinning
the improvements in market conditions including,
but not limited to:
•
• economic and social inflation.

the future impact of climate change; and

We believe, as a business with a legacy-free balance
sheet, we are in a strong position to incorporate the
potential impact of these risks into our underwriting
and reserving.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Executive Chairman’s introduction to corporate governance
continued

We also need to be mindful that, although we
go to great efforts to manage the volatility in our
underlying exposures, we are in the business of
protecting our clients against uncertainty, and
consequently our underwriting results are always
subject to the vagaries of major loss events, both
natural and man made.

A full set of risk factors is set out in section 3 of the
notes to the consolidated financial statements.

Stakeholder engagement
Malcolm Furbert, charged with employee
engagement, continued his role with diligence and
enthusiasm by meeting regularly with Heather
Mello, our Head of HR, and with Stuart Quinlan,
Deputy CEO and COO.

My colleagues have continued to hold regular,
routine quarterly update meetings with CRL's
regulator, the Bermuda Monetary Authority, to keep
the regulator apprised of business progress and
other developments at CRL.

I, together with the Head of Investor Relations, and
often the CEO and the CFO, have held numerous
meetings with shareholders, in addition to hosting
quarterly investor and analyst calls. The Senior
Independent Director also participated in several
meetings with shareholders.

More information on our stakeholder engagement
is contained in the Section 172 report on page 36.

Purpose, values, strategy and culture
Our strategy reflects our business culture, our core
values and our views on risk, including emerging
risks, and includes stakeholder considerations.
These factors inform our annual business planning
cycle and the setting of risk appetite.

Our business objectives:
• Building a sustainable business in the long-term

interests of our stakeholders

• Delivering on our cross-cycle targets for

profitability and RoE

Our core values shape everything we do and play
a key role in helping us to achieve our objective of
building a reinsurance business that will stand the
test of time. We expect all directors and employees
of Conduit to consider and apply these core values
when making decisions, carrying out duties and
representing Conduit. Our culture can be
characterised as follows:
• An open and transparent approach where all
ideas are welcome, and mistakes are a part of
developing and learning.
Information sharing is a daily occurrence

•
• Communications are strong, constant and not

just top down.

• Everyone is welcome and can be themselves –
we embrace individuality and recognise that
inclusivity will not only create a positive
environment but will enhance our overall
achievements.

• We are a lean group where everyone works hard.
• Formality and hierarchy is kept to a minimum

and flexibility and responding to individual needs
is key.

• A trust-based culture rather than one of rules,

where decisions are taken quickly .

• Significant opportunities for developing skills
and careers. Potential will be identified, and
colleagues will be appointed into new roles
wherever possible and will be supported in
realising their potential through training
and coaching.

• A vibrant, fun environment where working as
a team is a given and a pleasure. Our people
like and want to work together.

• We celebrate success.
• We embrace technology.

In-camera sessions
In addition to the activities of the each of the
committees described in the respective reports
below, regular in-camera sessions of the
Independent Directors, led by the Senior
Independent Director, were held at each
regularly scheduled Board meeting without
management present.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Executive Chairman’s introduction to corporate governance
continued

Induction
All of the CHL Non-Executive Directors have been
through an induction process, covering their duties
and responsibilities as Directors of a company
whose shares are admitted to trading on the
main market of the LSE the Company has a
comprehensive induction procedure.

During 2022, the Company did not induct any
new Directors.

Feedback from the strategy days held in May
is that the sessions were highly informative and
educational, assisting the Board in gaining further
valuable insights into the business of Conduit
which will help strengthen the Board’s oversight
of the business.

The year ahead
In 2023 our governance will be focused on
supporting the execution of the strategy we have
set out to follow.

Neil Eckert
Executive Chairman
3 March 2023

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Corporate governance and compliance with the UK Corporate
Governance Code

The UK Code
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 published by the FRC
in July 2018. However, the Company has chosen to
comply (or explain non-compliance) with The UK
Code, because the Board is committed to the
highest standards of corporate governance.

Compliance statement
The Board considers that for the financial period
ended 31 December 2022, the Company has
complied with the provisions of The UK Code,
save that:
• The Company did not comply with Provision 10
of The UK Code as Neil Eckert is Executive
Chairman and was not independent at
appointment as he was a founder of the
Company. However, 75% of the Board (excluding
the Chair) are Non-Executive Directors whom
the Board considers to be independent, and the
roles of Chair and CEO 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 CEO, while 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
Senior Independent Director, Sir Brian
Williamson, the Executive Chairman and the
CEO, as set out on the Company’s website.
In one respect, the Company does not comply
with Provision 37 of The UK Code which
provides that remuneration schemes and policies
should enable the use of discretion to override
formulaic outcomes. At the time of the
Company's establishment, it was determined
that an absolute calibration to the The
Management Incentive Plan (MIP) programme
with no discretionary assessment was
appropriate in the circumstances. The MIP was
put in place prior to the IPO, with no further
awards to be made under the Remuneration
Policy approved by the shareholders in May
2022. Malus and clawback provisions apply to
the MIP programme with further details set out
in more detail on page 58.

•

Governance framework
Conduit maintains a relatively simple corporate
structure and corporate governance framework.
The Board maintains overall responsibility for
Conduit 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 Conduit’s approach to ESG,
chaired by Sir Nicholas Soames, a senior and
independent industry figure who is not otherwise
involved with Conduit as a director or officer.

The Audit Committee oversees the effectiveness
of management’s processes for monitoring and
reviewing the effectiveness of risk management
and internal control systems in relation to the
Company’s financial reporting process, further
details of which are set out on pages 53 to 57.

In relation to the day-to-day operations in Conduit’s
reinsurance business, the Board relies on a strong
Board at CRL operating company level, which
includes four independent Non-Executive Board
members (Ken Randall, Elizabeth Murphy, Malcolm
Furbert and Michelle Seymour Smith) who serve at
both the CHL Board and CRL operating company
Board level, each of whom has extensive board and
operational level experience of regulated
reinsurance 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 comprising
of the chief and senior executives.

CRL operates a strict 'three lines of defence' model
with all second-line functions (for example risk and
compliance) 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 four independent Non-Executive Directors
serve on the Board of CRL, all independent Non-
Executive Directors are encouraged to attend as
observers at any Board or Board committee
meetings across Conduit, subject to any conflict
management limitations. Conduit is committed
to being open and transparent from a governance
perspective.

Conduit has a comprehensive set of policies and
procedures aimed at bolstering governance and
compliance. Conduit's code of conduct,
whistleblowing policy and procedures, and other
compliance policies and procedures, including
policies covering anti-bribery and corruption, anti-
money laundering and anti-terrorism financing,
conflicts of interest and gifts and hospitality are
made available to staff via the Conduit intranet.
Regular compliance training is provided. Conduit

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Corporate governance and compliance with the UK Corporate
Governance Code
continued

has contracted an external independent specialist
whistleblowing service provider to enable staff
to report whistleblowing incidents, anonymously
or otherwise, over the phone or in writing via
online submission.

The Board
Conduit has a Board with a strong blend of
experience and expertise in diverse professional
backgrounds including insurance and other financial
services, accounting, regulatory, governance and
other areas. The Board has overseen and will
continue to oversee the Company’s trading and
operation as a public company.

Biographical information for each of the current
Directors of the Company, including each Director's
experience, qualifications, attributes and skills is on
pages 39 to 43.

Succession planning was discussed at Board level in
2022 and is a key topic for 2023. More information
is contained in the Nomination Committee report
on page 51.

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 that 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, Michelle Seymour
Smith, Malcolm Furbert and Dr. Richard Sandor) are
free from any business or other relationship that
could materially interfere with the exercise of their
independent judgement 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 six 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 have been and will be arranged as necessary, including in
relation to the business of the committees. All Directors receive an agenda and meeting packs in advance
of the meetings. The number of Board and committee meetings attended by each Director for the purposes
of Provision 14 of The UK Code in the year ended 31 December 2022, relative to the number of meetings
held during their time in office, was as follows:

Neil Eckert

Trevor Carvey

Elaine Whelan

Sir Brian Williamson

Elizabeth Murphy

Ken Randall

Malcolm Furbert

Dr. Richard Sandor

Michelle Seymour Smith

Board

Nomination
Committee

Remuneration
Committee

Audit
Committee

5/5
4/51
5/5

5/5

4/5

5/5

n/a

3/3

3/3
2/22

n/a

3/3

n/a

3/3

n/a

4/4

n/a

4/4

Trevor Carvey was unavailable to attend a portion of one of the Board meetings held in 2022.

1.
2. Michelle Seymour Smith was appointed to serve on the Nomination Committee on 22 February 2022.
As part of the Company’s risk management framework, Conduit 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.

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
CHL Board was invited to attend (and did attend) CRL Board-level and underwriting committee meetings,
and are provided with all minutes and records of such subsidiary board and committee meetings. The Board

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Corporate governance and compliance with the UK Corporate
Governance Code
continued

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 Conduit.
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

Ensures the effective running of
the Board and supports the CEO
in an advisory role in the execution
of the CEO's responsibilities
(including with respect to ESG
matters), makes sure that the
views of the Board and
shareholders are taken into
account, and acts as the
primary ambassador for Conduit
in respect of Investor Relations
and ESG matters.

Ensures that the Board as a whole
plays a full and constructive part
in the development and
determination of Conduit's
strategy and overall commercial
objectives, with due consideration
to Conduit's responsibilities to its
shareholders, its suppliers, clients,
customers, employees and other
stakeholders.

Shapes the culture in the
boardroom, encouraging all
directors to engage in Board and
committee meetings by drawing
on their skills, experience and
knowledge; and fostering
relationships based on trust,
mutual respect and open
communication – both in and
outside the boardroom – between
Non-Executive Directors and the
executive team.

Promotes the highest standards of
integrity, probity and corporate
governance throughout Conduit
and particularly at Board level.

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

Senior Independent Director

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.

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

Provides clear leadership, inspires
and supports Conduit's employees
in all areas of Conduit's business,
including the development of
ideas, products and operations.
Ensures that there is effective
communication by Conduit with
its workforce, including with
respect to governance matters.

Manages Conduit’s risk profile,
with the CRO and other members
of the executive, 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 Chairman, providing
support in the delivery of the
Executive Chairman’s objectives.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Corporate governance and compliance with the UK Corporate
Governance Code
continued

The evaluation did not identify any deficiencies in
the effectiveness of each Director and no concerns
were identified in respect of Non-Executive Director
independence or external time commitments. 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.

The performance evaluation will be externally
facilitated in 2023.

Workforce engagement mechanism
Malcolm Furbert acts as the Company’s Non-
Executive Director responsible for workforce
engagement. See details on page 36 of the
Section 172 statement.

Board activities
In addition to monitoring closely Conduit’s core
underwriting business, Board activities in 2022 were
focused on overseeing the transition from the start-
up phase (which necessarily concentrated on
establishing the initial business and processes,
hiring staff and building technology) to process
improvement, refinement of technology, business
growth and enhancing the application of ESG
matters. The Board received regular written and
oral progress reports from executive management
on progress in each of these areas. The Board also
participated in a session straddling two days to
review strategy considering the wider market and
risk environment. It was determined that there
would be no changes to the strategy approved in
2021, the objective of which is to promote the long-
term success of the Company. Board meetings were
held in Bermuda to approve all key actions,
documentation and agreements.

Board effectiveness
Our Board continually seeks to improve its
performance. Each year, the performance of the
Board, its committees and the individual Directors
is evaluated. An internal Board performance
evaluation, using a questionnaire and interview
approach, was conducted for the financial year
ended 31 December 2022, led by Sir Brian
Williamson, the Senior Independent Director, and
supported by the Company Secretary. The
evaluation was conducted internally via one-on-one
interviews. The evaluation raised no concerns
regarding the Board’s composition or diversity,
or how effectively members worked together to
achieve objectives. However, the Board recognises
that, somewhat uniquely, given the compressed
timeframe between establishment of Conduit and
the IPO, a number of the Non-Executive Directors
will all complete their initial three year service
period at the same time in late 2023. Consequently,
implementation of an orderly succession plan
will be a priority in 2023.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Nomination Committee report

Introduction
I noted a year ago that it was a remarkable
achievement to set up a new $1 billion reinsurance
company from scratch, with an entirely new team,
during a pandemic. Recognising that a lot has been
accomplished in a short space of time during
Conduit's start-up phase, we have had the last 12
months to see how the working Board was gelling
following the end of travel restrictions. While
pleased with the Board make-up and the way it has
worked, the Nomination Committee has recognised
that, for the next phase of Conduit's existence, there
is a need to address some gaps in Board balance. In
particular, due to the speed at which Conduit was
established, Conduit's Non-Executive Directors
were almost all appointed on the same date in 2020
and thus have served for an identical time period.
A plan is now being implemented to manage an
orderly, staggered succession.

Nomination Committee membership
The Committee members are Ken Randall (Chair),
Elizabeth Murphy, Sir Brian Williamson,
Malcolm Furbert, Michelle Seymour Smith and
Dr. Richard Sandor.

Independence and experience
All Committee members are independent Non-
Executive Directors, each with many years of
relevant experience serving as directors and/or
working in the reinsurance industry. Detailed
biographies are available on pages 39 to 43.

As Chair, I am responsible for an annual review of
the Committee membership, and I am satisfied that
the current members are each independent and
capable of carrying out the committee role and
responsibilities.

Role and responsibilities
The Nomination Committee’s duties are set out
in its terms of reference, which are available on
Conduit’s website, The duties include, but are
not limited to:
• Director induction, training and development
identifying and nominating candidates to fill
•
Board vacancies.

Details on how we performed these key
responsibilities in 2022 is set out in the remainder
of this report.

2022 meetings
The Nomination Committee is required to meet at least twice annually, or more frequently if required, to
discharge its duties. In 2022, there were three committee meetings. In addition to the members, other
individuals such as the Executive Chairman and the Head of HR attended all or part of the meetings.

Name

Ken Randall

Elizabeth Murphy

Sir Brian Williamson

Malcolm Furbert
Michelle Seymour Smith1
Richard Sandor

Appointed

18 November 2020

22 February 2022

30 November 2020

Maximum possible
meetings

Meetings attended

Michelle Seymour Smith was appointed to the Nomination Committee on 22 February 2022 and was only eligible to attend two of the three
meetings held in 2022.

Performance evaluation
The Committee reviewed the results of the Board performance evaluation for the period ending
31 December 2022 as described on page 50.

Except with respect to the coincidence of service time, the 2022 evaluation raised no concerns regarding
the Board’s composition or diversity, or how effectively members worked together to achieve objectives.

The evaluation did not identify any deficiencies in the effectiveness of each Director and no concerns were
identified in respect of Non-Executive Director independence or external time commitments.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Nomination Committee report
continued

Board and committee composition and
succession planning
As noted in my introductory remarks,
implementation of a long-term succession plan is a
priority in 2023, bearing in mind the somewhat
unique situation where almost all Conduit's current
slate of Non-Executive Directors have served
Conduit from the same appointment date. In late
2022, the Nomination Committee discussed with
the Board how succession planning would address
this situation and afford the Board an opportunity
to bring in new Non-Executive Directors with
additional skills and experience, while cognisant of
the latest applicable listing rules on diversity and
board composition.

includes meetings with the executive leadership
team, department heads and advisers, technical
briefings and office visits.

A strategy and planning session was held over two
days in May 2022. It also served as training for
Directors, as diverse topics were covered including
the future of technology in the industry, the state of
the market, stock market perspectives from the
Company’s financial advisers and emerging risks,
including environmental liabilities and global
tax reform.

The Board also attended specific training sessions
in 2022 on IFRS 17.

In addition, as Conduit moves past the start-up
phase, a succession plan for other key leadership
positions will be developed.

In the meantime, Conduit maintains a robust
emergency succession plan in place for the Board
and senior management, which was reviewed by
the Committee and updated in 2022.

Diversity and inclusion (“D&I”)
Diversity and inclusion has been a priority since the
Company’s inception. Management and the Board
believe that valuing diversity and inclusiveness is
a competitive differentiator, enabling us to achieve
our vision to create unmatched value for our
customers, colleagues, business partners and
shareholders.

The Company's D&I Policy reflects the Company’s
principles for recruitment and advancement at all
levels of the Company and underlines the fact that
the Company is committed to recruiting, retaining
and developing people with diverse backgrounds
and experiences at all levels of Conduit’s 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,
gender identity, 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, family or marital status
or nationality.

As at 31 December 2022 one-third of the Board
was female.

Priorities for 2023
In 2023 the Committee will implement succession
planning with a view to satisfying Conduit’s
medium- to longer-term succession needs at Board
and senior management levels.

Director induction and training
The Committee ensured that an appropriate and
comprehensive plan is in place for inducting new
Directors and Conduit’s leadership team. Induction
is tailored to the needs of each individual but

Ken Randall, Chair
Nomination Committee
3 March 2023

Governance

Audit Committee report

Introduction
I am pleased to present the Audit Committee’s
report for the year ended 31 December 2022, which
outlines how the Audit Committee discharged its
responsibilities during Conduit’s second year of
operations and the key topics it considered.

The main areas of focus in 2022 were monitoring
the integrity of external financial reporting and the
continued monitoring of the development of
systems, processes and the control environment.

The Committee also prioritised the IFRS 17
implementation project, developments in climate
and ESG reporting, and audit practice reforms
impacting Conduit.

Audit Committee membership
The Audit Committee membership comprises of
independent Non-Executive Directors. For the full
year 2022, the members were Elizabeth Murphy,
Ken Randall and Michelle Seymour Smith.

The Audit Committee membership is the same for
CRL, which strengthens governance and oversight
of Conduit’s main operating subsidiary.

Independence and experience
All Audit Committee members are independent
Non-Executive Directors with recent and relevant
financial experience and competence in accounting
and/or auditing, and all have competence relevant
to the reinsurance sector in which Conduit operates.
Detailed information on the Audit Committee
members’ experience and qualifications is set out
in the directors’ biographies on pages 39 to 43.

2022 meetings
The Audit Committee held four meetings during the year. Members of senior management, internal and
external auditors were invited to present at each meeting. The Audit Committee also met privately with
the external auditors and in an executive session with the CFO present. The Chair of the Audit Committee
held regular meetings with the CFO and the external and internal auditors outside of the formal
committee meetings.

Name

Elizabeth Murphy

Ken Randall

Michelle Seymour Smith

Appointed

18 November 2020

15 September 2021

Maximum possible
meetings

Meetings attended

There were no points of concern arising out of the Board’s performance evaluation regarding the
Audit Committee’s performance during 2022.

Role and responsibilities
The Audit Committee is required to carry out duties in the areas listed below for CHL and Conduit as
a whole, as appropriate:
• Monitoring and reviewing financial and narrative reporting
• Keeping under review internal controls and risk management systems
• Reviewing compliance and fraud procedures and controls
• Monitoring and reviewing the effectiveness of the internal audit function
• Advising on the appointment of the external auditor and overseeing the relationship with the external

auditor, including their independence and effectiveness

More details around how these key responsibilities were performed are set out below. The Audit
Committee’s terms of reference are available on Conduit’s website.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Audit Committee report
continued

Monitoring and reviewing financial and
narrative reporting
The Audit Committee reviewed the Company’s
quarterly trading updates, the annual audited
consolidated financial statements and the interim
unaudited condensed consolidated financial
statements for the purposes of recommending
their approval by the Board. The Audit Committee
received reports from the external auditors on the
consolidated financial statements, including an
interim review report and a year-end audit results
report. These reports were discussed with the
external auditors at the Audit Committee meetings,
both with management present and with the Audit
Committee in private session.

Throughout the year the CFO and the Audit
Committee Chair communicated and met regularly
to discuss matters related to the preparation and
presentation of Conduit's financial statements,
including the progress of the external audit.

The Audit Committee also received regular and ad-
hoc reports on the following:
• Accounting treatment and policies in respect of
business and investment activities (see pages 95
to 103)

• Loss reserving developments and the reserving

process (see page 128)

• Development and implementation of finance

systems

• Recruitment and development within the

finance team

• Accounting and financial reporting

developments, including IFRS 17 and IFRS 9 and
the related implementation project

• Finance reports from CRL including with respect
to BMA filings (via the overlap with the CRL
Audit Committee)

• Significant judgements and estimates and going

concern assessments

• Management’s assessment of fraud risk

The Audit Committee also attended training
sessions in 2022 delivered by management to the
Board on IFRS 17. The IFRS 17 training sessions
covered the key technical requirements and
accounting policy principles of IFRS 17, changes to
the presentation and disclosure of the financial
statements that will occur under IFRS 17, industry
developments and emerging practice, and
programme risks and governance.

Keeping under review internal controls and risk
management systems
The Board has ultimate responsibility for ensuring
the maintenance by Conduit of a robust framework
of internal control and risk management systems.

Monitoring and review of these systems has been
delegated to the Audit Committee. The system of
internal controls is designed to manage rather than
eliminate the risk of failure to achieve business
objectives, and can only provide reasonable, not
absolute, assurance against material misstatement
or loss.

During 2022, the Audit Committee received
quarterly reports from Conduit's CRO covering:
risks events, including control failures, and
•
commentary on the Company’s risk profile;
risk appetite and tolerance statement
compliance;

•

• capital adequacy;
• update on the establishment of the risk function

including its plans and team.

The Committee reviewed management's
assessment of the effectiveness of the risk
management and control environment and
continued to review and approve applicable policies
and arrangements. All members of the Committee
also participated in discussions on emerging risk
and were briefed on Conduit's response to specific
risks including the risk of fraud, climate risk and
cyber risk. The Committee also received updates on
the ongoing development of IT systems.

The Committee also received reports and updates
from Internal Audit on aspects of internal control
as determined in the Internal Audit Plan.

Further detail of the emerging and principal risks
affecting Conduit, including those matters that have
informed the Board’s assessment of Conduit’s
ability to continue as a going concern, as well as the
risk mitigation procedures in place to identify and
manage them, can be found in the risk disclosures
on page 103 of the Annual Report and Accounts.

Reviewing compliance and fraud procedures
and controls
The Audit Committee received regular compliance
reports from the General Counsel, covering:
regulatory interactions with the BMA,
•
regulatory reporting and updates on the
regulatory environment;
the establishment of the compliance function;
the compliance plan and its implementation;

•
•
• compliance and regulatory training;
•

roll-out of compliance policies, including anti-
money laundering, anti-bribery and financial
crime, conflicts of interest, whistleblowing,
sanctions and Conduit’s code of conduct.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Audit Committee report
continued

The Audit Committee receives reports on the
number of whistleblowing cases reported to
Conduit’s whistleblowing service, the proportion
of reports that are designated as instances of
whistleblowing, the number of substantiated cases
and summaries of the action taken. The Audit
Committee reviewed and approved updates to
Conduit's whistleblowing policy and procedure in
2022 and the Audit Committee Chair has received
training from Conduit’s third-party whistleblowing
service provider on how whistleblowing reports
raised to them will be handled.

Monitoring and reviewing the effectiveness of the
internal audit function
EY Bermuda Ltd (EY) is the Company’s outsourced
internal auditor. EY has extensive and current
relevant experience, providing outsourced and co-
sourced internal audit services to reinsurance
businesses in Bermuda and internationally and they
are considered to have the necessary skills and
resources to deliver the internal audit function
effectively. The internal auditor reports directly
to the Audit Committee.

During the year, Internal Audit have provided
updates on their risk assessment, audit plan and
management's progress in addressing findings.
The Committee reviews the audit plan, internal
audit reports and management action plans,
and makes approvals or recommendations as
applicable. The Committee also met privately
with the internal auditor.

In May 2022, the Audit Committee approved the
internal audit charter and a three-year rolling plan.
The internal audit plan was based on an updated
risk assessment. Internal Audit provided quarterly
written and oral reports to the Audit Committee.
The findings of each internal audit are reported
at the Committee’s quarterly meetings. The
Committee reviews actions recommended to
management for the improvement of internal
controls and the status of implementation of
the actions.

The Audit Committee also evaluated the
independence of the internal auditors, and no
concerns were identified. The effectiveness of
the internal audit function is kept under review
at a high level annually and will also be formally
reviewed at least every three years.

Overseeing the relationship with the
external auditor
KPMG Audit Limited (KPMG) was originally
appointed as the Company’s external auditor in
December 2020. At the Company’s 2022 AGM,
KPMG was reappointed as external auditors of
the Company until the conclusion of the 2023 AGM.
The lead external audit partner is James Berry who
was appointed at the same time as KPMG was
appointed as the Company’s first auditor in
December 2020.

The Audit Committee met with KPMG regularly
during 2022 (both in private session and with
management present) and reviewed and approved
the external audit work plan for the year ending
31 December 2022. The Audit Committee receives
reports from KPMG, which include the progress of
the audit, key matters identified and the views of
KPMG on the significant estimates and judgements
outlined below. KPMG also reports on matters such
as their observations on the Company’s financial
control environment, developments in the audit
profession, key upcoming accounting and
regulatory changes and certain other mandatory
communications.

The Audit Committee continues to monitor
developments, recommendations and legislative
proposals related to the quality and effectiveness
of the external audit and anticipates it will formally
review the effectiveness of the external audit
function every three to five years.

Auditor independence and objectivity
The Audit Committee assesses the external
auditor’s independence annually and has assessed
that they are independent. To assist in maintaining
the external auditor’s independence and objectivity,
Conduit 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 policy describes
the circumstances in which the auditor may be
engaged to undertake non-audit work for Conduit.
The Audit Committee oversees compliance with the
policy and will consider and approve requests to
use the auditor for non-audit work when they arise,
if appropriate. Except for procedures conducted by
KPMG with respect to the Company’s unaudited
condensed interim consolidated financial
statements for the six months ended 30 June 2022,
there were no instances of the external auditors
performing non-audit work, or requests to perform
non-audit work, in 2022. The non-audit services
policy is available on the Company’s website.
Implementation of the policy is reviewed annually
by the Audit Committee.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Audit Committee report
continued

Auditor reappointment
The Company is required to appoint auditors at
every general meeting of the Company at which
financial statements are presented to shareholders.
KPMG, acting as external auditor to the Company
in the Company’s second year, has advised of its
willingness to stand for reappointment in 2023.

The Audit Committee and the Board consider
KPMG to have extensive experience auditing
publicly traded reinsurance businesses. The
Committee has concluded that KPMG’s
appointment as auditors for the forthcoming year
continues to be in the best interests of the
Company and its shareholders. The resolution to
reappoint KPMG will propose that KPMG 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 Board.

Significant areas of judgement and estimation
Annually, management provides the Audit
Committee with an analysis of significant areas of
judgement and estimation in the preparation of the
consolidated financial statements. Semi-annually,
management provides the Audit Committee with
an analysis of the appropriateness of preparing the
statements on a going concern basis. As discussed
in our risk disclosures on page 103, the most
significant estimates made by management are in
relation to losses and loss adjustment expenses,
both gross and net of ceded reinsurance. Less
significant estimates are made in determining the
estimated fair value of certain financial instruments
and estimates made in determining premiums
written and earned.

Valuation of losses and loss adjustment expenses
The valuation of losses and loss adjustment
expenses, including IBNR, involves a significant
amount of judgement. As stated in our accounting
policies, it is a complex process and it is reasonably
possible that uncertainties in the reserving process
and delays in cedants reporting losses to Conduit,
together with the potential for unforeseen adverse
developments, could lead to a material change in
estimated net losses and loss adjustment expenses.

The Audit Committee receives a quarterly report
from the Company’s Reserving Actuary. The
Committee reviews the adequacy of Conduit’s loss
reserves and challenges the methodology and
judgements applied.

The Committee also receives reports from the
independent loss reserve specialist semi-annually.
The Committee was able to compare their

evaluation of loss reserves to Conduit's and
understand the differences which naturally arise
between them.

The Committee also received semi-annual reports
from the external auditors on the adequacy of the
loss reserves.

The Committee focused in particular on:
• the reserving for natural-catastrophe and large-

loss events which occurred during the year;
• the use of selected attritional reserving ratios,
given the lack of historical data for Conduit;

• the difference in management’s estimates

versus the independent loss reserve specialist,
noting that the differences are within a
reasonable range;

• the adequacy of disclosure on the uncertainties

of the loss reserve estimates.

The Audit Committee was satisfied that all its
queries were appropriately addressed and noted
that there were no material differences between
the loss reserves calculated by the Company’s
Reserving Actuary and the independent loss
reserve specialist.

The Committee was therefore satisfied that the
valuation of losses and loss adjustment expenses
was appropriate.

Fair value of certain financial instruments
The asset types Conduit is invested in are not
complex with lower estimation uncertainty in
determining fair value. The assets are highly liquid
and are of high credit quality. As disclosed in note
12, all of Conduit’s assets are Level (I) or Level (II)
securities. There are no equities, hedge funds or
derivative instruments.

Conduit’s investments are fair valued through the
income statement (“FVTPL”) to minimise changes
in accounting treatment on the adoption of IFRS 17
and IFRS 9. Conduit does not therefore have any
judgement around impairment charges.

Estimates of premiums written and earned
Our quota share policies in particular are subject
to estimates. Some management judgement is
exercised in determining the initial ultimate
premium estimate from which to establish the
recognition of gross premiums written. While
underwriting only commenced on 1 January 2021,
the policies underwritten are largely mature and
known to the underwriting team and therefore
establishing an appropriate estimate is not
deemed to be a significant risk.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Audit Committee report
continued

Going concern assessment and longer-term
viability statements
The Audit Committee reviewed and advised the
Board on Conduit’s going concern and longer-term
viability statements included in the Annual Report
and Accounts and the assessment reports prepared
by management in support of such statements. As
part of this review, the Audit Committee assessed
the methods, assumptions and judgements
underpinning the going concern assessment. The
Audit Committee was satisfied by the level of
analysis presented during the year, the related
approach taken and statements made in Conduit’s
key external reporting. More information on the
going concern and viability statements can be
found on page 95.

Annual Report and Accounts
The Audit Committee reviewed and approved
Conduit’s preliminary unaudited results issued on
22 February 2023 and drafts of the Annual Report
and Accounts together with the external auditor’s
report. The Audit Committee advised the Board
that, in its view, the 2022 Annual Report and
Accounts, taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess Conduit’s
position and performance, business model
and strategy.

Priorities for 2023
The Audit Committee’s priorities for 2023 include
the following:
• Continued monitoring of the development of

systems, processes and the control environment.

• To monitor the implementation and the

completeness of disclosures in financial reporting
for IFRS 17 and IFRS 9.

• Continue to monitor developments in climate

and ESG reporting.

• To continue to monitor developments in
corporate governance including audit
practice reform.

Elizabeth Murphy, Chair
Audit Committee
3 March 2023

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Directors' remuneration report

Introduction of Directors remuneration report
I present the Directors’ remuneration report for
2022 which consists of three sections:

1. This introduction, which explains our approach

to remuneration and summarises the key
decisions made by the Committee during
the year (pages 58 to 59).

2. Directors’ Remuneration Policy – this sets out

our Remuneration Policy, which was approved
by a binding shareholder vote at the May 2022
AGM at which 97.6% of the votes cast were
in favour (pages 60 to 69).

3. Annual Report on Remuneration – this sets out

in detail how we’ve applied our Remuneration
Policy in 2022, the remuneration received by
Directors for the year and how we will apply
the policy in 2023. This report will be put to
an advisory shareholder vote at the 2023 AGM
(pages 70 to 79).

Performance for the year under review
There continued to be a significant effort involved
in setting up Conduit for the future and building
Conduit’s book of business during 2022. The
combined impact of loss events and mark-to-
market unrealised losses on our investments has
had an impact on RoE. For 2022, RoE continues to
be negative; however, we expect to begin seeing
improvement through 2023 and beyond.

Remuneration at this stage continues to be a
reflection of Conduit’s evolution as we continue
to build and implement the business strategy
post-IPO.

Annual bonuses for 2022 were based 75% on
financial (RoE) targets, and 25% on the personal
and strategic objectives of each Executive Director.

It is the opinion of the Remuneration Committee
and the Board that the Company’s management
has done an outstanding job to continue to build
a successful business beyond the foundation year.
Management has recruited an excellent team, now
more than 50 strong, and continued to build upon
the technologically modern operating platform. At
the same time, the business has continued to build
a strong book of diversified, quality business.

The remuneration outcomes in respect of 2022
reflect these achievements, but also acknowledge
that RoE at year-end was negative, impacted by a
number of factors as noted in both the CEO report
on pages 8 to 11 and the CFO report on pages 18 to
19, including higher-than-average natural-
catastrophe losses, the Russian invasion of Ukraine,
and the impact of increased interest rates on our

invested assets which resulted in a negative mark-
to-market effect.

The Committee considered whether it was
appropriate to pay bonuses in light of the financial
element not having been achieved for 2022 and the
resulting 0% pay-out of the financial element. The
Committee determined that no additional negative
discretion needed to be applied to the personal
element pay-out. Details of the bonuses can be
found on pages 71 to 73.

As per the Remuneration Policy, up to half of any
bonus may be deferred into shares, with malus and
clawback provisions in place.

Our Executive Directors participate in our legacy
MIP, which was detailed in the IPO prospectus and
there were no additional long-term incentive awards
made to the Executive Directors during the year.
The first tranche of the bonus deferral award made
to Executive Directors and staff from their 2021
annual bonus awards will vest in March 2023.

Remuneration for 2022 and beyond
As expected, 2022 has been a transition year as
Conduit moves forward from start-up into its post-
foundation phase and the forward-looking
remuneration will continue to reflect this as the
business grows. As a non-UK incorporated
company, Conduit does not need to comply with
the requirements of the relevant provisions of the
UK Companies Act. As part of its commitment to
high standards of corporate governance, the
Committee put the Remuneration Policy to a
binding shareholder vote at the May 2022 AGM.
At this meeting, the policy was approved with
97.6% votes in favour, and therefore it is in place
for a three-year period ending with the 2024
business year. The Remuneration Policy seeks to
ensure our Executive Directors are fairly and
appropriately rewarded while ensuring alignment
with our shareholders. The policy was developed
considering market best practice and the provisions
of The UK Code.

For 2023, base salaries of the Executive Directors
will be increased by 3.0%, while the average
increase across the wider workforce is 3.7%. Pension
and benefits will remain unchanged, with pension
contributions aligned to the wider workforce.
Annual bonuses will again be based 75% on financial
targets and 25% on personal objectives. Executive
Directors will not receive the new cost-of-living
allowance that is being awarded to staff across
the wider workforce in 2023 in response to the
inflationary market impacts. Further details can
be found on pages 78 and 79.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Directors' remuneration report
continued

As mentioned in previous disclosures, the Executive
Directors participate in the legacy MIP, with no
further long-term incentive awards expected to be
granted to them over the course of the current
Policy. At present, the Company does not have an
ongoing plan under which long-term incentives
can be granted to employees. However, in 2022,
the Company commenced a review of long-term
incentive plan (LTIP) structures. It is intended that
a new LTIP will be implemented during 2023. In line
with the current Remuneration Policy, Executive
Directors will not be eligible for awards under this
LTIP under the current, shareholder-approved,
Remuneration Policy.

The Remuneration Committee takes into
consideration the views expressed by shareholders
and other stakeholders in making its decisions. In
2022, I and the Executive Chairman met with
several significant shareholders and discussed
Conduit’s remuneration.

I and the rest of the Board remain acutely aware
that we must continue to work with investors
and be responsive and balanced in all key aspects
of remuneration.

Remuneration Committee membership
I was appointed as Chairman of the Remuneration
Committee at the time of the IPO in 2020. The other
members of the Remuneration Committee are Ken
Randall, Malcolm Furbert and Richard Sandor, all of
whom are independent Non-Executive Directors.

2022 meetings
The Remuneration Committee held three meetings during the year.

Name

Sir Brian Williamson, Chair

Ken Randall

Malcolm Furbert

Richard Sandor

Appointed

17 November 2020

24 November 2020

Maximum possible
meetings

Meetings attended

Role and responsibilities
The responsibilities of the Remuneration
Committee include the following:
• Determining the policy for Directors'

remuneration and setting remuneration for the
Executive Chair of the Board, Executive
Directors and senior management including the
Company Secretary (the Executive Group).
• Reviewing the ongoing appropriateness of

workforce remuneration and related policies.
• Reviewing the ongoing appropriateness and

relevance of the Remuneration Policy.

Key activities in the year
• Established a Remuneration Policy for Executive

Directors, which was approved by the
Company's shareholders at the May 2022 AGM.

• Approved the DSBP, and initial Awards under

the Plan to staff and Executive Directors.
• Reviewed the remuneration for Executive

Directors in line with the Policy.

• Reviewed the business plan and resulting RoE

to set appropriate links to annual bonus
parameters.

• Reviewed total compensation for the

• Determining all elements of the remuneration

Executive Group.

of the Executive Group.

• Reviewed overall bonus arrangements for staff.

The Remuneration Committee’s terms of
reference, which also set out the Committee’s
reporting obligations and authority to carry
out its responsibilities, are available on the
Company’s website.

There were no points of concern arising out of
the Board’s performance evaluation regarding
the Remuneration Committee’s performance
during 2022.

Conclusion
The Committee is dedicated to an open dialogue
with our investors, and I therefore welcome views
on any part of our remuneration arrangements.

Sir Brian Williamson, Chair
Remuneration Committee
3 March 2023

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Directors' Remuneration Policy

This section sets out the Directors’ Remuneration
Policy (“Policy”), which was approved by a binding
shareholder vote at the May 2022 AGM, updated
where appropriate to reflect the passage of time.
This Policy came into effect from 1 January 2022
and it is intended that this Policy will apply for a
three-year period unless amended before then.
As a non-UK incorporated company, Conduit does
not need to comply with the requirements of the
provisions of the Companies Act 2006 and
Schedule 8 of the Large and Medium–sized
Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2008, however it has
chosen to do so voluntarily. The Policy has been
developed considering market best practice and
The UK Code, noting that as a standard listed
company it complies with The UK Code on a
voluntary basis, reflecting the Board’s commitment
to high standards of corporate governance.

The Remuneration Committee may make minor
changes to this Remuneration Policy to support its
operation or implementation (for example, for
regulatory or administrative purposes), provided
that any such change does not materially advantage
any Directors, without obtaining shareholder
approval for such changes.

Conduit’s approach to senior executive reward
(including the legacy MIP) is shaped by the
following key principles, where it is intended
to deliver:
• Balancing short- and long-term goals – provide

a package with an appropriate balance between
short- and longer-term performance targets
linked to the delivery of the Company’s business
plan and the generation of sustainable long-term
returns for shareholders.

• Shareholder alignment – ensure alignment of the

interests of the Executive Directors, senior
management and employees to the long-term
interests of shareholders.

• Competitive remuneration – maintain a

competitive package in order to attract, retain
and motivate high-calibre talent to help ensure
the Company performs successfully.
• Fairness – take an active interest in the

development of good practices to deliver fair
remuneration at all levels of the organisation.

• Performance-focused compensation –

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

In addition, the approach to senior reward
(including the MIP) is tested against the six factors
listed in The UK Code:
• Clarity – the Policy is designed to be simple and
to support long-term sustainable performance
so should be well understood by participants
and shareholders.

• Simplicity – the Remuneration Committee is
mindful of the need to avoid overly complex
remuneration structures – the executive
remuneration policies and practices are relevant
to the continued development of the business
and simple to communicate and operate.
• Risk – the Policy is designed to ensure that

inappropriate risk taking is not encouraged and
will not be rewarded. Appropriate limits are set
out in the Policy. A balance of financial and non-
financial targets is used, which is designed to be
stretching but achievable to ensure the
arrangements do not encourage excessive risk
taking. The Committee retains discretion to
override formulaic outturns. There is a significant
role played by equity in the incentive plans, with
up to half of any annual bonus deferred into
shares, the legacy MIP, and shareholding
(including post-cessation) requirements. Malus
and clawback provisions are in operation.

• Predictability – the Policy contains appropriate

caps for the different pay elements. The potential
reward outcomes are set out in the illustrations
provided, which clearly show the potential
scenarios of performance.

• Proportionality – there is a clear link between

individual awards, delivery of strategy and long-
term performance. In addition, the significant role
played by incentive/‘at-risk’ pay is designed to
ensure that poor performance is not rewarded.

• Alignment to culture – the Policy encourages
performance that is aligned to the culture of
Conduit and in accordance with accepted
behaviours and values.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Directors' Remuneration Policy
continued

Executive Director remuneration

Base salary
Purpose and link
to strategy

Operation

Base salary is a key element to recruiting, retaining and incentivising
executives of the right calibre to successfully execute Conduit’s
business strategy.

Base salaries are normally reviewed annually, with any changes usually
effective from 1 January. Exceptionally, an out-of-cycle review may be
conducted if the Committee determines it is appropriate.

When setting base salary levels, the Committee will take into account
several factors including (but not limited to):
• The Director’s role, skills and experience
• The economic environment
• Overall business performance
• Salary levels and pay conditions across the wider Group
•
• Market data for similar roles in comparable companies (including

Individual performance

reinsurance company peers)

• Changes to the size and complexity of the business

The process for salary review is consistent for all employees.

Maximum opportunity There is no maximum base salary level.

The process for salary review is consistent for all employees and increases
for the Executive Directors are normally considered in relation to the
wider salary increases across Conduit.

Higher increases may be permitted where appropriate, for example
development in role or a change in position or responsibilities.

Performance metrics

There are no formal metrics, although individual and Group performance
is taken into consideration as part of the annual review.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Directors' Remuneration Policy
continued

Executive Director remuneration

Benefits (including pension benefits)
Purpose and link
to strategy

Benefits support recruitment and retention and facilitate a healthy
workforce.

Operation

Pension benefits
Conduit’s pension schemes are based on defined contributions or
equivalent cash in lieu or salary sacrifice, subject to applicable law and
local market standards. For all staff, including Executive Directors, a cash
allowance of up to 10% of salary is paid in lieu of the standard employer
pension contribution, or a combination of pension contributions and cash
allowance, totalling 10% of salary. Any changes in the workforce pension
arrangements may be reflected in Executive Director remuneration.

Other benefits
Other benefits reflect normal market practice, are determined on a basis
consistent with all employees, and are set within agreed principles.
Benefits include, but are not limited to:
• Bermuda payroll tax and social insurance
• Medical, dental and vision insurance
• Life assurance
• Long-term disability scheme
• Gym and club membership
• Travel allowance
• Housing allowance for Bermuda-based Executive Directors

Additional benefits may be provided as the Remuneration Committee
considers appropriate and reasonable based on market practice.
Executive Directors are included in the directors’ and officers’ indemnity
insurance policy.

Maximum opportunity There is no maximum value of benefits; the value is set according to

recruitment and retention needs bearing in mind local market standards
and requirements.

Pension contributions for Executive Directors will normally be in line with
the wider workforce, currently 10% of salary.

Performance metrics

None.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Directors' Remuneration Policy
continued

Executive Director remuneration

Annual bonus
Purpose and link
to strategy

Operation

To reward the achievement of financial results and key
objectives over the financial year, which are linked to Conduit’s
strategic priorities.

To facilitate and encourage share ownership to align senior
employees with CHL shareholders through the use of deferral
into shares.

Annual bonus awards for the Executive Directors are based on the
financial performance of Conduit and the performance against
personal and/or strategic objectives of each Executive Director
during the financial year, with performance measures and objectives
set by the Committee at the beginning of the financial year.

At the end of the performance period, the Remuneration Committee
will determine the actual bonus awards for each Executive Director.
The Remuneration Committee aims to ensure that awards for
Executive Directors are based on performance viewed holistically
rather than on a formulaic outcome and has the discretion to adjust
the formulaic outcome.

Up to 50% of any bonus earned will be deferred into shares, which
normally vest over three years with one-third of the award vesting
in each of the following three years. Participants may also be
entitled to receive dividend equivalents which have accrued on
unvested shares during the vesting period, such dividend
equivalents to be paid at vesting.

Bonus awards are subject to malus and clawback provisions.

Maximum opportunity

The maximum bonus achievable for the Executive Directors is 300%
of base salary.

Performance metrics

The majority of the performance measures will be based on financial
performance (for example, RoE). The financial component will
normally comprise at least two-thirds of the overall opportunity. For
the current Policy, the Committee has set the financial component
at 75% of the overall opportunity.

A financial performance hurdle applies before any bonus is payable
in relation to the financial component, which is reviewed annually.
Where performance is deemed to be below a pre-determined
hurdle, payouts for the financial component will be nil. 25% is
payable for threshold performance.

The Committee has the discretion to make an award under the
personal performance component.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Directors' Remuneration Policy
continued

Executive Director remuneration

Shareholding requirement
Purpose and link to strategy

Operation

To ensure Executive Directors are aligned with
shareholder interests.

Each of the Executive Directors is required to build and
maintain a shareholding in the Company of 300% of salary
while in post.

The portion of any future bonuses which is paid in shares
(post-tax and vested) and other share awards will accumulate
until this requirement is met. There is a seven-year period from
the date of IPO in which to achieve compliance.

Post-cessation shareholding requirements apply which will
require Executive Directors to retain for two years following
cessation of their employment by Conduit the lower in
value of:
•

such number of shares on cessation that have a market
value equal to the shareholding guideline in place at that
time; and
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.

Maximum opportunity

Performance metrics

None.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Directors' Remuneration Policy
continued

Non-Executive Director remuneration

Fees
Purpose and link to strategy

Operation

Maximum opportunity

To provide an appropriate fee level to attract and retain
Non-Executive Directors who have a broad range of skills
and experience to oversee the implementation of
Conduit’s strategy.

Non-Executive Directors receive an annual fee in respect
of their Board appointments together with additional
compensation for further duties (for example, Board
committee membership and chairperson roles).

The fees paid are determined by reference to market data
and the skills and experience required by the Company, as
well as the time commitment associated with the role.

Fees are normally reviewed every two years, but not
necessarily increased.

Non-Executive Directors are not eligible for participation
in the Company’s incentive plans.

Travel and other reasonable expenses incurred by Non-
Executive Directors while performing their duties for the
Company are reimbursed (including any tax where these
are deemed to be taxable benefits).

Non-Executive Directors are included in the directors’ and
officers’ indemnity insurance policy.

The amount of any remuneration payable to Non-Executive
Directors shall be determined by the Board (excluding the
Non-Executive Directors).

An aggregate remuneration limit applies under the Company
Bye-laws and shall not exceed $1.3 million per annum (unless
otherwise approved by the shareholders).

Performance metrics

None.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Notes to the Director's Remuneration Policy

Performance targets
The Committee aims to ensure that performance
targets for the annual bonus awards to Executive
Directors are closely aligned to Conduit’s short-
term and long-term objectives. Each year, the
Committee reviews and selects the most
appropriate performance measures, considering
the key priorities of Conduit at the time over both
the short and long term.

The measures and their weightings may change
from year to year to reflect the needs of the
business.

Details are included in Conduit’s Annual Report and
Accounts each year, subject to limitations with
regards to commercial sensitivity for the annual
bonus (where general terms will be provided), and
the full details disclosed following the end of the
financial year in Conduit’s next Annual Report and
Accounts, again, subject to limitations with regards
to commercial sensitivity for the annual bonus
(if appropriate).

Malus and clawback
The Remuneration Committee will have the
discretion to reduce a bonus award (malus) or
require repayment of a bonus award (clawback)
where it considers that there are exceptional
circumstances. Such exceptional circumstances
are limited to:
• material misstatement of results, financial

or otherwise;

• material breach of any post-termination

•

employment covenants; or
fraud or a financial criminal act, which affects
Conduit 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.

Committee discretions
The Committee operates under the powers it has
been delegated by the Board. The Committee
operates the incentive plans in accordance with the
plan rules and applicable legislation where relevant.
Within the incentive plans, the Committee retains
a number of discretions to ensure effective
operation of the plans. These discretions are
standard market practice and include (but are
not limited to) the following:
• Selecting the participants in the plans.
• Determining the timing of payments/grants

of awards.

• Determining the quantum of awards and/or

payments (within the limits set out in the Policy).

• Determining the choice of (and adjustment of)
performance measures and targets for each
incentive plan in accordance with the Policy
and rules of each plan.

• Determining the extent of pay-out based on the

assessment of performance.

• Overriding formulaic annual bonus outcomes,

taking account of overall or underlying
Company performance.

• Determining whether and to what extent

dividend equivalents should apply to awards.
• Determining whether malus and/or clawback
shall be applied to any award in the relevant
circumstances and, if so, the extent to which
they shall be applied.

• Making appropriate adjustments required
in certain circumstances, for instance for
changes in capital structure (or any similar
corporate event).

• Application of the holding period.
• Determining good leaver status for incentive
plan purposes and applying the appropriate
treatment.

• Agreeing to early payment of deferred bonuses
to Executive Directors on an exceptional basis.
• Undertaking the annual review of weighting of
performance measures and setting targets for
the annual bonus plan from year to year.

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.

If an event occurs that results in the annual bonus
plan performance conditions and/or the targets
being deemed no longer appropriate (e.g. material
acquisition or divestment), the Committee will have
the ability to adjust appropriately the measures
and/or targets and alter weightings, provided that
the revised conditions are not materially less
challenging than the original conditions. In addition,
the Committee may exercise its discretion to make
other non-material decisions affecting the Executive
Directors’ awards in order to facilitate the plans.

Any use of the above discretion would, where
relevant, be explained in the Company’s annual
report on remuneration of Directors.

Legacy arrangements
For the avoidance of doubt, any commitments
entered into by Conduit prior to the approval and
implementation of the Policy outlined above may be
honoured, even if they are not consistent with the

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Notes to the policy table
continued

policy prevailing at the time the commitment
is fulfilled.

This includes the MIP, which was in place prior to
this Policy. Details of this plan can be found on page
37 of the 2020 Annual Report and Accounts. This
may also include commitments to future Executive

Directors where the terms were agreed prior to
(and not in contemplation of) promotion to
Executive Director, which includes satisfying awards
of variable remuneration based on the terms agreed
at the time the award was granted.

Illustration of the policy
The charts below set out the potential values of the remuneration package of the Executive Directors
for 2023 under various performance scenarios.

Notes
• Minimum: Fixed pay only (salary, benefits

and pension).

• Target: Fixed pay and annual bonus at 50%

of maximum.

• Maximum: Fixed pay and maximum achievable

On 18 November 2020, Neil Eckert and Trevor
Carvey each entered into service agreements with
CHL, which have since been transitioned to
agreements with CSL. On 13 January 2021, Elaine
Whelan entered into a service agreement and was
appointed as an Executive Director and the CFO.

annual bonus.

• Salary represents annual for 2023.
• Benefits have been included based on the
actual 2022 value of benefits (including
housing allowances).

• Pension represents the value of the annual
pension of 10% of salary contributed by
the Company.

As a legacy arrangement, the MIP is excluded and
no scenario showing maximum with share price
growth on a long-term incentive plan is included as
no further awards of a long-term nature for
Executive Directors is provided for in the Policy.

Service agreements – 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, per the terms of their
service agreement, 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 agreements 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 (which would be
considered separately in the appropriate
circumstances), 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.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Notes to the policy table
continued

In some cases, an Executive Director may be
determined a good leaver. Good leavers may
receive an annual bonus payment, which will
normally be subject to the satisfaction of the
relevant performance criteria tested at the normal
date and, ordinarily, the outcome will be calculated
on a time pro-rata basis to date of departure. The
Committee retains discretion on whether the whole
bonus payable is paid in cash, or whether part of it
is deferred either in cash or shares.

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.

In the event of a change of control or similar event,
awards may vest early subject to performance and,
normally, any bonus entitlement would be subject
to prorating on a time apportioned basis.

The Committee may at its discretion determine that
awards shall not be subject to time prorating or be
subject to prorating to a lesser extent if it considers
it appropriate in the circumstances. Alternatively,
following an internal reorganisation which results in
a change of control, awards may be rolled over into
awards in the acquiring company.

Service agreements – 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.

Director

Elizabeth Murphy

Ken Randall

Malcolm Furbert

Sir Brian Williamson

Richard Sandor

Michelle Seymour Smith

Date of Appointment

18 November 2020

26 November 2020

15 September 2021

Succession planning for Board positions is discussed on page 48.

Expiry of first three-year term1
18 November 2023

18 November 2023

26 November 2023

15 September 2024

Recruitment of Directors – approach
to remuneration
Consistent with best practice, remuneration
packages for any new appointments to the Board
and senior employees (including those promoted
internally) will be set in line with the Policy which
remains unchanged.

Committee may consider it appropriate to pay
reasonable relocation or incidental expenses,
including payment of reasonable legal expenses.
This will ordinarily be for a reasonable but fixed
period of time and will be disclosed on
appointment. Pension will normally be in line
with the wider workforce.

In setting base salaries for new Executive Directors,
the Committee will consider the individual’s level
of skills and experience. Where it is appropriate to
offer a below market-salary on initial appointment,
the Committee will have the discretion to allow
phased salary increases over a period of time for
a newly appointed Executive Director up to an
appropriate salary for the appointment, even
though this may involve increases in excess of
those awarded to the wider workforce.

Benefits will be offered in line with the Policy table.
For both external and internal appointments, the

Annual bonus will be in line with the Policy table
and will be prorated in the year of joining to reflect
the period of service. In setting the annual bonus,
the Committee may set different performance
metrics (to those of other Executive Directors)
in the first year of appointment.

For external appointments, the Committee
recognises that it may need to provide
compensation for forfeited awards from the
individual’s previous employer. To the extent
possible, the design of any buyout will be made
on a broadly like-for-like basis and shall be no more

Conduit Holdings Limited Annual Report and Accounts 2022

Broader employee context – consideration of
employment conditions elsewhere in Conduit
In accordance with the Committee’s terms of
reference, when setting remuneration for Executive
Directors and the Executive Chairman, the
Committee reviews the pay and conditions across
Conduit. Conduit aims to provide a market
competitive package to all employees and the
Committee considers executive remuneration in
the context of the wider employee population.

The Policy for Executive Directors is weighted more
towards variable pay than for other employees, with
a greater part of their pay therefore at risk to them
and conditional on the successful delivery of
Conduit’s business strategy. The operation of the
bonus scheme for the Executive Directors is
consistent with Conduit’s other senior employees.
Bonus pools are determined based on financial
performance against a target (reviewed annually).
Arrangements tailored to roles and responsibilities
are operated for selected positions. Bonuses for
more junior employees are calculated using a more
formulaic approach.

While employees are not directly consulted on
matters of remuneration policy for Executive
Directors, the Committee liaises with the Head of
HR to ensure that there is an appropriate level of
consultation between HR and Conduit's employees
on remuneration matters. The results of any
employee feedback, whether direct feedback or as
part of the annual employee engagement survey
process, is reported to the Committee.

Governance

Notes to the policy table
continued

generous than the terms of the incentives they are
replacing, taking into account the performance
conditions attached to the vesting of the forfeited
incentives, the timing of vesting and the likelihood
of vesting. In addition, it may be necessary to make
an initial forward-looking LTIP award.

Conduit does not currently operate an LTIP under
which future grants can be made to Executive
Directors. Although not subject to the requirements
of the Listing Rules as a standard listed company to
seek shareholder approval for an LTIP in which
Executive Directors may participate (or which may
involve the issue of new shares), it would in practice
seek such approval. Therefore, the Committee may
also use the flexibility provided (being best practice
rather than a requirement) under the Listing Rules
to make awards as provided for under Rule 9.4.2 (2)
without prior shareholder approval.

For an internal appointment, any variable pay
element or benefit awarded in respect of their
prior role may be allowed to continue on its
original terms.

The terms of appointment for a new Non-
Executive Director will be in accordance with the
Policy for Non-Executive Directors as set out in the
Policy table.

Executive Directors’ external appointments
Executive Directors may accept external
appointments as Non-Executive Directors of other
companies, as long as the companies concerned are
not competitors of Conduit, and the appointment
will not adversely affect the performance of the
Executive Director for the Company, and with the
specific prior approval of the Board in each case.
Any fees receivable may be retained by the
Executive Director concerned.

How shareholders’ views are taken into account
The Committee considers the views of shareholders
when reviewing the remuneration of Executive
Directors and other senior executives, and takes
into account published remuneration guidelines and
the specific views of shareholders and proxy
agencies. The Committee will consult with the
Company’s key shareholders when considering
significant changes to the implementation of the
Policy and when the Policy is being reviewed
(typically ahead of an AGM binding vote on the
Policy). The Committee will consider shareholder
feedback received before and after an AGM. The
Committee values feedback from its shareholders
and seeks to maintain a continued, open dialogue.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Annual report on remuneration

This section summarises the Directors’ remuneration
for the period ending on 31 December 2022 and
how the policy will be implemented for the year
ahead. This report on remuneration together
with the Chairman’s statement, as detailed on
pages 58 to 59, will be put to an advisory vote
at the 2023 AGM.

The following sections in respect of Directors’
remuneration have been audited by KPMG
Audit Limited:
• Single figure of remuneration
• Non-Executive Director fees
• 2023 annual bonus payments in respect of 2022

performance

• Deferred bonus awards
• Directors’ shareholdings and share interests

Executive Directors’ single figure of remuneration
The table below sets out the total remuneration (in $’000) for Executive Directors for the financial period
ending 31 December 2022.

Executive Director

Year

Salary

Benefits3

Neil Eckert

2022 $546

2021

$530

Trevor Carvey

2022 $824

Elaine Whelan1

Mark Heintzman2

2021

$800

2022 $603

2021

$553

2022

2021

$51

$329

$318

$243

$213

$55

Pension or
payment
in lieu4

$14

$82

Annual
bonus5

$307

$919

$464

$88

$1,443

$60

$395

$56

$1,069

$16

LTIP6 Other

Total fixed
remuneration

Total variable
remuneration

Total
remuneration

$561

$545

$1,235

$1,206

$906

$822

$122

$307

$919

$464

$1,443

$395

$1,069

$868

$1,464

$1,699

$2,649

$1,301

$1,891

$122

Notes to single figure table
1.
2.

Joined the Board on 14 January 2021. For 2021, disclosures were prorated for time in employment.
Left the Board on 13 January 2021. For 2021, disclosures were prorated for time in employment. In accordance with the leaver terms outlined
on page 65 of the 2021 Annual Report and Accounts.
Benefits for Bermuda-based Executive Directors comprise Bermuda payroll taxes (employee obligations paid by the Company), Bermuda social
insurance (employee obligations paid by the Company), medical, dental and vision coverage (employee obligations paid by the Company), life
insurance (employee obligations paid by the Company), housing and other allowances paid or to be paid by CHL in line with standard market
practice. Benefits for Neil Eckert, who is UK-based, are a reflection of the annual well-being/gym allowance paid; there are no additional benefits
under his terms and conditions.
The Executive Directors’ pension provision 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. For 2021, the amounts paid also included any back-dated pension
contributions owed for services in 2020 when Conduit schemes had not yet been set up. Neil Eckert is on a split employment contract to
delineate his UK and Bermuda duties. Therefore, pension benefit for Neil is a reflection of his UK contractual benefit requirement; there are no
Bermuda-based benefits which he is eligible for under his terms of employment.
Executive Director bonus awards are stated as the full value of the bonus award; up to 50% of bonuses awarded are payable as a deferred share
award of an equivalent value.

6. Other than the legacy MIP, Executive Directors do not currently participate in any LTIP. Details of the MIP can be found on pages 75 and 76.

No awards vested under the MIP during the year.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Annual report on remuneration
continued

The following chart summarises the above disclosed remuneration of each Executive Director for 2021
and 2022:

Annual bonus
Following the approach that was set out in the 2021 Annual Report and Accounts, annual bonus awards for
the Executive Directors were based on the financial performance of Conduit and the personal contributions
of each Executive Director, with the financial component making up 75% of the overall opportunity and 25%
based on personal contribution and/or meeting strategic objectives. The financial measure for 2022 was
RoE. The Remuneration Committee determined the actual bonus awards for each Executive Director, based
on the following criteria.

Financial Performance (75%)

RoE

Threshold

5.7 %

Target

8.7 %

Maximum

13.7 %

Actual

(9.1) %

Financial
element

0 %

Executive Directors’ performance objectives (25%)
Each of the Executive Directors was evaluated against their performance objectives for the year.

Neil Eckert
• Effective leadership
and management of
the Board of
Directors

• Development of the

investor relations and
general business
strategy

• Advocate for

Conduit’s ESG
strategy

Detailed objectives
Effectively perform the duties of the
Chairman’s role, primarily achieved
through overseeing the business and
investor relations strategy plus managing
the Board of Directors.

Assessment
Despite being primarily based in the
UK, Neil has provided valuable
oversight and input into the
continued growth and development
of Conduit’s Investor Relations
strategy and relationships.

Perform a leading role in promoting ESG
principles across the business.

Support the CEO to ensure the efficient
operation of Conduit.

Neil has played a critical role in
partnering with internal stakeholders
to progress Conduit’s ESG initiatives
and developing ways for ESG
principles to be incorporated into the
way we work at Conduit.

As co-founder, Neil continues to make
valuable contributions to the
Company and continues to provide
guidance to the executive group and
the Board.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Annual report on remuneration
continued

Trevor Carvey
• Effective leadership
and management of
the senior executive
team and Group
• Development of the
general business
strategy
Incorporate ESG
principles into the
business

•

Detailed objectives
Effectively perform the duties of the
CEO role: managing the business in line
with the strategy and business plan,
participation in relevant Committee
meetings including leading the executive
team and making recommendations to
improve business operations.

Lead the executive team, ensuring they
are all contributing to business strategy
growth and development, including
fostering strong relationships with
our investors.

Perform a leading role in promoting ESG
principles across the business.

Elaine Whelan
• Effective leadership
and management of
the finance and
investments and
treasury functions for
Conduit

Effectively perform the duties of the
CFO role: managing production of
financial reports which are required as a
public company, participation in relevant
Committee meetings including making
recommendations to improve capital
efficiency and risk-adjusted returns.

• Contribution to the
general finance and
investment strategies
Incorporation of ESG
principles into the
investment portfolio

•

Demonstrate leadership and
management of the finance team.

Manage Conduit’s investment portfolio
while working in conjunction with the
investment committee and CEO.

Perform a leading role in promoting
ESG principles within the investment
portfolio. Manage our rating agency
relationships, update the CEO on matters
which will get rating agency attention
and recommend action/communication.

Contribute, as a member of the
executive team, to the efficient operation
of Conduit.

Assessment
This year, Trevor has been able to
further focus his efforts on his
oversight and management of the
business in his role as CEO, having
handed over the role of CUO to Greg
Roberts during the year. This has
ensured that Trevor has been able to
focus more valuable time managing
key investor and stakeholder
relationship engagement.

Trevor has led Conduit through
another successful growth year, and
the business team has further
developed a diverse book of business
to support the business strategy.
Trevor and his executive group have
worked tirelessly to ensure that
Conduit is well positioned for the
current market cycle.

Elaine continues to play a key role in
leading the finance team and all
related aspects of finance systems
build and integration to support the
business and ensure timely and
accurate financial reporting.

Elaine has continued to consider ESG
principles around Conduit’s
investment strategy and portfolio
while also managing the portfolio
through volatile markets.

Elaine is a valued member of the
Conduit executive team, working
collaboratively with the executive
team to ensure efficient business
management.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Annual report on remuneration
continued

As a result of the performance assessment outcomes, the Committee determined bonuses for the Executive
Directors as follows:

Neil Eckert

Trevor Carvey

Elaine Whelan

Financial
element pay-out
(% of weighted
element)

Personal
element pay-out
(% of weighted
element)

Actual bonus
pay-out (% of
maximum)

150.0

175.0

19.0

22.0

Bonuses are subject to a maximum of 300% of base salary. Up to 50% of bonuses awarded are 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). These
awards vest under the terms defined in the scheme rules, over three years with one-third of the award
vesting (including dividend equivalents) in each of the following three years. The Committee considers this
to be an appropriate structure with the deferral serving as a retention mechanism over the three-year
period. Deferral over three years is also more in line with the expected duration of Conduit’s reserves.

Actual bonus
pay-out
(% of
maximum)

Maximum
opportunity
(% of salary)

Actual bonus
pay-out
(% of salary)

300

Cash bonus
paid,
$'000
(50%)

Bonus
deferred into
shares, $'000
(50%)

153.5

231.7

197.7

153.6

231.8

197.7

Outcome
($'000)

307.1

463.5

395.4

Neil Eckert

Trevor Carvey

Elaine Whelan

Long-term incentive plan
As previously disclosed, the Executive Directors participate in the legacy MIP scheme, which was detailed in
the IPO prospectus and subsequent Annual Report and Accounts. The MIP is currently Conduit’s only long-
term share-based incentive plan. Details of the plan can be found on pages 75 to 76.

No awards under the MIP vested in the year under review.

Payments for loss of office
No Executive Director left the employment of Conduit during the year under review.

Payments to past Directors
No payments were made to former Directors during the year.

Non-Executive Directors
The Non-Executive Director fees have been determined in accordance with the Remuneration Policy set out
on page 65.

The Non-Executive Directors’ basic fee is $75,000 per annum, with additional annual 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). The Non-Executive Directors do
not participant in incentive schemes.

There were no Non-Executive Director appointments during 2022.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Annual report on remuneration
continued

For the year ended 31 December 2022, under the terms of their appointments the Non-Executive Directors
of CHL were paid the following fees:

Aggregate fees paid (including in respect of CRL) $’000
Non-Executive Director

Sir Brian Williamson

Elizabeth Murphy

Ken Randall

Malcolm Furbert

Dr. Richard Sandor
Michelle Seymour Smith1,2
Total

2022

$130

$140

$155

$130

$105

$128

$788

2021

$130

$140

$155

$130

$105

$31

$691

1.
2.

For 2021, fees were prorated from 24 September 2021, the date of appointment.
For 2022, fees include prorated fees for additional Board Committee appointment (Nomination Committee) with effect from 22 February 2022.

The aggregate remuneration paid for the year to 31 December 2022 by way of fee for all the Non-Executive
Directors was $787,813 made up of $687,813 in respect of CHL and $100,000 in respect of CRL.

Directors’ shareholdings
Details of the Directors’ interests in shares are shown in the following table. Executive Directors are required
to build and retain a holding of the Company’s shares equivalent to at least 300% of their base salary.

Details of awards under the DSBP
As previously disclosed, there is no LTIP in place that Executive Directors can participate in;, however, up to
50% of an Executive Director's annual bonus is deferred into shares under the DSBP. Details of the 2022
awards, from the 2021 annual bonus for the Executive Directors, are below.

Neil Eckert

Grant date
25-Mar-221

Trevor Carvey

25-Mar-221

Elaine Whelan

25-Mar-221

Awards held
at 1 Jan 2022

Awards
granted
during the
year

Awards
vested
during the
year

Awards
exercised
during the
year

Awards held
at 31 Dec
2022

95,726

150,253

111,371

95,726

150,253

111,371

The vesting dates for the DSBP awards are subject to the Company being out of a closed period and are as follows:
2022 award – vests 33.33% per year over a three-year period, being 25 March 2023, 25 March 2024 and 25 March 2025.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Annual report on remuneration
continued

Shareholding

Director
Neil Eckert4
Trevor Carvey

Elaine Whelan

Beneficially
owned as at
1 Jan 2022

Beneficially
owned as at
31 Dec 2022

597,112

669,657

180,000

65,950

295,630

153,053

Share awards
held – deferred
bonus
(vested1)
-

Share awards
held – deferred
bonus
(unvested2)
95,726

Guideline % of

base salary Guideline met3
Yes

300%

150,253

111,371

300%

1.
2.

No awards under the DSBP vested during 2022.
Share awards under the DSBP are calculated as up to 50% of the annual bonus award, 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. See page 74 for details.

3. As at 31 December 2022, Neil Eckert met the shareholding requirement set for Executive Directors. The other Executive Directors (Trevor Carvey

and Elaine Whelan) have seven years from appointment to build their shareholdings in order to meet the requirement.

4. Neil Eckert's beneficially owned shares includes 35,873 shares owned by his spouse, Nicola Eckert.

Non-Executive Director

Sir Brian Williamson

Elizabeth Murphy

Ken Randall

Malcolm Furbert

Dr Richard Sandor

Michelle Seymour Smith

Beneficially
owned as at
1 Jan 2022

Beneficially
owned as at
31 Dec 2022

Share awards
held – deferred
bonus1
(vested)

Share awards
held – deferred
bonus1
(unvested)

15,000

55,000

8,000

15,000

20,000

15,000

55,000

8,000

15,000

20,000

N/A

Non-Executive Directors do not receive an annual bonus and therefore do not participate in the DSBP.

A share incentive plan, the MIP, was put in place prior to Admission 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 Conduit from Admission. The table below sets out the respective MIP Share allocations for each of the
Executive Directors at 31 December 2022:

Name

Neil Eckert

Trevor Carvey
Elaine Whelan1
Total

USD MIP
Shares

45,000

30,000

5,000

80,000

GBP MIP
Shares

Percentage
of MIP

45,000

30,000

5,000

80,000

45.0%

30.0%

5.0%

80.0%

Elaine Whelan’s MIP award is in the form of a nil-cost option.

Success in the MIP will be measured by share price performance and investor returns, and the MIP
arrangements reflect these key metrics. The MIP was facilitated by the subscription for shares in CML
(a direct subsidiary of CHL, which is an intermediate holding company of CRL). Under the MIP, Executive
Directors and other senior managers invited to participate subscribed for shares or were issued nil-cost
options in CML (“MIP Shares”). Half of the MIP Shares are denominated in sterling (“GBP MIP Shares”)
and half in US 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 time, the MIP Shares will be automatically exchanged for common 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
(the “Growth”) (7.5% of the Growth based on calculations in sterling for the GBP MIP Shares and 7.5% of the
Growth based on calculations in US dollars for the USD MIP Shares).

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Annual report on remuneration
continued

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%. 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% 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 have been exchanged will not be exchanged
and will automatically exchange at the next anniversary date on which the Performance Condition is
satisfied. 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% of Growth for each of the
USD MIP Shares and the GBP MIP Shares).

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. MIP Shares are subject to customary
leaver provisions and malus/clawback principles.

Performance graph and table
This graph shows the value of £100 invested in Conduit Holdings Limited compared with the value of FTSE
250 (excluding Investment Trusts) since Admission. This index has been selected as it comprises companies
of a comparable size and complexity and provides a good indication of the Company’s relative performance.

CHL relative to FTSE 250 (2/12/20–31/12/22)

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Annual report on remuneration
continued

CEO single figure of remuneration
The table below shows the pay information of our CEO (in $’000).

CEO total remuneration

Actual bonus as a % of maximum

Actual share award vesting as % of the maximum

2022

$1,699

19%

N/A

2021

$2,649

59%

N/A

2020

$606

N/A

Percentage change in CEO remuneration
Given Conduit was only incorporated on 7 December 2020 and was listed for less than a month in 2020
following the IPO, a year-on-year comparison in remuneration for 2020 versus 2021 is of limited use. Market-
loss events and mark-to-market unrealised losses on our investments have had a negative impact on CEO
remuneration in 2022 as shown in the above table.

Relative importance of the spend on pay
The table below shows the Company’s expenditure on employee pay compared to distributions to
shareholders for the period under review. Given that the Company was only incorporated on 7 December
2020 and the period of listing for 2020 was only three weeks, no comparison data for 2020 is shown.

Distributions to shareholders

Total employee pay

2022
$m

$59.3

$22.3

2021
$m

$29.7

$19.0

Percentage
change
%

99.7 %

17.4 %

CEO pay ratio
The majority of our employees are based in Bermuda, with fewer than 250 employees globally. As a result,
we are not required to publish a CEO pay ratio.

External advisers
The Committee can seek independent external advice if it deems it appropriate to do so. No such advice
was sought in 2021. However, in early 2022, the Committee appointed specialist remuneration advisers at
Alvarez & Marsal Taxand UK LLP ("A&M"), a firm with no other connection to the Company or individual
directors. A&M is a member of the Remuneration Consultants’ Group and is a signatory to its Code of
Conduct, requiring the advice provided to be objective and impartial. Based on the above, the Committee
is comfortable that the advice provided was independent. During 2022, $65,411 was paid to A&M on a time
and materials basis.

Statement of shareholding voting
At the 2022 shareholder AGM, the first Policy and Directors’ Remuneration Report was submitted to
shareholders. Disclosure of the voting results at the AGM is presented below.

For

Against

Total

Abstentions

Vote to approve 2021 Annual
Report on Remuneration
(at the 2022 AGM)

Vote to approve 2022-2024
Remuneration Policy
(at the 2021 AGM)

Total number

of votes % of votes cast

132,758,002

22,914

132,780,916

1,450,000

99.98

0.02

100.0

131,008,002

3,222,914

134,230,916

97.60

2.40

100.0

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Annual report on remuneration
continued

Remuneration for 2023
We disclose here the remuneration approach we have implemented for Executive Director and senior
management remuneration in 2023.

Impact of inflationary environment on employees
Management have modelled various scenarios on how the impact of inflation on our employees can be
minimised. Management have approved a fixed-term cost-of-living allowance ("COLA") for our staff,
excluding Executive Directors. In determining the appropriate level for the COLA, management's focus was
to ensure that those with the greatest need (i.e., those at the lower end of the salary scale) received the
greatest assistance.

While the COLA is not intended to be permanent, it will be subject to review in 12 months' time, ahead of the
determined end-date, to evaluate if the circumstances within the market have changed, resulting
in an extension or termination of the COLA, or its replacement by another mechanism.

Salary increases across Conduit
A standard salary increase of 3.0% was applied to Executive Directors when setting the 2023 salaries.
Across the wider workforce for Conduit, the average increase is 3.7%, including adjustments for promotions
or market alignment. Additionally, the wider workforce are eligible to participate in the cost-of-living
allowance which is noted in more detail below, and Executive Directors are not eligible for this additional
allowance. When accounting for annual salary and the cost-of-living allowance, the average increase in fixed
pay across the wider workforce is 5.2%.

All salary increases are with effect from 1 January 2023 and for Executive Directors are as follows:

Executive Director

Neil Eckert
Trevor Carvey1
Elaine Whelan

2023 salary

2022 salary

$562,277

$545,900

$848,720

$824,000

$620,627

$602,550

Trevor Carvey's 2022 salary has been restated from the 2021 report statement to accurately reflect the salary awarded for 2022.

Housing allowances
Housing allowances for the Bermuda-based Executive Directors remain unchanged from the prior year and
are as follows:

Executive Director

Trevor Carvey

Elaine Whelan

2023

2022

Monthly
housing
allowance

Annual
housing
allowance

Monthly
housing
allowance

Annual
housing
allowance

$17,500

$210,000

$17,500

$210,000

$10,000

$120,000

$10,000

$120,000

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Annual report on remuneration
continued

Bonus target and maximum parameters
Current bonus target and maximum opportunities for the senior executives also remain unchanged from the
prior year. They are as follows:

Executive Director

Neil Eckert

Trevor Carvey

Elaine Whelan

2023

2022

Bonus target

Maximum
bonus

Bonus target

Maximum
bonus

150%

300%

150%

300%

For the 2023 bonus scheme for Executive Directors, 75% will relate to financial performance based on RoE
and 25% will relate to personal performance aligned to key strategic objectives. The target RoE generated
by the annual business plan process is considered when setting the appropriate targets for calculating the
financial element of target bonuses, with actual bonus payments calculated subject to a range of RoE levels.
A minimum RoE financial performance hurdle applies before any bonus is payable. The Remuneration
Committee believes that these targets are suitably challenging for Conduit’s operations. Details of the
targets will be disclosed retrospectively in next year’s report.

Up to half of any bonus award will be deferred into shares. Consistent with best practice, malus and
clawback provisions will be operated at the discretion of the Remuneration Committee.

Other benefits
Other market-typical benefits for Executive Directors working in Bermuda have been provided, including
normal health and welfare benefits, travel allowances and the Company’s payment of the employee’s
obligations for Bermuda payroll taxes and social insurance.

Pension
The Executive Directors’ pension provision for 2023 is aligned with 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.

Long-term incentives
Executive Directors participate in the legacy MIP, with no new long-term incentive awards to be granted
in 2023 in line with the approved Remuneration Policy which is in effect through 2024.

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Directors' report

The Directors of Conduit Holdings Limited present
their report for the year ended 31 December 2022.
This report includes the additional information
required to be disclosed under the Disclosure and
Transparency Rules of the Financial Conduct
Authority. Certain information included in the
Strategic Report, the Corporate Governance report,
the Audit Committee report, the Nomination
Committee report and the Directors’ Remuneration
report are incorporated by reference into the
Directors’ report in addition to the following topics.

Overview
Conduit Holdings Limited was incorporated in
Bermuda on 6 October 2020 under registration
number 55936 and has three subsidiaries
incorporated in Bermuda: Conduit MIP Limited,
an incentive-related entity (registration number
56057), Conduit Reinsurance Limited, the main
operating company of Conduit (registration number
55937), and Conduit Services Limited, a services
company (registration number 56189). Conduit
Reinsurance Services Limited is a wholly owned
services company registered in England
(registration number 12947450).

On 7 December 2020, all of CHL’s common shares
were admitted to the standard listing segment of
the Official List of the UK Financial Conduit
Authority and admitted to trading on the LSE’s
main market for listed securities.

Principal activity
Conduit’s principal activity, through its main
operating subsidiary Conduit Reinsurance Limited,
is to provide reinsurance products and services to
its clients worldwide.

Principal risks and financial internal controls and
risk management
Conduit’s principal risks and a description of the risk
management framework and governance are set
out in the ERM summary on pages 23 to 28;
information regarding financial internal controls and
risk management is set out on page 54.

Board of Directors
The Directors of the Company who served during
the financial year and through to the date of this
report are listed on page 48.

Biographies are set out on pages 39 to 43.

Dividends
On 26 July 2022, the Board declared an interim
dividend of $0.18 (approximately £0.15) per
Common Share, resulting in an aggregate payment
of $29.6 million.

On 21 February 2023, the Board declared a final
dividend of $0.18 (approximately £0.15) per
Common Share resulting in an aggregate payment
of $28.8 million.

Insurance and indemnification
Conduit purchases insurance to cover Directors and
Officers against their costs in defending themselves
in civil proceedings taken against them in that
capacity and in respect of damages resulting from
the unsuccessful defence of any proceedings.

The bye-laws of the Company also provide that the
Company shall, to the extent permitted by law,
indemnify the Directors in respect of their acts and
omissions and that the Company shall advance
funds to Directors for their defence costs. The
indemnity provisions set out in the bye-laws were
in force during the financial year. Insurance and
indemnity arrangements will not provide cover
where the Director has acted fraudulently
or dishonestly.

Recent developments
Recent developments are discussed on page 134.

Stakeholder engagement
A review of the Company’s engagement with
stakeholders is set out in the Section 172 statement
on pages 36 and 37.

Diversity and inclusion
A discussion of D&I is set out in the Nomination
Committee report on page 52.

Compliance with the Code
A review of the Company’s compliance with the
Code is set out on pages 47 to 50.

ESG
The ESG summary on pages 30 to 35 provides
an overview of the Company’s approach to ESG,
including charity and climate.

Carbon emissions
Details of Conduit's carbon emissions for 2022
can be found in the ESG summary on page 32 of
this report.

Conduit Holdings Limited Annual Report and Accounts 2022

Transactions in own shares and Employee
Benefit Trust
In 2022, the Company continued to make on-market
purchases of its own shares pursuant to the
announcement it made in December 2021. The
purchases were made pursuant to shareholder
approval obtained in CHL’s AGM in 2021, updated
in the general meeting held in May 2022.

Further details of the share repurchase programme
are set out in note 18 to the consolidated financial
statements on page 131.

CHL established an Employee Benefit Trust during
the second quarter of 2022 with the sole purpose
of managing the equity incentives granted to
executives and employees of Conduit.

Further details of the EBT are set out in note 22 to
the consolidated financial statements on page 133.

Governance

Directors' report
continued

Political donations
No political donations were made by Conduit in the
year ended 31 December 2022, nor in 2021.

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 18 to the consolidated
financial statements. The common shares of $0.01
par value each is the only class of shares of the
company presently in issue carrying voting rights.
There are no nil or partly paid shares in issue. All
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. The common shares
are freely transferable and there are no restrictions
on transfer, except as set out in the bye-laws or
as may from time to time be imposed by law
and regulations.

On 10 May 2022, the Company's share premium was
reduced from $ 1,054,983,424.67 to nil and credited
to the Company’s contributed surplus account
following shareholder approval at the 2022 AGM.

Bye-law amendments
A copy of the Company’s bye-laws is available for
inspection on the Company’s website and at the
Company’s registered office. Changes to the
Company’s bye-laws are governed by Bye-law 84,
the text of which is repeated here in full: “84.1
Subject to Bye-law 84.2, no bye-law shall be
rescinded, altered or amended and no new bye-law
shall be made until the same has been approved by
a resolution of the Board and by a resolution of
the Members.

84.2 Bye-laws 43, 44, 45, 47, 84 and 86 shall not be
rescinded, altered or amended and no new bye-law
shall be made which would have the effect of
rescinding, altering or amending the provisions of
such bye-laws, until the same has been approved by
a resolution of the Board including the affirmative
vote of not less than 66% of the Directors then in
office and by a resolution of the members including
the affirmative vote of not less than 66% per cent of
the votes attaching to all shares in issue.”

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Directors' report
continued

Directors’ interests
Directors’ beneficial interests in the Company’s common shares as of 31 December 2022, including interests
notified to the Company in respect of Directors’ closely associated persons within the meaning of the
Market Abuse Regulation (MAR) were as follows:

Directors

Neil Eckert, Executive Chairman

Trevor Carvey, Chief Executive Officer

Elaine Whelan, Chief Financial Officer

Sir Brian Williamson, Senior Independent Non-Executive Director

Malcolm Furbert, Non-Executive Director

Ken Randall, Non-Executive Director

Richard Sandor, Non-Executive Director

Elizabeth Murphy, Non-Executive Director

Michelle Seymour Smith, Non-Executive Director

Includes 35,873 shares owned by his spouse, Nicola Eckert.

Common shares
held as of
31 December 2022
669,6571
295,630

Common shares
held as of
31 December 2021
597,1121
180,000

153,053

20,000

8,000

55,000

15,000

20,000

65,950

15,000

8,000

55,000

15,000

Shareholding guidelines require Executive Directors to build and maintain a shareholding in the Company
of 300% of salary while in post. Where not met at admission, any portion of future bonuses that are paid
in shares and other share awards or purchases will accumulate until this requirement is met. Further details
are set out in the remuneration report on pages 74 to 76. As at 31 December 2022, Neil Eckert was in
compliance with the share ownership guidelines applicable to Executive Directors. Trevor Carvey and Elaine
Whelan continue to build out their share ownership and have almost five years remaining to achieve
compliance under the policy.

Major shareholdings
As at 1 February 2023 Conduit Holdings Limited has been notified (via forms TR-1: Standard form for
notification of major holdings in accordance with DTR 5.3.1R(1)) of the following interests of 5% or more
in the voting rights in its common shares.

Shareholder

Aviva PLC and affiliates

JO Hambro Capital Management Limited (London)

FIL Limited

Going concern and viability statement
A review of the financial performance of Conduit is
set out on pages 20 to 22. The financial position of
Conduit, including its cash flows and its borrowing
facilities, are included in the financial statements
starting on page 85. Conduit is well capitalised and
has a well-balanced book of business.

The Board will consider Conduit’s strategic plan for
the business annually on a rolling basis using a
three-to-five-year time horizon. This period aligns
to Conduit’s liabilities and business model, allowing
Conduit to adapt capital and solvency quickly in
response to market cycles, events and
opportunities.

Number of shares
February 2022 (m)

% of shares notified
per Form TR1

24,277,267

8,263,209

16,433,270

14.70

5.00

9.99

This is consistent with the outlook period set out
in Conduit’s IPO prospectus.

Building on the strategy and plan presented in the
IPO prospectus, the Board conducted its annual
review of strategy in 2022 and updated Conduit’s
planning over a three-to-five-year time horizon,
taking into account perspectives on the external
business environment and the principal risks and
material uncertainties affecting Conduit and
examining how Conduit’s capital and operational
capacity can best be aligned to support Conduit’s
objectives over the next three years. Further
information on Conduit’s principal risks can be
found on pages 25 to 26. The risk disclosures
section of the consolidated financial statements on
pages 103 to 119 sets out the principal risks to which

Conduit Holdings Limited Annual Report and Accounts 2022

Governance

Directors' report
continued

Conduit is exposed, including reinsurance risk,
market risk, liquidity risk, credit risk, operational risk,
and strategic risk, together with Conduit’s policies
for monitoring, managing and mitigating its
exposures to these risks. As part of the
consideration of the appropriateness of adopting
the going concern basis, Conduit uses stress and
scenario analysis, and testing, to assess the
robustness of Conduit’s solvency and liquidity
positions. To make the assessment, Conduit
analysed and tested a number of scenarios
individually and in combination, including applying
reverse stress tests. The Board considers an
aggregated occurrence of all these scenarios to be
remote and that under the assessed scenarios
Conduit remained adequately capitalised.

The Audit Committee also considered a formal
"going concern" analysis from management at
its February 2022 and November 2022 meetings
(for further details, see page 57 in the Audit
Committee report).

After reviewing Conduit’s strategy, budgets and
medium-term plans, and subject to the principal
risks faced by the business, the Board has a
reasonable expectation that Conduit has adequate
resources to continue in operational existence
through the period to 31 December 2024. For this
reason, the Board continues to adopt the going
concern basis in preparing the accounts.

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:
•

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

•

Powers of Directors
The powers given to the Directors are contained in
the Company’s bye-laws and are subject to relevant
legislation and, in certain circumstances (including
in relation to the issuing and buying back by the
Company of its shares), approval by shareholders
in a general meeting. At the AGM in 2022, the
Directors were granted authorities to allot and issue
shares and to make market purchases of shares and
intend to seek renewal of these authorities in 2023.

Appointment and replacement of Directors
The appointment and replacement of Directors
is governed by the Company’s bye-laws and the
Bermuda Companies Act 1981 and related
legislation. In accordance with The UK Code,
all Directors will stand for annual re-election.

Annual General Meeting
The 2023 AGM will be held at 10:00 a.m. Atlantic
time on 17 May 2023 at the Company’s
headquarters at Ideation House, 94 Pitts Bay Road,
Pembroke, Bermuda. The Notice of the AGM will
be sent to shareholders in a separate circular.
The deadline for submission of proxies will be
20 hours before the meeting.

Approved by the Board of Directors and signed
on behalf of the Board

Greg Lunn
Company Secretary
3 March 2023

Auditors
KPMG Audit Limited has expressed its willingness
to remain in office and the Audit Committee has
recommended its reappointment to the Board.

A resolution to reappoint the auditors and to
authorise the Directors to determine their
remuneration will be proposed at the AGM
of the Company.

Conduit Holdings Limited Annual Report and Accounts 2022

The audited consolidated financial statements were
approved for issue on 3 March 2023 and the
Directors responsible for authorising the
responsibility statement on behalf of the Board are:

Trevor Carvey
Executive Director
and CEO
3 March 2023

Elaine Whelan
Executive Director
and CFO
3 March 2023

Governance

Directors' responsibilities statement

The Board is responsible for preparing the Annual
Report and Conduit’s consolidated financial
statements in accordance with applicable law and
regulations. Our responsibilities include ensuring
that the Company maintains proper accounting
records which disclose with reasonable accuracy
the financial position of Conduit and that the
financial statements present a fair view for each
financial period.

Legislation in Bermuda governing the preparation
and dissemination of the consolidated financial
statements may differ from legislation in
other jurisdictions.

Directors’ confirmations
We confirm that we consider 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 Conduit’s position, performance, business
model and strategy.

Further, we confirm that to the best of our
knowledge:
• The consolidated annual financial statements
are prepared on a going concern basis in
accordance with IFRS. Where IFRS is silent, as
it is in respect of certain aspects relating to the
measurement of insurance products, US GAAP
has been considered. In such instances,
Conduit’s management determine appropriate
measurement bases, to provide the most useful
information to users of the consolidated financial
statements, providing a true and fair view of the
assets, liabilities, financial position, and profit or
loss of Conduit, give a true and fair view of the
assets, liabilities, financial position and profit or
loss of the issuer and the undertakings included
in the consolidation taken as a whole; and
• The Strategic Report on pages 5 to 37 which

serves as the management report, includes a fair
review of the development and performance of
the business and position and the undertakings
included in the consolidation taken as a whole,
together with a description of the principal risks
and uncertainties they face. Information required
by the following sections of the Disclosure and
Transparency Rules of the UK’s Financial
Conduct Authority.

Conduit Holdings Limited Annual Report and Accounts 2022

Financial
statements

Conduit Holdings Limited Annual Report and Accounts 2022

Financial statements

Independent Auditor's report

KPMG Audit Limited
Crown House

4 Par-la-Ville Road
Hamilton
HM 08
Bermuda

Telephone
Fax

Internet

+1 441 295 5063
+1 441 295 9132

www.kpmg.bm

INDEPENDENT AUDITOR'S REPORT

To the Shareholders and Board of Directors of Conduit Holdings Limited

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 2022, the
consolidated statements of comprehensive loss, changes in equity and cash flows for the year then ended,
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 2022, and its consolidated financial
performance and its consolidated cash flows for the year then ended 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.

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. We summarize below the key audit
matters (unchanged from 2021), in decreasing order of audit significance, in arriving at our audit opinion
above, together with our key audit procedures to address those matters. 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.

Conduit Holdings Limited Annual Report and Accounts 2022

Financial statements

Independent Auditor's report
continued

The risk
Loss and loss adjustment expense reserves (gross and net)

Our response

(2022: $459.3 million gross, $382.7 million net of outwards reinsurance, of which incurred but not reported reserves
represented $361.2 million gross, $307.4 million net of outwards reinsurance; 2021: $171.6 million gross, $122.7 million net
of outwards reinsurance, of which incurred but not reported reserves represented $145.6 million gross, $96.7 million net
of outwards reinsurance)

Refer to the Audit committee report on pages 53 to 57 and the following in the notes to the consolidated financial
statements: note 2 ‘Significant accounting policies’, note 3 ‘Risk disclosures’ and note 14 disclosures on loss and loss
adjustment expense reserves.

A significant and critical judgement and estimate made
by management is the estimation of loss and loss
adjustment expense reserves (gross and net). The Group
establishes its reserves for losses and loss adjustment
expense reserves by taking outstanding losses, adding
an estimate for incurred but not reported losses (IBNR)
and, if deemed necessary, additional case reserves (ACR)
which represent the Group’s estimate for losses related
to specific contracts that the Group believes may not be
adequately estimated by the cedant as of that date.

Subjective valuation
The valuation of the ACR and IBNR liabilities is a
complex process which incorporates a significant
amount of judgement with high estimation uncertainty
such as initial expected loss ratios and estimates of
ultimate premium.

Our procedures included:
Control design and implementation:

- We evaluated the design and implementation of the
Group’s key controls regarding review and approval of
the loss and loss adjustment expense reserve. 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:

- We evaluated the competence, capabilities and
objectivity of the Group’s internal and independent
experts;

Amounts recoverable from reinsurers are estimated
using the same methodology and judgements as for the
underlying liabilities.

- We (together with our own valuation specialists)
performed enquiries of these experts to understand their
processes and models.

Estimated IBNR reserves may also consist of a provision
for losses which have occurred but have not yet been
reported by cedants. IBNR reserves are estimated initially
using expected loss and loss adjustment expense ratios
which are selected based on information derived by the
Company’s underwriters and actuaries during the initial
pricing of the business. The judgements and estimates
used in establishing loss reserve calculations may be
revised as additional experience or other data becomes
available. In addition, an allowance is made for specific
risks. The determination of this allowance is a subjective
judgement based on the perceived uncertainty and
potential for volatility in the underlying claims.

The effect of these matters is that, as part of our risk
assessment, we determined that the valuation of gross
and net loss and loss adjustment expense reserves has a
high degree of estimation uncertainty, with a potential
range of reasonable outcomes greater than our
materiality for the consolidated financial statements as a
whole, and possibly many times that amount.

Our valuation expertise:

- We used our own valuation specialists in assessing and
challenging the reasonableness of the methods and
assumptions utilised by the Group’s experts (on a gross
and net of outwards reinsurance basis) – including the
assessment of selected loss ratios, adjustments to arrive
at management’s best estimate and reserves held for
specific large loss and catastrophe (CAT) events. We
also compared the Group’s reserving methodology with
industry practice.

Assessing observable inputs:

- We agreed the underlying data utilised in the actuarial
analyses to accounting records. We agreed a sample of
cedant CAT loss estimates to supporting documentation
where these formed the basis of reserving for CAT
events.

Assessing transparency:

- We evaluated the adequacy of the Group’s disclosures
on loss and loss adjustment expense reserves in
accordance with the requirements of relevant accounting
standards.

Conduit Holdings Limited Annual Report and Accounts 2022

Financial statements

Independent Auditor's report
continued

The risk
Accuracy of premium estimates on proportional business
(2022: $637.5 million 2021: $378.8 million) included within Gross premiums written.

Our response

Refer to the Audit committee report on pages 53 to 57 and the following in the notes to the consolidated financial
statements: note 2 ‘Significant accounting policies’.

Subjective valuation
Proportional business constitutes a significant portion of
business written during the year; pricing for which is
based on estimates of ultimate premiums provided by
ceding companies supplemented by management
estimates. Management exercises judgement in
determining the ultimate estimates in order to establish
the appropriate premium value. These judgements are
based on experience with the ceding company,
familiarity with each market, timing of the reported
information and its understanding of the characteristics
of each class of business.

As part of our risk assessment, we determined that the
accuracy of inward premium estimates on proportional
business has a higher degree of estimation uncertainty,
with a potential range of reasonable outcomes greater
than our materiality for the consolidated financial
statements as a whole.

Our procedures included:
Control design and implementation:

- We evaluated the design and implementation of the
Group’s key controls regarding review of the premium
estimates recorded. 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 assumptions and methodology:

- For a statistical sample of policies, we agreed the
estimated ultimate premium to third party supporting
documentation and challenged assumptions applied by
the Company including judgements made by
management’s underwriters. In assessing the
appropriateness of assumptions applied by management,
we have evaluated the comparison of estimated and
actual premiums for prior year policies.

Assessing transparency:

- We evaluated the adequacy of the Group’s disclosures
on premium estimates in accordance with the
requirements of relevant accounting standards.

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.

Conduit Holdings Limited Annual Report and Accounts 2022

Financial statements

Independent Auditor's report
continued

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 judgement and maintain professional
skepticism throughout the audit. We also:

•

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.
• 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.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by management.

• 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.

• 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.

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.

Conduit Holdings Limited Annual Report and Accounts 2022

Financial statements

Independent Auditor's report
continued

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
Directors’ remuneration report
The Group voluntarily prepares an annual report on remuneration in accordance with the provisions of the
United Kingdom (UK) Companies Act 2006. The Directors have engaged us to audit the part of the annual
report on remuneration specified by the UK Companies Act 2006 to be audited as if the Company were a
UK registered company.

In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared
in accordance with the UK Companies Act 2006, as if those requirements applied to the Company.

Corporate governance statement
We have been engaged to review the part of the corporate governance statement on pages 47 to 50
relating to the Group’s compliance with the provisions of the UK Corporate Governance Code that would be
specified by the Listing Rules of the UK’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 82 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:

•

the directors’ confirmation within the Longer term viability statement on page 82 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;
the directors’ explanation in the Longer term viability statement page 82 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.
the related going concern statement made in conformity with the Listing Rules set out on page 82.

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.

Chartered Professional Accountants

Hamilton, Bermuda

3 March 2023

Conduit Holdings Limited Annual Report and Accounts 2022

Financial statements

Consolidated statement of comprehensive loss
For the year ended 31 December 2022

Gross premiums written

Ceded reinsurance premiums

Net premiums written

Change in unearned premiums

Change in unearned premiums on premiums ceded

Net premiums earned

Net investment income

Net realised losses on investments

Net unrealised losses on investments

Net foreign exchange losses

Total net revenue

Insurance losses and loss adjustment expenses

Insurance losses and loss adjustment expenses recoverable

Net insurance losses

Net insurance acquisition expenses

Equity-based incentives

Other operating expenses

Total expenses

Results of operating activities

Financing costs

Notes

2022
$m

2021
$m

637.5

378.8

(56.6)

(32.6)

580.9

346.2

(99.6)

(152.8)

1.0

0.8

482.3

194.2

17.8

(2.8)

5, 12

(67.8)

429.5

386.1

(40.2)

345.9

136.1

2.1

34.3

518.4

(88.9)

(0.8)

4, 14

4, 6

4, 7, 8, 15, 22

9, 15

5.5

(1.0)

(7.6)

(0.5)

190.6

191.0

(48.9)

142.1

59.1

0.3

30.6

232.1

(41.5)

(0.5)

Total comprehensive loss for the year

(89.7)

(42.0)

Loss per share

Basic and diluted

$(0.55)

$(0.25)

Conduit Holdings Limited Annual Report and Accounts 2022

Financial statements

Consolidated balance sheet
As at 31 December 2022

Assets

Cash and cash equivalents

Accrued interest receivable

Investments

Inwards premiums receivable

Reinsurance assets

– Unearned premiums on premiums ceded

– Reinsurance recoverable

– Other reinsurance receivables

Other assets

Right-of-use lease assets

Deferred acquisition expenses

Intangible assets

Total assets

Liabilities

Reinsurance contracts

Notes

11, 17

2022
$m

112.9

5.5

2021
$m

67.5

3.7

12, 13, 17

1,021.7

1,008.4

260.5

155.0

1.8

76.6

12.8

3.6

2.2

69.4

1.4

0.8

48.9

0.3

1.6

2.9

44.6

1.1

1,568.4

1,334.8

– Losses and loss adjustment expenses

459.3

– Unearned premiums

– Other reinsurance payables

Amounts payable to reinsurers

Other payables

Lease liabilities

Total liabilities

Shareholders' equity

Share capital

Own shares

Other reserves

Retained loss

Total shareholders' equity

252.4

15.0

16.2

8.7

2.4

171.6

152.8

7.3

19.0

2.9

754.0

353.6

1.7

(20.1)

1.7

(0.2)

1,058.1

1,056.0

(225.3)

814.4

(76.3)

981.2

Total liabilities and shareholders' equity

1,568.4

1,334.8

The consolidated financial statements were approved by the Board of Directors on 3 March 2023 and signed
on its behalf by:

Trevor Carvey
CEO

Elaine Whelan
CFO

Conduit Holdings Limited Annual Report and Accounts 2022

Financial statements

Consolidated statement of changes in shareholders’ equity
For the year ended 31 December 2022

Balance as at 31 December 2020

1.7

1,055.7

(4.6)

1,052.8

Share
capital
$m

Own shares
$m

Other
reserves
$m

Retained
loss
$m

Notes

Total
shareholders'
equity
$m

Total comprehensive loss for the year

Purchase of own shares

Dividends on common shares

Equity-based incentives

7, 19

(0.2)

0.3

(42.0)

(29.7)

Balance as at 31 December 2021

1.7

(0.2)

1,056.0

(76.3)

Total comprehensive loss for the year

Purchase of own shares

Dividends on common shares

Equity-based incentives

7, 19

(19.9)

2.1

(89.7)

(59.3)

(42.0)

(0.2)

(29.7)

0.3

981.2

(89.7)

(19.9)

(59.3)

2.1

Balance as at 31 December 2022

1.7

(20.1)

1,058.1

(225.3)

814.4

Conduit Holdings Limited Annual Report and Accounts 2022

Financial statements

Statement of consolidated cash flows
For the year ended 31 December 2022

Cash flows from operating activities

Comprehensive loss

Depreciation

Interest expense on lease liabilities

Net investment income

Net realised losses on investments

Net unrealised losses on investments

Net foreign exchange losses (gains)

Equity-based incentives

Change in operational assets and liabilities

– Reinsurance assets and liabilities

– Other assets and liabilities

Net cash flows from operating activities

Cash flows used in investing activities

Purchase of investments

Proceeds on sale and maturity of investments

Interest received

Purchase of intangible assets

Purchase of property, plant and equipment

Net cash flows used in investing activities

Cash flows used in financing activities

Lease liabilities paid

Dividends paid

Purchase of own shares

Net cash flows used in financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

Effect of exchange rate fluctuations on cash and cash equivalents

Cash and cash equivalents at end of year

Notes

2022
$m

2021
$m

(89.7)

(42.0)

9, 15

0.9

0.1

(18.7)

2.8

67.8

0.3

2.1

239.6

(2.0)

203.2

0.1

(6.2)

1.0

7.6

0.3

82.0

5.5

48.7

(304.9)

(1,570.4)

206.2

558.9

21.1

(0.3)

7.5

(0.9)

(0.5)

(77.9)

(1,005.4)

(0.6)

(59.3)

(19.9)

(0.1)

(29.7)

(0.2)

(79.8)

(30.0)

45.5

(986.7)

67.5

1,054.0

(0.1)

112.9

0.2

67.5

Conduit Holdings Limited Annual Report and Accounts 2022

Financial statements

Notes to the consolidated financial statements
For the year ended 31 December 2022

1. General information
CHL was incorporated under the laws of Bermuda on 6 October 2020 and, on 7 December 2020, all of its
common shares of par value $0.01 per share were admitted to the standard listing segment of the Official
List of the UK Financial Conduct Authority and admitted to trading on the LSE’s main market for listed
securities. CHL’s registered office is Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda. CHL's
consolidated financial statements as at, and for the year ended 31 December 2022 include the Company's
subsidiaries (together referred to as the “Group”). The principal activity of Conduit is to provide reinsurance
products and services to its clients worldwide.

A full listing of Conduit's related parties can be found in note 22.

2. Summary of significant accounting policies
The basis of preparation, use of judgements and estimates, consolidation principles and significant
accounting policies adopted in the preparation of these consolidated financial statements are set out below.
Excluding percentages, share and per share data or where otherwise stated, all amounts in tables and
narrative disclosures are in millions of US dollars.

Basis of preparation
These consolidated financial statements are prepared on a going concern basis in accordance with IFRS as
issued by the IASB, prepared on a historical cost basis, except for items measured at fair value as disclosed
in the relevant accounting policies. In accordance with the requirements of IAS 1, the financial statements’
assets and liabilities have been presented in order of liquidity, which provides information that is more
reliable and relevant for a financial institution.

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

Going concern
The consolidated financial statements of Conduit have been prepared on a going concern basis. In assessing
Conduit's going concern position as at 31 December 2022, the Directors have considered a number of
factors, including the current balance sheet position, Conduit’s strategic and financial plan, taking account of
possible changes in trading performance and funding retention, stress testing and scenario analysis, and the
COVID-19 pandemic. Conduit only commenced underwriting activities during the twelve months ended 31
December 2021 and, with COVID-19 exclusions included in policy wordings, does not believe it has any
exposure to reinsurance losses from COVID-19. The assessment therefore concluded that Conduit has
sufficient capital and liquidity for the next 12 months. Conduit’s capital ratios and its capital resources are
comfortably in excess of regulatory solvency requirements, and internal stress testing indicates Conduit can
withstand severe economic and competitive stresses.

As a result of the assessment, the Directors have a reasonable expectation that Conduit and Conduit Re
have adequate resources to continue in operational existence for the foreseeable future and therefore
believe that Conduit is well placed to manage its business risks successfully. Accordingly, they continue
to adopt the going concern basis in preparing the consolidated financial statements.

Changes in accounting standards
While a number of amended IFRS standards have become effective during the year ended 31 December
2022, none of these standards have had a material impact on Conduit.

Conduit Holdings Limited Annual Report and Accounts 2022

Financial statements

Notes to the consolidated financial statements
continued

Future accounting changes
Of the upcoming accounting standard changes, we anticipate that IFRS 17 will have the most material
impact on the financial statements’ results, and presentation and disclosures. Conduit will apply IFRS 17 for
the first time on 1 January 2023. We have substantially completed the build-out of the necessary systems
and processes to implement IFRS 17, and testing is in progress. As relevant to Conduit, a brief overview of
each of these standards and the applicable accounting policies and the impact, where we can reliably
quantify it, is provided below:

IFRS 17, Insurance Contracts
IFRS 17, Insurance Contracts, issued in May 2017, specifies the financial reporting for insurance contracts.
The new standard replaces IFRS 4, Insurance Contracts, and is effective for accounting periods beginning
on or after 1 January 2023 and will significantly change the accounting for, valuation of, and presentation
of insurance contracts.

Classification
Contracts that transfer significant reinsurance risk at the inception of the contract are accounted for
as reinsurance contracts. Contracts that do not transfer significant reinsurance risk are accounted for
as investment contracts. The adoption of IFRS 17 will not change the classification of Conduit's
reinsurance contracts.

Before accounting for a reinsurance contract based on the guidance in IFRS 17, Conduit analyses whether
the contract contains components that must be separated. IFRS 17 distinguishes three categories of
components that must be accounted for separately:
• Cash flows relating to embedded derivatives that are required to be separated.
• Cash flows relating to distinct investment components.
• Promises to transfer distinct goods or distinct non-insurance services.

Conduit applies IFRS 17 to all remaining components of the contract. Where contracts contain multiple
reinsurance components that meet the requirements for separation, these are separated and accounted
for as standalone contracts.

Some of Conduit's reinsurance contracts issued contain profit commission arrangements. Under these
arrangements, there is a minimum guaranteed amount that the policyholder will always receive – either in
the form of profit commission or as claims or another contractual payment, irrespective of the insured event
happening. These are typically considered non-distinct investment components. The impact of the non-
distinct investment components are excluded from the consolidated statement of comprehensive loss.

Level of aggregation
Conduit manages reinsurance contracts issued by class of business within an operating segment. Classes
of business are then aggregated into portfolios of contracts that are subject to similar risks. Each portfolio
is further disaggregated into groups of contracts that are issued within a calendar year (annual cohorts)
and are (i) contracts that are onerous at initial recognition; (ii) contracts that at initial recognition have no
significant possibility of becoming onerous subsequently; or (iii) a group of remaining contracts. These
groups represent the level of aggregation at which reinsurance contracts are initially recognised and
measured. Such groups are not subsequently reconsidered.

Conduit assumes there are no contracts in the portfolio that are onerous at initial recognition, unless there
are facts and circumstances which may indicate otherwise. Management considers the following in order
to determine whether there are facts and circumstances that mean a group of contracts are onerous:
• Pricing information.
• Results of similar contracts it has recognised.
• External factors, e.g., a change in market experience or regulations.

Measurement model
Under IFRS 17, Conduit's reinsurance contracts issued and reinsurance contracts held are substantially all
eligible to be measured by applying the Premium Allocation Approach ("PAA"). The PAA simplifies the
measurement of reinsurance contracts in comparison with the General Model under IFRS 17.

Conduit Holdings Limited Annual Report and Accounts 2022

Financial statements

Notes to the consolidated financial statements
continued

The measurement principles of the PAA differ from the ‘earned premium approach’ used under IFRS 4 in the
following key areas:
• The liability for remaining coverage reflects premiums received less deferred acquisition expenses less

amounts recognised in revenue for reinsurance services provided.
If contracts are assessed as being onerous, a loss component is recognised.

•
• The recognition of reinsurance acquisition cash flows includes an allocation of acquisition-related

operating expenses incurred in the period. All acquisition related cash flows are deferred and amortised
over the coverage period of the group of contracts.

• Measurement of the liability for incurred claims (previously losses and loss adjustment expenses) is
determined on a discounted probability-weighted expected value basis and includes an explicit risk
adjustment for non-financial risk.

Significant judgements and estimates
Conduit will estimate the liability for incurred claims as the fulfilment cash flows related to incurred claims.
The fulfilment cash flows incorporate, in an unbiased way, all reasonable and supportable information
available without undue cost or effort about the amount, timing and uncertainty of those future cash
flows. They reflect current estimates from the perspective of the entity and include an explicit adjustment
for non-financial risk (the risk adjustment). The liability for incurred claims is discounted using market-based
yield curves.

Conduit will generally determine yield curves by leveraging the bottom-up method of applying a liquidity
premium to a risk-free yield curve to reflect the differences between the liquidity characteristics of the risk-
free rate and the liquidity characteristics of the insurance liabilities.

Conduit intends to determine the risk adjustment by leveraging indications developed by Conduit's
actuaries, historical reinsurance loss experience and estimates of pricing adequacy trends, as well as
a combination of management's judgement and experience. The risk adjustment is then translated to
a confidence interval, which will be disclosed in the financial statements as a significant judgement
and estimate.

Presentation and disclosure
Presentation and disclosure will change significantly. The balance sheet will continue to contain related
assets and liabilities for reinsurance business, albeit in a different, more condensed form. The most
significant change will be in the presentation of the consolidated statement of comprehensive loss where
premiums and claims related line items will be replaced by reinsurance revenue and reinsurance service
expenses. Certain commissions on reinsurance contracts issued which were previously presented as
acquisition expenses will now be presented as a deduction to revenue under IFRS 17. Commissions and
reinstatement premiums on reinsurance contracts that are dependent on claims will be treated as claims
cash flows and presented as part of reinsurance service expenses. All insurance contract assets and liabilities
will be monetary items with any revaluation adjustments being recognised in the consolidated statement of
comprehensive loss.

Under IFRS 17, changes in the carrying amounts of groups of contracts arising from the effects of the time
value of money are presented as reinsurance finance income or expenses. Conduit has elected not to
disaggregate reinsurance finance income or expenses and will present the total amount in the consolidated
statement of comprehensive loss.

Transition
Conduit will adopt the full retrospective approach for all changes in accounting policies due to the
implementation of IFRS 17.

IFRS 9, Financial Instruments
IFRS 9, Financial Instruments: Classification and Measurement, is effective for annual periods beginning on or
after 1 January 2018. The amendments to IFRS 4, Insurance Contracts, issued in 2016, provided a temporary
exemption from applying IFRS 9 for companies whose predominant activity is to issue insurance contracts.
The carrying value of Conduit’s liabilities connected with insurance activities comprised over 90% of the
total liabilities. The activities of Conduit are therefore predominantly connected with insurance which
satisfies the criteria set out in IFRS 4 for the temporary exemption from IFRS 9. The exemption lasts until the

Conduit Holdings Limited Annual Report and Accounts 2022

Financial statements

Notes to the consolidated financial statements
continued

implementation date of IFRS 17 and addresses the accounting consequences of applying IFRS 9 to insurers
prior to the adoption of IFRS 17.

Classification and measurement
IFRS 9 introduces new classification and measurement requirements for financial instruments. IFRS 9
requires all financial assets to be assessed based on a combination of Conduit's business model for the
management of the assets and the instruments' cash flow characteristics. Conduit currently anticipates that
all investments will be classified as at FVTPL, because they are managed on a fair value basis. Conduit's
fixed maturity securities portfolio is currently classified as FVTPL. As a result, the adoption of IFRS 9 is not
expected to result in any changes to the measurement of Conduit’s investments, which will continue to be
at FVTPL. Conduit will apply any changes resulting from IFRS 9 retrospectively.

Presentation and disclosure
To reflect the differences between IAS 39 and IFRS 9, IFRS 7 Financial Instruments: Disclosures was also
amended. Conduit will apply the amended disclosure requirements at the same time as applying IFRS 9.

Estimated impact of the adoption of IFRS 17 and IFRS 9
Conduit has assessed the estimated impact that the initial application of IFRS 17 and IFRS 9 will have on
its consolidated financial statements. Based on the assessments undertaken to date, we estimate that the
cumulative IFRS 17 impact will be an increase to shareholders’ equity as at 1 January 2022 of between
$6.0 million and $9.0 million, which represents between 0.6% and 0.9% of Conduit’s reported shareholders’
equity as at 31 December 2021. No financial impact is expected from the initial application of IFRS 9.

The increase to shareholders’ equity from IFRS 17 is predominantly driven by the discounting of loss
reserves which were previously undiscounted, the deferral of certain acquisition related operating expenses
and the revaluation of insurance balances that are now considered monetary items under IFRS 17. The
impacts of discounting and the deferral of acquisition related operating expenses are timing differences as
both will be unwound over the settlement of claims liabilities and insurance contract coverage periods
respectively.

Conduit is still performing assessments of the impact of IFRS 17 for the financial year ended 31 December
2022, however we expect the impact of discounting, given the rising rate environment, to be significant.

The assessment above is preliminary as the transition work has not yet been fully finalised or subject to
external audit. Therefore, the reported impact of the adoption of IFRS 17 in the 2023 consolidated financial
statements may deviate from that noted above, although any such deviation is unlikely to be material.

Use of judgements and estimates
The preparation of financial statements in conformity with IFRS requires Conduit to make judgements and
estimates that affect the reported and disclosed amounts at the balance sheet date, revenues and expenses
during the reporting period and the associated financial statement disclosures. All estimates are based on
management’s knowledge of current facts and circumstances, assumptions based on that knowledge and
their prediction of future events. Actual results may differ significantly from the estimates made.

The most significant estimates made by management are in relation to losses and loss adjustment expenses,
both gross and net of ceded reinsurance, as discussed within the "Risk disclosures" section and in note 14.

Less significant estimates are made in determining the estimated fair value of certain financial instruments,
as discussed in note 12.

In addition, some management judgement is exercised in determining the ultimate premiums expected from
which to establish the recognition of gross premiums written.

While not significant, estimates are also used in the estimated fair value of the MIP as discussed in note 7
and the valuation of intangible assets as discussed in note 16.

Conduit Holdings Limited Annual Report and Accounts 2022

Financial statements

Notes to the consolidated financial statements
continued

Consolidation principles
These consolidated financial statements comprise the financial statements of Conduit and its subsidiaries as
at and for the year ended 31 December 2022. Subsidiaries are those entities that are controlled by Conduit
and are fully consolidated from the date on which Conduit obtains control and continue to be consolidated
until the date when such control ceases. Control is achieved when Conduit is exposed, or has rights, to
variable returns from its involvement with the subsidiary and has the ability to affect those returns through
its power over the subsidiary.

Intragroup balances and transactions are eliminated in preparing the consolidated financial statements.
Subsidiaries’ accounting policies are generally consistent with Conduit’s accounting policies.

Foreign currency
The functional currency, which is the currency of the primary economic environment in which the entity
operates, for all Group entities is US dollars. Items included in the financial statements of each of the Group’s
entities are measured using the functional currency. These consolidated financial statements are presented
in US dollars.

Foreign currency transactions are recorded in the functional currency for each entity using the exchange
rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign
currencies are revalued at period end exchange rates. The resulting foreign exchange differences on
revaluation are recorded in the consolidated statement of comprehensive loss within net foreign exchange
gains (losses). Non-monetary assets and liabilities denominated in a foreign currency are carried at historic
rates. Non-monetary assets and liabilities carried at estimated fair value and denominated in a foreign
currency are translated at the exchange rate at the date the fair value was determined.

Reinsurance contracts
Classification
Contracts that transfer significant reinsurance risk at the inception of the contract are accounted for
as reinsurance contracts. Contracts that do not transfer significant reinsurance risk are accounted for
as investment contracts. Reinsurance risk is transferred when a reinsurer agrees to compensate a
policyholder if a specified uncertain future event adversely affects the policyholder.

Premiums
Conduit writes both excess of loss and proportional (also known as quota share or pro-rata)
reinsurance contracts.

Excess of loss contracts
For the majority of excess of loss contracts, premiums written are recorded based on the minimum and
deposit or flat premium, as defined in the contract. Subsequent adjustments to the minimum and deposit
premium are recognised in the period in which they are determined. For excess of loss contracts where no
deposit is specified in the contract, premiums written are recognised based on estimates of ultimate
premiums provided by the ceding company. Initial estimates of premiums written are recognised in the
period in which the contract incepts, or the period in which the contract is bound, if later. Subsequent
adjustments, based on reports of actual premium by ceding companies, or revisions in estimates, are
recorded in the period in which they are determined. For multi-year policies that are payable in annual
instalments generally only the initial annual instalment is included as premiums written at policy inception
due to the ability of the reinsured to commute or cancel the policy. The remaining annual instalments are
included as premiums written at each successive anniversary date within the multi-year term.

Premiums written are generally earned evenly over the term of the underlying risk period of the reinsurance
contract, except where the period of risk differs significantly from the contract period. In these
circumstances, premiums are recognised over the period of risk in proportion to the amount of reinsurance
protection provided. The portion of the premium related to the unexpired portion of the risk period is
reflected in unearned premiums. Where contract terms require the reinstatement of coverage after a ceding
company’s loss, the estimated mandatory reinstatement premiums are recorded as premiums written and
earned when a specific loss event occurs. Reinstatement premiums are not recorded for losses included
within the provision for IBNR that do not relate to a specific loss event.

Conduit Holdings Limited Annual Report and Accounts 2022

Financial statements

Notes to the consolidated financial statements
continued

Proportional contracts
Premiums written for proportional contracts are recognised based on estimates of ultimate premiums
provided by the ceding company, supplemented by management's estimates of premiums based on its
experience with the ceding company, familiarity with each market, the timing of the reported information
and its understanding of the characteristics of each class of business. Initial estimates of premiums written
are recognised in the period in which the contract incepts, or the period in which the contract is bound, if
later. Contracts written on a ‘risks attaching’ basis cover claims which attach to the underlying reinsurance
policy written during the term of the respective policy. Premiums earned on such policies generally extend
beyond the original term of the contract. Subsequent adjustments, based on reports of actual premium by
the ceding company, or revisions in estimates, are recorded in the period in which they are determined.

Premiums receivable
Reinsurance premiums receivable from cedants are recorded net of commissions, brokerage, premium
taxes and other levies on premiums, unless the contract specifies otherwise. A significant portion of amounts
included as premiums receivable are not currently due based on the terms of the underlying contracts.
These balances are regularly reviewed for impairment, with any impairment loss recognised as an expense
in the period in which it is determined. Based on currently available information, management believes that
the premium estimates included in premiums receivable will be collectable and therefore no provision for
doubtful accounts has been recorded.

Acquisition expenses
Acquisition expenses represent commissions, brokerage, profit commissions and other variable costs that
relate directly to the successful securing of new contracts and renewing existing contracts. Generally,
acquisition expenses are deferred over the period in which the related premiums are earned to the extent
they are recoverable out of expected future revenue margins. All other acquisition expenses are recognised
as an expense when incurred.

Ceded reinsurance premiums
Ceded reinsurance is purchased in the normal course of business to increase capital capacity, limit the
impact of individual risk losses and loss events impacting multiple cedants (such as natural-catastrophes),
or both. Conduit may purchase ceded reinsurance on both an excess of loss and proportional basis, and may
in future supplement this with the use of catastrophe bonds or other capital market products. Ceded
reinsurance premiums, being the cost of reinsurance contracts entered into, are accounted for in the period
in which the contract incepts or is bound if that date is later. Ceded reinsurance premiums are generally
earned in the same manner as the inwards contracts, depending on the terms of the contract. The provision
for the reinsurers’ share of unearned premiums represents the part of ceded reinsurance premiums which
are estimated to be earned in future periods. Deferred ceded acquisition expenses are recognised as a
liability using the same principles.

Net losses and loss adjustment expenses
Net losses and loss adjustment expenses in the consolidated statement of comprehensive loss include
changes in the provision for outstanding losses and ACRs, changes in the provision for IBNR, plus related
expenses and losses paid in the period. Amounts are net of any changes in the provision for reinsurance
recoverable and related expenses for the period. Net losses and loss adjustment expenses are recognised
in total comprehensive income as they are incurred.

Losses and loss adjustment expenses in the consolidated balance sheet represent the estimated ultimate
cost of settling all reinsurance claims arising from events which have occurred up to the end of the reporting
period, including a provision for IBNR. Conduit does not currently discount its liabilities for unpaid losses.
Outstanding losses are initially set on the basis of reported losses received from cedants. ACRs are
determined where management’s best estimate of the reported loss is greater than that reported. Estimated
IBNR reserves may also consist of a provision for additional development in excess of losses reported by
cedants, as well as a provision for losses which have occurred but have not yet been reported by cedants.
IBNR reserves are estimated initially using expected loss and loss adjustment expense ratios which are
selected based on information derived by underwriters and actuaries during the initial pricing of the
business. These estimates are reviewed regularly and, as experience develops and new information is
received, the reserves are adjusted as necessary. As actual loss information is reported, and Conduit
develops its own loss experience, management will use various actuarial methods as well as a combination

Conduit Holdings Limited Annual Report and Accounts 2022

100

Financial statements

Notes to the consolidated financial statements
continued

of management’s judgement and experience, historical reinsurance industry loss experience and estimates
of pricing adequacy trends to estimate IBNR reserves. Any adjustments to initial expectations are reflected
in the consolidated statement of comprehensive loss in the period in which they are determined.

The estimation of the ultimate loss and loss adjustment expense liability is a complex process which
incorporates a significant amount of judgement. It is reasonably possible that uncertainties in the reserving
process, delays in cedants reporting losses to Conduit, together with the potential for unforeseen adverse
developments, could lead to a material change in estimated net losses and loss adjustment expenses.

Any amounts recoverable from reinsurers are estimated using the same methodology as for the underlying
losses. Management monitors the creditworthiness of its reinsurers on an ongoing basis and assesses any
reinsurance assets for impairment, with any impairment loss recognised as an expense in the period in which
it is determined.

Liability adequacy tests
At each balance sheet date, Conduit performs a liability adequacy test to determine if there is an overall
excess of expected claims over unearned premiums for the period of unexpired risk by using current best
estimates of future cash outflows generated by its reinsurance contracts, plus any investment income
thereon. If, as a result of these tests, the carrying amount of Conduit’s reinsurance liabilities is found to be
inadequate, the deficiency is charged to the consolidated statement of comprehensive loss for the period,
initially by writing off deferred acquisition costs and subsequently by establishing a provision.

Financial instruments
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held on call with banks, money market funds, and
other short-term highly liquid investments with a maturity of three months or less at the date of purchase.
Carrying amounts approximate fair value due to the short-term nature and high liquidity of the instruments.

Investments
Conduit’s fixed maturity securities portfolio is classified as FVTPL and carried at estimated fair value in the
consolidated balance sheet. The classification of financial assets is determined at the time of initial purchase.
A financial asset is classified at FVTPL if it is managed and evaluated on a fair value basis or if acquired
principally for the purpose of selling in the short term, or if it forms part of a portfolio of financial assets in
which there is evidence of short-term profit taking. Presentation of these securities in the FVTPL category
is consistent with how management monitors and evaluates the performance of these securities.

Regular way purchases and sales of investments are recognised at estimated fair value on the trade date,
and are subsequently carried at estimated fair value. Balances pending settlement are reflected in the
consolidated balance sheet in other assets or other payables. The estimated fair value of Conduit’s fixed
maturity securities portfolio is determined based on bid prices from recognised exchanges, broker-dealers,
recognised indices or pricing vendors. Changes in estimated fair value of investments classified as FVTPL
are recognised in the consolidated statement of comprehensive loss within net unrealised gains and losses
on investments.

Investments are derecognised when Conduit has transferred substantially all the risks and rewards of
ownership. On derecognition of an investment held at FVTPL, previously recorded unrealised gains and
losses are recycled from net unrealised gains and losses on investments to net realised gains and losses
on investments.

Interest income, amortisation and accretion of premiums and discounts on fixed maturity securities are
calculated using the effective interest rate method and recognised in net investment income. The
carrying value of accrued interest income approximates estimated fair value due to its short-term nature
and high liquidity.

Intangible assets
Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring
into use the specific software. An intangible asset with a finite useful life is amortised on a straight-line basis

Conduit Holdings Limited Annual Report and Accounts 2022

101

Financial statements

Notes to the consolidated financial statements
continued

over the useful life. The useful life is reviewed annually to determine if any changes are required to the
amortisation period.

Leases
Conduit recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-
use asset is initially measured at cost, which comprises the initial measurement of the corresponding lease
liability adjusted for any lease payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of any costs to be incurred at the expiration of the lease agreement.

Right-of-use assets are subsequently measured at cost less accumulated depreciation and any impairment
losses. Straight-line depreciation is calculated from the commencement date of the lease to the earlier of
either the end date of the lease term or the useful life of the underlying asset.

The lease liability is initially measured at the present value of the future lease payments at the lease
commencement date. Lease payments are discounted using the interest rate implicit in the lease or, if that
rate cannot be readily determined, Conduit's incremental borrowing rate. Lease payments included in the
measurement of the lease liability include fixed payments (including in-substance fixed payments) less any
lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts
expected to be paid under residual value guarantees.

The lease liability is subsequently measured by increasing the lease carrying amount to reflect the interest
due on the lease liability using the effective interest rate method and reducing the carrying amount to
reflect the lease payments made. Conduit re-measures the lease liability and the related right-of-use asset
whenever there is a change in future lease payments arising from a change in index or rate, if Conduit
changes its assessment of whether it will exercise a purchase, extension or termination option or if there
is a revised in-substance fixed lease payment.

Right-of-use assets and lease liabilities are presented as separate financial statement line items in the
consolidated balance sheet.

Employee benefits
Equity-based incentives
Conduit currently operates a MIP under which shares are subscribed for or nil cost options are granted.
The fair value of the instruments granted is estimated on the date of grant. The estimated fair value is
recognised as an expense pro-rata over the vesting period of the instrument, adjusted for the impact of
any non-market vesting conditions. No adjustment to vesting assumptions is made in respect of market
vesting conditions.

During 2022 Conduit established a DSBP. A percentage of each employee's bonus is automatically deferred
into shares as nil cost options. These nil cost awards vest annually in separate equal tranches over a three-
year period from the date of grant and do not have associated performance criteria attached to the awards.
These awards accrue dividend equivalents for all dividends declared where the record date falls between
the grant date and date of exercise, and are paid at the time of exercise.

At each balance sheet date, Conduit revises its estimate of the number of instruments that are expected to
become exercisable. It recognises the impact of the revision of original estimates, if any, as equity-based
incentive expense in the consolidated statement of comprehensive loss, and a corresponding adjustment
is made to other reserves in shareholders’ equity over the remaining vesting period.

On exercise, the differences between the expense charged to the consolidated statement of comprehensive
loss and the actual cost to Conduit, if any, is transferred to other reserves in shareholders’ equity.

Pensions
Conduit’s pension plans are based on defined contributions or equivalent cash in lieu, subject to applicable
law and local market standards. On payment of contributions to the plans or cash in lieu there is no further
obligation to Conduit. Contributions or payments of cash in lieu are recognised as employee benefits in the
consolidated statement of comprehensive loss in the period when the services are rendered.

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Notes to the consolidated financial statements
continued

Tax
Income tax on the profit or loss for the period comprises current and deferred tax. Current tax is the
expected tax payable on the taxable income for the year using tax rates enacted or substantively enacted
at the year-end reporting date and any adjustments to tax payable in respect of prior periods.

Deferred tax is provided, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the financial statements. The amount of deferred tax
provided is based on the expected manner of realisation or settlement of the carrying amount of the assets
and liabilities, using tax rates enacted or substantively enacted at the reporting date. Deferred tax assets are
recognised in the consolidated balance sheet to the extent that it is probable that future taxable profit will
be available against which the temporary differences can be utilised.

Own shares
Own shares include shares repurchased under share repurchase authorisations and held in treasury, plus
shares repurchased and held in trust, for the purposes of employee equity-based incentive schemes. Own
shares are deducted from shareholders’ equity. No gain or loss is recognised on the purchase, sale,
cancellation or issue of own shares and any consideration paid or received is recognised directly in equity.

Share capital and issuance costs
Shares are classified as shareholders' equity if there is no obligation to transfer cash or other financial assets.
Transaction costs that are attributable to the issuance of new shares are treated as a deduction from equity.

3. Risk disclosures
Introduction
Conduit is exposed to risks from several sources, classified into six primary risk categories. The primary risk
categories are: (a) reinsurance risk; (b) market risk; (c) liquidity risk; (d) credit risk; (e) operational risk; and
(f) strategic risk. These are discussed in detail on the following pages. The primary risk to Conduit is
reinsurance risk.

The Board is responsible for determining the nature and extent of the principal risks Conduit is willing to
take in achieving its strategic objectives and should maintain sound risk management and internal control
systems. To this end, the Board has established various committees to support the execution of its
responsibilities and has reviewed the committee structures at CRL. The Board, and committees thereof,
define the risk preferences and appetites within which management is authorised to operate.

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

Day-to-day management of risk is the responsibility of management, operating within the defined appetite
and tolerances of the Board, or the CRL board, approved delegations of authority. The risk framework
prescribes a standardised approach to the management of risk, oversight and challenge by the risk function
and independent assurance provided by the internal audit function. The risk framework also addresses the
reporting of risks, emerging risks, risk events and compliance with risk appetite and tolerance statements to
executive management and the Board, and relevant Board committees, of CRL and CHL. To ensure
transparency and accountability of the business all independent Non-Executive Directors, four independent
Non-Executive Directors from the Board have been appointed to the Board of CRL. Furthermore, the Board
is invited to attend operating entity board level meetings and see all minutes and records of such operating
entity Board and committee meetings.

COVID-19
The COVID-19 pandemic has caused significant disruption in global financial markets and to worldwide
economies. The COVID-19 pandemic is an ongoing situation making it exceptionally difficult to predict what

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Notes to the consolidated financial statements
continued

the ultimate impact for the reinsurance industry will be. Conduit only commenced underwriting operations
during the twelve months ended 31 December 2021 and, for any reinsurance business underwritten during
that period, had COVID-19 related exclusions in its reinsurance contracts and policy wordings. As a result,
Conduit does not believe it has any exposure to reinsurance losses associated with the COVID-19 pandemic
during the period. The impacts of the COVID-19 pandemic on Conduit are discussed throughout these
consolidated financial statements.

Climate change
Conduit is exposed to risks associated with climate change but also potential opportunities arising from that
risk. Risks from climate change can include physical risk and those associated with a changing economy.
Physical risks are those relating to the physical impacts of climate change, which can be from increased
frequency and/or severity of climate-related events, or structural, due to longer-term shifts in climate
patterns. Economic risks are those relating to the transition to a lower carbon economy and include risks
such as policy and legal risk, technology risk, market risk and reputational risk. The potential financial impact
from these risks is mitigated by Conduit’s strategic and risk management policies.

Global tax reform
Conduit continues to monitor and assess the implications arising from the Organisation for Economic Co-
operation and Development’s inclusive framework agreement that aims to implement a global minimum tax
rate of 15%, along with the potential impacts of other global tax reforms that are relevant to Conduit’s
business operations.

a. Reinsurance risk
Conduit underwrites both short-tail and long-tail reinsurance contracts on a worldwide basis. These
reinsurance contracts transfer insurance risk, including risks exposed to both natural and man-made
catastrophes, and risk and liability losses. The risk in connection with underwriting reinsurance contracts is,
in the event of a covered loss, whether the premiums will be sufficient to meet the associated loss payments
and expenses. The underwriters evaluate and estimate the level of premiums sufficient to cover expected
losses, expenses and profitability through a combination of sophisticated risk modelling tools, past
experience and knowledge of loss events, current industry trends and broader economic indicators. In order
to ensure appropriate reinsurance risk selection and limits on the concentration and diversification of the
aggregate portfolio, Conduit has established risk management and internal control systems to evaluate and
assess the expected losses of each individual contract, class of business, geographic region and the
aggregate portfolio. These controls, include, but are not limited to:
• Conduit has a five-year strategic plan that defines the over-riding business goals that management and

the Board aim to achieve.

• A detailed business plan is produced annually and considers current market conditions and the risk-

adjusted profitability of the underwriting portfolio.

• Conduit's internal capital requirements consider the probability and magnitude of reinsurance losses
varying adversely from the expected losses considered during the underwriting and subsequent
reserving processes.

• Forecasts are produced periodically to assess the progress toward the business plan and the

strategic plan.

• Each underwriter has a clearly defined limit of underwriting authority.
• Each contract underwritten is subject to a pre-bind peer review.
• An underwriting roundtable meeting, typically held daily, where deal flow, pricing and opportunities

are discussed.

• Pricing models are used in all areas of the underwriting process.
• Risk appetite and tolerance statements have been established and the CRO reports quarterly

on adherence.

• A number of modelling tools are used to model catastrophes and expected losses.
• Outwards reinsurance is purchased to mitigate both frequency and severity of losses, and to protect

Conduit’s capital base.

Catastrophe management
Certain of Conduit’s classes of business provide coverage for natural-catastrophes (e.g., earthquakes, floods,
hurricanes and wildfires) and are subject to seasonal variation and the impacts of climate change. Conduit’s
business has exposure to large catastrophe losses in North America, Europe and Japan as a result of

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Notes to the consolidated financial statements
continued

windstorms. The level of windstorm activity, and landfall thereof, during the North American, European and
Japanese wind seasons may materially impact loss experience. The North American and Japanese wind
seasons are typically June to November and the European wind season November to March. Conduit also
has exposure to other natural-catastrophes, such as earthquakes, tsunamis, droughts, floods, hail and
tornadoes, which can occur throughout the year. In addition, Conduit is exposed to risk losses throughout
the year from perils such as fire, explosion, war, terrorism, political risk and other events, including loss
arising from legal liabilities rather than physical damage.

Conduit has defined its appetite and tolerances for risk accumulations and uses models to determine the
expected frequency and severity of aggregating exposures. As with all such models, there is a risk that
modelled expectations may not reflect actual outcomes and the scope of the models are such that not all
exposures are captured.

Conduit has set tolerances around various scenarios. Of these, at the commonly reported 100-year and 250-
year return periods, Conduit’s most significant exposures to any single peril and region combination are to
Florida windstorm and California earthquake perils, respectively. The table below shows the estimated net
exposures to these peak zone perils on a first occurrence basis. Net positions are calculated by applying
relevant reinstatement premiums and outwards reinsurance to the respective modelled gross exposures.

Return period

Peril

100-year

250-year

Florida windstorm

California earthquake

As at 31 December 2022

As at 31 December 2021

% of
tangible
capital
%

2.3

9.2

Net
$m

18.5

74.8

% of
tangible
capital
%

1.0

6.3

Net
$m

9.6

61.8

There can be no guarantee that the modelled assumptions and techniques deployed in calculating these
figures are accurate. There could also be an unmodelled loss which exceeds these figures. The models also
contain loss scenarios which could cause a larger loss to capital than the modelled expectation from the
above return periods.

Operating segments
The underwriting business is comprised of three principal divisions: property, casualty and specialty. These
divisions are also considered to be Conduit's operating segments. Details of each operating segment and
gross premiums written by geographic region and operating segment are as follows:

Year ended 31 December 2022

Worldwide

Europe

Other

Property
$m

Casualty
$m

Specialty
$m

174.7

93.5

16.3

15.1

171.9

29.0

33.3

2.5

8.7

81.2

10.2

1.1

Total
$m

355.3

203.7

59.8

18.7

Total
%

55.7

32.0

9.4

2.9

Gross premiums written

299.6

236.7

101.2

637.5

100.0

Year ended 31 December 2021

Worldwide

Europe

Other

Property
$m

Casualty
$m

Specialty
$m

Total
$m

105.4

62.3

6.0

9.7

118.7

3.9

228.0

7.1

2.8

0.4

62.3

0.2

131.7

8.8

10.3

Total
%

60.2

34.8

2.3

2.7

Gross premiums written

183.4

129.0

66.4

378.8

100.0

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Property reinsurance
Conduit is exposed to large natural-catastrophe losses, such as windstorm and earthquake losses,
primarily from assuming risks associated with property treaties. Exposure to natural-catastrophe events is
controlled and measured by managing to predefined limits within stochastic modelling and deterministic
accumulations across classes per geographic zone and peril. The accuracy of these analyses is limited by the
quality of data and the effectiveness of the modelling. It is possible that a catastrophic event significantly
exceeds the expected modelled event loss.

Natural-catastrophe risk is written across both the US and internationally on an excess of loss and capped
quota share basis. Reinsurance structures are offered strategically, most notably in respect of peril,
geography and probability of activation or exhaustion.

Property per risk treaties are offered with the strategy to minimise natural-catastrophe exposure, focusing
on fire risk. This is considered by both natural-catastrophe specific metrics, treaty conditions and excess of
loss structure.

Ceded reinsurance may be purchased to mitigate exposures to large natural-catastrophe losses. Ceded
reinsurance is typically purchased on an excess of loss basis, however industry loss warranties, catastrophe
bonds, or proportional treaty arrangements may also be entered into.

Casualty reinsurance
Conduit underwrites a balanced portfolio of casualty classes of business, comprised of both excess of loss
and proportional contracts, on a worldwide basis.

Casualty claims tend to take longer to be reported and ultimately settled than physical damage risks.
Conduit typically maintains net reserves for losses and loss adjustment expenses for casualty classes of
business over a longer period of time than for the property and specialty classes of business where the costs
of claims are generally known and settled within a shorter time frame.

Conduit will purchase ceded reinsurance to protect against any ‘clash’ between losses arising in its
casualty portfolio.

The sub-classes of casualty business include directors and officer’s liability, financial institutions liability,
general liability for multiple sub-classes and, on an excess and umbrella basis, medical malpractice,
professional liability and transactional liability. Conduit has limited appetite for, and generally avoids,
workers compensation, standalone auto and cyber treaties.

Directors and officers liability
Directors and officers liability policies offer protection for company managers and directors and officers
against claims that may arise in the normal course of operations. Coverage includes legal expenses and
liability to shareholders, bondholders, creditors or others owing to actions or omissions by a director or
officer of a private or public corporation, or not-for-profit organisation.

Financial institutions liability
Financial institutions coverage may cover risks such as computer and commercial crime, professional
indemnity and civil liability.

General liability
General liability commonly provides cover for losses arising from the legal liability of an original insured and
statutory liability in the case of employers’ liability which result in bodily injury or disease to third parties or
physical damage to third-party property. The Group offers a wide range of general liability reinsurance
products including contractors general liability, excess general liability, umbrella, energy and environmental.

Medical malpractice
Medical malpractice reinsurance generally covers professional liability and errors and omissions specifically
in the healthcare industry, protecting physicians and other healthcare professionals against claims of
negligent acts or injury of patients under their care. Medical malpractice reinsurance does not cover
intentional or criminal acts.

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Professional liability
Professional liability generally provides coverage for third-party losses resulting from legal liability or civil
liability or negligence, errors or omissions or wrongful acts arising from the provision of, or failure to provide,
professional services by an original insured. Sub-classes of this business would include lawyers, accountants,
architects and engineers, errors and omissions, plus miscellaneous professional liability.

Transactional liability
Transactional liability reinsurance is used by parties to various business transactions, such as mergers,
acquisitions and divestitures, to transfer certain transaction-related risks to the reinsurance market. There
can be a broad range of risks covered, including warranty, litigation, pension and tax uncertainties and
employment matters.

Specialty reinsurance
Conduit's specialty classes of business are written on both an excess of loss and proportional basis and can
provide reinsurance coverage against physical damage (short-tail) or against legal liability (long-tail) losses.
Although specialty classes of business are exposed to natural-catastrophe risk, it is generally to a lesser
extent than property classes of business. They are more likely to be affected by specific large loss events
such as accidents, collisions, fires and similar man-made catastrophe events. Specialty classes of business
are highly diverse in nature and require specific market expertise and experience. The specialty classes of
business include aviation, energy, marine, renewables, political violence and terrorism and are offered on
both a specific and a whole account basis.

Conduit purchases ceded reinsurance protection to reduce exposure to both large risk losses and an
accumulation of smaller losses. Ceded reinsurance is typically purchased on an excess of loss basis, but,
from time to time, proportional arrangements may be entered into.

Aviation
The aviation class of business provides cover to the insurers of the world’s major airlines and aircraft
manufacturers and includes cover for the aircraft themselves as well as losses arising from passenger and
third-party liability claims against airlines and/or manufacturers.

Energy
The energy class of business provides reinsurance cover for a global spread of accounts that can include
primary risks such as downstream energy, upstream energy, energy liability, construction energy and Gulf
of Mexico offshore energy programmes. Policies typically cover property for physical damage (including
natural-catastrophe) and machinery breakdown perils plus consequential business interruption exposure,
often with loss limits set at a level commensurate with a modelled estimated maximum loss scenario.

Marine
Marine cargo is an international account and covers the reinsurance of commodities or goods in transit.
Typically, transit cover is provided on an all-risks basis for marine perils for the full value of the goods
concerned. Static cover is also provided for losses to cargo, from both elemental and non-elemental causes.
In addition, the cargo account can include for example, fine art, vault risks, artwork on exhibition and marine
war and terrorism business relating to cargo in the ordinary course of transit.

Marine liability is mostly the reinsurance of the International Group of Protection and Indemnity Clubs.
Marine builders’ risk covers the building of ocean-going vessels in specialised yards worldwide and their
testing and commissioning.

The marine hull class generally consists of worldwide coverage spanning physical damage, hull and
machinery breakdown, loss of hire and mortgagees’ interests for a range of maritime vessels from cargo and
passenger ships to private pleasure craft. Products typically cover both risk and catastrophe exposures.

Political violence and terrorism
Political violence and terrorism coverage is provided for US and worldwide property risks, but typically
excluding nuclear, chemical, biological and cyber coverage in most territories.

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Notes to the consolidated financial statements
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Whole account
Coverage is generally provided on a worldwide basis and covers a broad spectrum of the cedants risks
under a single policy. The classes of business covered under a whole account reinsurance policy can include
traditional property and casualty classes of business including commercial and personal automobile, general
liability, workers’ compensation, employers’ liability, excess casualty and umbrella, as well as selected
professional liability coverage.

Ceded reinsurance
Ceded reinsurance is purchased in the normal course of business to increase capital capacity, limit the
impact of individual risk losses and loss events impacting multiple cedants (such as natural-catastrophes),
or both. Ceded reinsurance may also be purchased from time to time to optimise the risk-adjusted return
of Conduit's aggregate underwriting portfolio. Conduit may purchase ceded reinsurance on both an excess
of loss and proportional basis, and may in future supplement this with the use of catastrophe bonds or other
capital market products. The mix of ceded reinsurance coverage is dependent on specific loss mitigation
requirements, market conditions and available capacity. In certain market conditions, Conduit may deem
it more economic to hold capital than purchase ceded reinsurance. Ceded reinsurance does not relieve
Conduit of its obligations to policyholders. Conduit is exposed to reinsurance risk where ceded reinsurance
contracts put in place to reduce gross reinsurance risk do not perform as anticipated, result in coverage
disputes or prove inadequate in terms of the limits purchased. Failure of a ceded reinsurer to pay a valid
claim is considered a credit risk which is detailed in the credit risk section below. Ceded reinsurance
coverage is not intended to be available to meet all potential loss circumstances. Conduit will retain certain
losses, as the cover purchased is unlikely to transfer the totality of Conduit’s exposure. Any loss amount
which exceeds the ceded reinsurance coverage purchased would be retained by Conduit. Some ceded
reinsurance policies have limited reinstatements, therefore the number of claims which may be recovered
on second, and subsequent loss circumstances is limited.

Under Conduit’s ceded reinsurance security policy, ceded reinsurers are assessed and approved based on
their financial strength ratings, amongst other factors. These decisions are regularly reviewed as an integral
part of the business planning and performance monitoring process. The management Counterparty
Security Committee examines and approves all Conduit’s ceded reinsurers to ensure that they possess
suitable security.

Net losses and loss adjustment expenses
A significant and critical judgement and estimate made by management is the estimation of net losses and
loss adjustment expenses. Management estimates net losses and loss adjustment expenses, and the
associated reserves to cover its estimated liability for both reported and unreported claims on events that
have occurred up to the latest valuation date. Management uses methodologies that calculate a point
estimate for the ultimate losses, representing management’s best estimate of ultimate net losses and loss
adjustment expenses. Conduit establishes its reserve for losses and loss adjustment expenses by taking
outstanding losses, adding an estimate for IBNR and, if deemed necessary, ACRs which represent Conduit's
estimate for losses related to specific contracts that the management believes may not be adequately
estimated by the client as of that date.

Loss reserves are not permitted until the occurrence of an event which may give rise to a claim. As a result,
only loss reserves applicable to losses that have occurred up to the reporting date are established, with no
allowance for the provision of a contingency reserve to account for expected future losses or for the
emergence of new types of latent claims. Claims arising from future events can be expected to require the
establishment of substantial reserves from time to time. All of Conduit’s reserves are currently reported on
an undiscounted basis.

The reserving process is dependent on management's judgement and is subject to meaningful uncertainty
due to both qualitative and quantitative factors, including, but not limited to: the nature of the business
written, whether it is short-tail or long-tail, whether it is excess of loss or proportional, the magnitude and
timing of loss events, the geographic areas impacted by loss events, time lags in the reporting process from
the original claimant, limited claims data, policy coverage interpretations, case law, regulatory directives,
demand surge and inflation, potential uncertainties related to reinsurance and ceding company reserving
practices, and other factors inherent in the estimation process for net losses and loss adjustment expenses.

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Notes to the consolidated financial statements
continued

The judgements and estimates used in establishing loss reserve calculations may be revised as additional
experience or other data becomes available. Loss reserves are also reviewed as new or improved
methodologies are developed and as laws or regulations change. Furthermore, as a business operating
within a broker market, management must rely on loss information reported to brokers by other insurers
and their loss adjusters, who must estimate their own losses at the policy level, often based on incomplete
and changing information. The information management receives varies by cedant and may include paid
losses, estimated case reserves and an estimated provision for IBNR reserves. Additionally, reserving
practices and the quality of data reporting may vary among ceding companies, which adds further
uncertainty to management’s estimates of the ultimate losses.

Conduit’s internal actuaries review the reserving assumptions and methodologies on a quarterly basis and
develop an actuarial best estimate of Conduit’s net losses and loss adjustment expenses using the processes
outlined above. The management Reserving Committee reviews the estimate for net losses and loss
adjustment expenses on a quarterly basis. The reserves are subject to a semi-annual independent review
by Conduit’s external actuaries. The results of the internal and independent reserve reviews are presented
to the Audit Committee.

Short-tail versus long-tail
Claims relating to short-tail risks are generally reported more promptly than those relating to long-tail risks.
The timeliness of reporting can be affected by such factors as the nature of the event causing the loss, the
location of the loss and whether the losses are from policies in force with primary insurers or reinsurers.

Excess of loss versus proportional
For excess of loss contracts, management is aided by the fact that each policy has a defined limit of liability
arising from one event. Once that limit has been reached, there is no further exposure to additional losses
from that policy for the same event. For proportional business, an initial estimated loss and loss expense
ratio is generally used. This is based upon information provided by the ceding company and/or their broker
and management’s historical experience of that treaty, if any, and the estimate is adjusted as actual
experience becomes known.

b. Market risk
Conduit is at risk of loss due to movements in market factors. The main market risks Conduit was exposed
to include:
• Reinsurance risk;
•
• Currency risk.

Investment risk;

Reinsurance risk
Conduit is exposed to reinsurance market risk from several sources, including the following:
• The advent or continuation of a soft market, which may result in a stabilisation or decline in premium

rates and/or terms and conditions for certain classes, or across all classes.

• The actions and reactions of key competitors, which may directly result in volatility in premium volumes

and rates, fee levels and other input costs.

• Market events, including unusual inflation in rates, may result in a limit in the availability of cover, causing

political intervention or national remedies.

• Failure to maintain broker and cedant relationships, leading to a limited or substandard choice of risks

inconsistent with Conduit’s risk appetite.

• Changes in regulation including capital, governance or licensing requirements, and laws.
• Changes in the geopolitical environment.

The most important method to mitigate reinsurance market risk is to maintain strict underwriting standards.
Conduit manages reinsurance market risk in numerous ways, including the following:
• Reviews and amends underwriting plans and outlook as necessary.
• Reduces exposure to, or withdraws from, market sectors where conditions have reached

unattractive levels.

• Purchases appropriate, cost-effective reinsurance cover to mitigate exposures.
• Closely monitors changes in rates, terms and conditions, and inflation.

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• Ensures through rigorous underwriting criteria that surplus capital does not drive short-term

risk appetite.

• Typically holds a daily underwriting briefing meeting for CRL to discuss deal flow, pricing and

opportunities.

• Holds a quarterly management Underwriting Oversight Committee meeting that considers matters that

include underwriting performance for CRL.

• Holds an annual strategy review meeting.
• Holds a quarterly management Underwriting Committee meeting that considers matters including

underwriting performance for CRL.

• Holds a quarterly management Risk, Capital and Compliance Committee meeting to review relevant risk

and capital considerations for CRL.

• Holds regular meetings with regulators and rating agencies.

Reinsurance contract liabilities are currently not directly sensitive to the level of market interest rates,
as they are undiscounted and contractually non-interest bearing.

Investment risk
Movements in investments resulting from changes in interest and inflation rates, credit spreads, and
currency exchange rates, among other factors, may lead to an adverse impact on the value of Conduit’s
investment portfolio. Conduit seeks to invest in issuers with stronger ESG practices on balance, as it believes
that this will also help reduce risk in the portfolio.

The Investment Committee of CRL is responsible for all investment-related decisions and investment
guidelines. The investment guidelines set the parameters within which Conduit’s external managers must
operate. Important parameters of these guidelines include permissible asset classes, duration1 ranges,
credit quality, permitted currency, maturity, industry sectors, geographical, sovereign and issuer exposures.
Guideline compliance is monitored on a monthly basis. The portfolio of fixed maturity securities is currently
managed by three external managers. Their performance is monitored on an ongoing basis. Conduit projects
the level of funds required to meet near-term obligations and cash flow needs following extreme events in
order to ensure adequate liquidity is maintained. Conduit also prioritises liquid asset classes with higher
credit quality and shorter duration so that Conduit can meet reinsurance and other near-term obligations.
Conduit has split the portfolio into a short-tail mandate, to better match the property and specialty classes
of business, and a long-tail mandate, to better match the casualty classes of business and some aspects
of the specialty classes of business. The short-tail mandate will be slightly shorter duration than the long-
tail mandate.

Conduit reviews the composition, duration and asset allocation of its investment portfolio on a regular basis
to respond to changes in interest rates and other market conditions. If certain asset classes are anticipated
to produce a higher return within management’s risk tolerance, an adjustment in asset allocation may be
made. Conversely, if the risk profile is expected to move outside of tolerance levels, adjustments may be
made to reduce the risks in the portfolio.

Conduit models various periods of significant stress in order to better understand the investment portfolio’s
risks and exposures. The scenarios represent what could, and most likely will, occur – albeit not in the exact
form of the scenarios, which are based on historic periods of volatility. Conduit also monitors the portfolio
impact of more severe scenarios consisting of extreme shocks.

Conduit focuses on the most significant risks in its investment portfolio which are interest rate risk, credit
risk and liquidity risk, and has built, or is building, stress testing and risk analytics around these risks to
ensure they are within tolerances and preferences.

Duration is the weighted average maturity of a security's cash flows, where the present values of the cash flows serve as the weights. The effect
of convexity, or sensitivity, of the portfolio's response to changes in interest rates is also factored in to the calculation.

Conduit Holdings Limited Annual Report and Accounts 2022

110

Financial statements

Notes to the consolidated financial statements
continued

Strategic asset allocation reviews will be undertaken periodically to assess Conduit’s overall investment
strategy and to consider alternative asset allocations to achieve the best risk-adjusted return within
Conduit's risk appetite. Any resulting recommendations would be approved by the appropriate
management committee(s) and reported to the Board. The Investment Committee met quarterly to ensure
that the strategic and tactical investment actions were consistent with investment risk preferences, appetite,
risk and return objectives and tolerances. The investment risk tolerances have been incorporated into the
ERM framework.

The investment mix by mandate and sector of Conduit's portfolio of fixed maturity securities is as follows:

As at 31 December 2022

Short-term investments

US treasuries

US agency debt

US municipals

Non-US government and agency

Asset-backed

US government agency mortgage-backed

Non-agency mortgage-backed

Agency commercial mortgage-backed

Non-agency commercial mortgage-backed

Corporate

Total

As at 31 December 2021

Short-term investments

US treasuries

US agency debt

US municipals

Non-US government and agency

Asset-backed

US government agency mortgage-backed

Non-agency mortgage-backed

Agency commercial mortgage-backed

Non-agency commercial mortgage-backed

Corporate

Total

Estimated
fair value
short-tail
$m

Estimated
fair value
long-tail
$m

Estimated
fair value
total
$m

33.2

4.7

103.6

106.6

10.0

2.0

102.6

52.7

9.8

3.2

21.9

263.6

1.8

5.2

61.2

47.9

3.0

30.8

157.9

37.9

210.2

1.8

15.2

2.0

163.8

100.6

12.8

3.2

52.7

421.5

602.6

419.1

1,021.7

Estimated
fair value
short-tail
$m

Estimated
fair value
long-tail
$m

Estimated
fair value
total
$m

8.9

52.4

11.0

2.2

97.3

53.2

13.6

3.2

24.3

119.4

2.0

2.2

72.4

41.4

5.6

34.1

8.9

171.8

2.0

13.2

2.2

169.7

94.6

19.2

3.2

58.4

302.6

162.6

465.2

568.7

439.7

1,008.4

Conduit Holdings Limited Annual Report and Accounts 2022

111

Financial statements

Notes to the consolidated financial statements
continued

Corporate and non-US government and agency bonds by country are as follows:

As at 31 December 2022

Canada

Other countries

Total

As at 31 December 2021

Canada

Other countries

Total

The sector allocation of corporate bonds is as follows:

As at 31 December

Financials

Industrials

Utilities

Total

Other
industries
$m

Non-US
government
and agency
$m

Financials
$m

140.6

187.7

21.7

23.2

35.4

5.5

0.5

6.9

220.9

200.6

2.0

Other
industries
$m

Non-US
government
and agency
$m

Financials
$m

153.5

214.8

22.1

23.3

37.6

7.4

0.6

5.9

236.5

228.7

2.2

2022

220.9

180.3

20.3

52.4

42.8

4.8

2021

236.5

209.5

19.2

Total
$m

328.3

27.2

23.7

44.3

423.5

Total
$m

368.3

29.5

23.9

45.7

467.4

50.9

45.0

4.1

421.5

100.0

465.2

100.0

Conduit’s investment portfolio is comprised of fixed maturity securities and cash and cash equivalents. Fair
values can be impacted by movements in interest rates, credit ratings, exchange rates, the current economic
environment and outlook. The estimated fair value of the portfolio of fixed maturity securities is generally
inversely correlated to movements in market interest rates. If market interest rates fall, the estimated fair
value of Conduit’s portfolio of fixed maturity securities would tend to rise and vice versa. The sensitivity of
the price of fixed maturity securities to movements in interest rates is indicated by their duration. The
greater a security’s duration, the greater its price volatility to movements in interest rates. The sensitivity of
Conduit’s portfolio of fixed maturity securities to interest rate movements is detailed below, assuming linear
movements in interest rates.

Conduit Holdings Limited Annual Report and Accounts 2022

112

Financial statements

Notes to the consolidated financial statements
continued

As at 31 December

Immediate shift in yield (basis points)

100

-25

-50

-75

-100

2022

(23.0)

(17.2)

(11.5)

(5.7)

6.6

13.2

19.7

26.3

(2.2)

(1.7)

(1.1)

(0.6)

0.6

1.3

1.9

2.6

2021

(27.7)

(20.8)

(13.9)

(6.9)

5.7

11.5

17.2

22.9

(2.7)

(2.1)

(1.4)

(0.7)

0.6

1.1

1.7

2.3

Conduit mitigates interest rate risk on the investment portfolio by establishing and monitoring duration
ranges in its investment guidelines. The duration of the portfolio is matched to the modelled expected
duration of the reinsurance reserves, within a permitted range. The permitted duration range for the
portfolio is between 1.5 and 5 years. The overall duration for the fixed maturity securities, managed cash
and cash equivalents is 2.2 years as at 31 December 2022 (31 December 2021: 2.4 years).

In addition to duration management, Conduit monitors VaR to measure potential losses in the estimated fair
values of its cash and invested assets and to understand and monitor risk. The VaR calculation is performed
using variance/covariance risk modelling. Securities are valued individually using standard market pricing
models. These security valuations serve as the input to many risk analytics. The principal VaR measure that
is produced is an annual VaR at the 99th percentile confidence level. Under normal conditions, the portfolio
is not expected to lose more than the VaR metric listed below, 99% of the time over a one-year time
horizon. The appropriateness of this measure is considered by the Investment Committee periodically.

Conduit’s annual VaR calculation is as follows:

As at 31 December

99th percentile confidence level

2022

2021

% of
shareholders'
equity

7.6

30.2

3.1

62.0

Currency risk
Conduit is susceptible to fluctuations in rates of foreign exchange, principally between the US dollar and
pound sterling and the US dollar and the euro. Even though risks are assumed on a worldwide basis, they
are predominantly denominated in US dollars. Conduit is exposed to currency risk to the extent its assets
are denominated in different currencies to its liabilities. Conduit is also exposed to translation risk on non-
monetary assets such as unearned premiums and deferred acquisition costs. Foreign currency gains and
losses are recorded in the period they occur in the consolidated statement of comprehensive loss.

Conduit hedges monetary non-US dollar liabilities primarily with non-US dollar assets but may also use
derivatives, such as currency forwards, to mitigate foreign currency exposures. The main foreign currency
exposure relates to its reinsurance obligations, cash holdings, premiums receivable and dividend payable,
if applicable.

Conduit Holdings Limited Annual Report and Accounts 2022

113

Financial statements

Notes to the consolidated financial statements
continued

The following table summarises the carrying value of total assets and total liabilities categorised by
Conduit’s main currencies:

As at 31 December 2022

Total assets

Total liabilities

Net assets (liabilities)

As at 31 December 2021

Total assets

Total liabilities

Net assets (liabilities)

USD
$m

1,515.9

(691.3)

824.6

USD
$m

1,318.0

(331.8)

986.2

GBP
$m

26.1

(9.1)

17.0

GBP
$m

6.4

(2.8)

3.6

EUR
$m

24.2

(44.9)

(20.7)

EUR
$m

9.3

(17.1)

(7.8)

Other
$m

Total
$m

2.2

1,568.4

(8.7)

(754.0)

(6.5)

814.4

Other
$m

Total
$m

1.1

1,334.8

(1.9)

(353.6)

(0.8)

981.2

The impact on profit from a proportional foreign exchange movement of 10.0% against the US dollar at
year end spot rates would be a decrease or increase of $0.3 million (31 December 2021: $0.2 million).

c. Liquidity risk
Liquidity risk is the risk that cash may not be available to pay obligations when they are due without
incurring unreasonable costs. Conduit's main exposure to liquidity risk is with respect to its reinsurance and
investment activities. Conduit is exposed if proceeds from the sale of financial assets are not sufficient to
fund obligations arising from reinsurance contacts and/or other liabilities. Conduit can be exposed to fund
daily calls on its available investment assets, principally to settle reinsurance claims and/or to fund trust
accounts following a large catastrophe loss, or other collateral requirements.

Liquidity risk exposures related to reinsurance activities are as follows:
• Large catastrophic events, or multiple medium-sized events in quick succession, requiring the payment

of high value claims within a short time frame or to fund trust accounts established to collateralise claims
payment liabilities.

• Failure of cedants to meet their contractual obligations with respect to the timely payment of premiums.
• Failure of Conduit’s ceded reinsurers to meet their contractual obligations to pay claims within a

timely manner.

Liquidity risk exposures related to investment activities are as follows:
• Adverse market movements and/or a duration mismatch to obligations, resulting in investments needing

to be disposed of at a significant realised loss.

• An inability to liquidate investments due to market conditions.

Conduit's investment strategy is to hold high quality, liquid securities sufficient to meet reinsurance liabilities
and other near-term liquidity requirements. Portfolios are specifically designed to ensure funds are readily
available in an extreme event.

Conduit Holdings Limited Annual Report and Accounts 2022

114

Financial statements

Notes to the consolidated financial statements
continued

The maturity dates of Conduit's portfolio of fixed maturity securities are as follows:

As at 31 December 2022

Fixed maturity securities at FVTPL

Less than one year

Between one and two years

Between two and three years

Between three and four years

Between four and five years

Over five years

Asset-backed and mortgage-backed

Total

As at 31 December 2021

Fixed maturity securities at FVTPL

Less than one year

Between one and two years

Between two and three years

Between three and four years

Between four and five years

Over five years

Asset-backed and mortgage-backed

Total

Short-tail
$m

Long-tail
$m

Total
$m

167.9

149.5

54.2

15.8

4.9

20.1

190.2

46.0

37.0

12.5

48.8

21.0

110.9

142.9

213.9

186.5

66.7

64.6

25.9

131.0

333.1

602.6

419.1

1,021.7

Short-tail
$m

Long-tail
$m

43.8

145.7

144.5

21.3

11.0

10.8

191.6

1.5

70.6

39.1

9.5

57.2

108.3

153.5

Total
$m

45.3

216.3

183.6

30.8

68.2

119.1

345.1

568.7

439.7

1,008.4

The estimated maturity profile of the reinsurance contracts and financial liabilities of Conduit is as follows:

As at 31 December 2022

Carrying
value
$m

Years until liability becomes due – undiscounted
Less than
one
$m

Three to
five
$m

One to
three
$m

Over five
$m

Total
$m

Losses and loss adjustment expenses

459.3

161.5

156.6

72.5

68.7

459.3

Other reinsurance payables

Amounts payable to reinsurers

Other payables

Lease liabilities

Total

15.0

16.2

8.7

2.4

15.0

16.2

8.7

0.6

1.3

501.6

202.0

157.9

0.7

73.2

15.0

16.2

8.7

2.6

68.7

501.8

Conduit Holdings Limited Annual Report and Accounts 2022

115

Total
$m

171.6

7.3

19.0

3.2

Financial statements

Notes to the consolidated financial statements
continued

As at 31 December 2021

Carrying
value
$m

Years until liability becomes due – undiscounted
Less than
one
$m

Three to
five
$m

One to
three
$m

Over five
$m

Losses and loss adjustment expenses

171.6

65.0

62.7

23.1

20.8

Amounts payable to reinsurers

Other payables

Lease liabilities

Total

7.3

19.0

2.9

200.8

7.3

19.0

0.6

91.9

1.3

64.0

24.4

20.8

201.1

Actual maturities of the above may differ from contractual maturities because certain borrowers have the
right to call or prepay certain obligations with or without call or prepayment penalties. The estimation of the
ultimate liability for net losses and loss adjustment expenses is complex and incorporates a significant
amount of judgement. The timing of payment of net losses and loss adjustment expenses is also uncertain
and cannot be predicted as simply as for other financial liabilities. Actuarial and statistical techniques, past
experience and management’s judgement have been used to determine a likely settlement pattern.

As at 31 December 2022, cash and cash equivalents were $112.9 million (31 December 2021: $67.5 million).
Conduit manages its liquidity risks via its investment strategy to hold high quality, liquid securities, sufficient
to meet its reinsurance liabilities and other near-term liquidity requirements. In addition, Conduit has
established asset allocation and maturity parameters within the investment guidelines such that the majority
of the investments are in high quality assets which could be converted into cash promptly and at minimal
expense. Conduit monitors market changes and outlook and reallocates assets as it deems necessary.

As at 31 December 2022, Conduit considers it has more than adequate liquidity to pay its obligations as they
fall due even if difficult investment market conditions were to prevail for a period of time.

d. Credit risk
Credit risk is the risk that a counterparty may fail to pay, or repay, a debt or obligation. Conduit is exposed
to credit risk on its fixed maturity investment portfolio, its premiums receivable from cedants, and on any
amounts recoverable from reinsurers. While Conduit has not experienced any such collection issues, the
COVID-19 pandemic increased the risk of defaults across many industries. The global recovery from the
COVID-19 pandemic continues and the risk that counterparties fail to meet their financial obligations as they
fall due has decreased.

Credit risk on Conduit’s portfolio of fixed maturity securities is mitigated through the investment policy to
invest in instruments of high credit quality issuers and to limit the amounts of credit exposure with respect
to particular ratings categories and any one issuer. Securities rated below an S&P or equivalent rating of
BBB+ may comprise no more than 10.0% of the portfolio. Conduit also limits exposure to individual issuers,
with declining limits for less highly rated issuers. Conduit therefore does not expect any significant credit
concentration risk on its investment portfolio, except for fixed maturity securities issued by the
US government and its agencies.

Conduit is potentially exposed to counterparty credit risk in relation to the premiums receivable from
reinsurance brokers and cedants and on any amounts recoverable from Conduit’s ceded reinsurers. Given
the dislocation in the market, the COVID-19 pandemic may adversely impact the ability to collect amounts
due to Conduit. Credit risk on inwards premiums receivable from cedants is managed by conducting
business with reputable broking organisations, with whom Conduit has established relationships, and by
rigorous cash collection procedures. Conduit also has a broker approval process in place. Credit risk from
ceded reinsurance recoverables is primarily managed by the review and approval of reinsurer security, with
ongoing monitoring in place.

The table below presents an analyses of Conduit’s major exposures to counterparty credit risk, based
on their rating. Premiums receivable are not rated, however there is limited default risk associated with
these amounts.

Conduit Holdings Limited Annual Report and Accounts 2022

116

Financial statements

Notes to the consolidated financial statements
continued

As at 31 December 2022

AAA

AA+, AA, AA-

A+, A, A-

BBB+, BBB, BBB-

Other

Total

As at 31 December 2021

AAA

AA+, AA, AA-

A+, A, A-

BBB+, BBB, BBB-

Other

Total

Cash and cash
equivalents
and fixed
maturity
securities
$m

Inward
premiums
receivables
$m

Reinsurance
recoverable
and other
reinsurance
receivables
$m

651.4

74.5

279.7

129.0

1,134.6

260.5

59.5

29.9

89.4

Cash and cash
equivalents
and fixed
maturity
securities
$m

Inward
premiums
receivables
$m

Reinsurance
recoverable
and other
reinsurance
receivables
$m

542.4

75.6

306.2

151.7

1,075.9

155.0

30.8

18.4

49.2

The reinsurance recoverable classified as other is fully collateralised.

As at 31 December 2022 the average credit quality of Conduit's cash and cash equivalents and portfolio
of fixed maturity securities was AA (31 December 2021: AA-). The COVID-19 pandemic has increased the risk
of defaults across many industries and Conduit continually monitors credit risk, especially during this time of
volatility. Given the investment portfolio positioning, this is not expected to have a meaningful impact from
a credit perspective, although credit spreads are likely to remain volatile in the near-term. Potential interest
rate rises are similarly not expected to impact inwards premiums receivable.

The following table shows premiums receivable that are not yet due and those that are past due but
not impaired:

As at 31 December

Not yet due

Less than 90 days past due

Other

Total

2022
$m

227.3

29.8

3.4

2021
$m

123.0

22.2

9.8

260.5

155.0

For the year ended 31 December 2022 and 2021 no provisions have been made for impaired or irrecoverable
balances and no amount was charged to the consolidated statement of comprehensive loss in respect of
bad debts.

Conduit Holdings Limited Annual Report and Accounts 2022

117

Financial statements

Notes to the consolidated financial statements
continued

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

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

f. Strategic risk
Conduit has identified several strategic risks, including:
• 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.

• The risks of the failure to maintain adequate capital, accessing capital at an inflated cost or the inability
to access capital and unanticipated changes in vendor, regulatory and/or rating agency models that
could result in an increase in capital requirements or a change in the type of capital required.

• The risks of succession planning, staff retention and key personnel risks.

Business plan risk
Conduit's business plan forms the basis of operations and provides strategic direction to management.
Actual versus planned results are monitored regularly.

Capital management risk
The total tangible capital is as follows:

As at 31 December

Shareholders' equity

Intangible assets

Total tangible capital

2022
$m

814.4

1.4

2021
$m

981.2

1.1

813.0

980.1

Risks associated with the effectiveness of Conduit’s capital management are mitigated as follows:
• Regular monitoring of current and prospective regulatory and rating agency capital requirements.
• Oversight of capital requirements by the Board.
• Ability to purchase sufficient, cost-effective reinsurance.
• Maintaining contact with vendors, regulators and rating agencies in order to stay abreast of upcoming

developments.

• Participation in industry groups such as the Association of Bermuda Insurers and Reinsurers, Reinsurance

Association of America and the International Underwriting Association.

Conduit reviews the level and composition of capital on an ongoing basis with a view of:
• Maintaining sufficient capital for underwriting opportunities and to meet obligations to policyholders;
• Maximising the risk-adjusted return to shareholders within the context of the defined risk appetite;
• Maintaining an adequate financial strength rating; and
• Meeting all relevant capital requirements.

Capital is increased or returned as appropriate. The retention of earnings generated leads to an increase in
capital. Capital raising can include debt or equity and returns of capital may be made through dividends,
share repurchases, a redemption of debt or any combination thereof. Other capital management tools and
products available to Conduit may also be utilised. All capital actions require approval by the Board.

Conduit Holdings Limited Annual Report and Accounts 2022

118

Financial statements

Notes to the consolidated financial statements
continued

The primary source of capital used by Conduit is equity shareholders’ 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 and minimum margin of solvency requirements. CRL had
sufficient capital at all times throughout the year to meet the BMA’s requirements.

Retention risk
Risks associated with succession planning, staff retention and key man risks are mitigated through
a combination of resource planning processes and controls, including:
• The identification of key personnel with appropriate succession plans at CHL;
• The identification of key team profit generators at CRL and function heads with targeted

retention packages;

• Documented recruitment procedures, position descriptions and employment contracts;
• Resource monitoring and the provision of appropriate compensation, including equity-based incentives

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

• Training schemes.

4. Segmental reporting
Management and the Board review Conduit’s business and evaluates its performance primarily by three
segments: Property, Casualty and Specialty. These are considered to be the reportable segments for the
purposes of segmental reporting. Further classes of business are underwritten within each reportable
segment. The nature of these individual classes is discussed further in the “Risk disclosures” section.

Reportable segments Operations and classes of business

Property

US and international property risk on an excess of loss and proportional contract basis.

Casualty

Specialty

US and international casualty risk principally including directors and officers, financial
institutions, general, medical malpractice, professional and transactional.

Diverse portfolio of business, principally including aviation, energy, marine, political violence
and terrorism and whole account.

Reportable segment performance is measured by the net underwriting profit or loss and the combined ratio.
The chief operating decision maker does not manage Conduit's assets by reportable segment, and,
accordingly, investment income and other non-underwriting related items are not allocated to each
reportable segment. Refer to the risk disclosures for more information.

All amounts reported are transactions with external parties and associates. There are no significant inter-
segmental transactions.

Conduit Holdings Limited Annual Report and Accounts 2022

119

Financial statements

Notes to the consolidated financial statements
continued

As at 31 December 2022

Gross premiums written by geographic region

Worldwide

Europe

Other

Total

Ceded reinsurance premiums

Net premiums written

Change in unearned premiums

Property
$m

Casualty
$m

Specialty
$m

174.7

93.5

16.3

15.1

171.9

29.0

33.3

2.5

8.7

81.2

10.2

1.1

Total
$m

355.3

203.7

59.8

18.7

299.6

236.7

101.2

637.5

(46.3)

(1.3)

253.3

235.4

(43.6)

(40.1)

(9.0)

92.2

(15.9)

(56.6)

580.9

(99.6)

Change in unearned premiums on premiums ceded

0.9

0.1

1.0

Net premiums earned

210.6

195.4

76.3

482.3

Net insurance losses and loss adjustment expenses

(140.0)

(129.0)

(76.9)

(345.9)

Net insurance acquisition expenses

Net underwriting profit (loss)

Other operating expenses

Net unallocated revenue / expenses

Total comprehensive loss

Net loss ratio

Net acquisition expense ratio

Other operating expense ratio

Combined ratio

(55.5)

(63.0)

15.1

3.4

(17.6)

(18.2)

66.5%

26.4%

66.0%

32.2%

100.8%

23.1%

(136.1)

0.3

(34.3)

(55.7)

(89.7)

71.7%

28.2%

7.1%

92.9%

98.2%

123.9%

107.0%

Conduit Holdings Limited Annual Report and Accounts 2022

120

Financial statements

Notes to the consolidated financial statements
continued

As at 31 December 2021

Gross premiums written by geographic region

Property
$m

Casualty
$m

Specialty
$m

Total
$m

Worldwide

Europe

Other

Total

Ceded reinsurance premiums

Net premiums written

Change in unearned premiums

Change in unearned premiums on premiums ceded

Net premiums earned

Net insurance losses and loss adjustment expenses

Net insurance acquisition expenses

Net underwriting loss

Other operating expenses

Net unallocated revenue / expenses

Total comprehensive loss

Net loss ratio

Net acquisition expense ratio

Other operating expense ratio

Combined ratio

105.4

62.3

6.0

9.7

183.4

(26.4)

157.0

(60.0)

97.0

(70.9)

(30.5)

(4.4)

118.7

3.9

228.0

7.1

2.8

0.4

62.3

0.2

131.7

8.8

10.3

129.0

66.4

378.8

(1.2)

127.8

(67.9)

0.8

60.7

(41.1)

(19.7)

(0.1)

(5.0)

61.4

(32.6)

346.2

(24.9)

(152.8)

0.8

36.5

(30.1)

(8.9)

(2.5)

73.1%

31.4%

67.7%

32.5%

82.5%

24.4%

104.5%

100.2%

106.9%

119.4%

194.2

(142.1)

(59.1)

(7.0)

(30.6)

(4.4)

(42.0)

73.2%

30.4%

15.8%

Included within the other geographic region, are premiums written with external parties in Bermuda for
$0.6 million (31 December 2021: $0.4 million).

Investment return

As at 31 December 2022

Fixed maturity securities

Cash and cash equivalents

Total

As at 31 December 2021

Fixed maturity securities

Cash and cash equivalents

Total

Net
investment
income
$m

Net
realised
gains /
(losses)
$m

Net
unrealised
gains /
(losses)
$m

Total
investment
return
$m

16.5

1.3

17.8

(2.8)

(67.8)

(54.1)

1.3

(2.8)

(67.8)

(52.8)

Net
investment
income
$m

Net
realised
gains /
(losses)
$m

Net
unrealised
gains /
(losses)
$m

Total
investment
return
$m

5.3

0.2

5.5

(1.0)

(7.6)

(3.3)

0.2

(3.1)

Included in net investment income is $1.1 million of investment management and custody fees for the year
ended 31 December 2022 (31 December 2021: $0.7 million).

Conduit Holdings Limited Annual Report and Accounts 2022

121

Financial statements

Notes to the consolidated financial statements
continued

6. Net insurance acquisition expenses

Year ended 31 December

Insurance acquisition expenses

Change in deferred acquisition expenses

Insurance acquisition expenses ceded

Total

7. Employee benefits and other incentives
Aggregate remuneration and other incentives of Conduit’s employees is as follows:

Year ended 31 December

Wages and salaries

Pension benefit

Bonus and other benefits

Total cash compensation

Equity-based incentives

Total employee benefits and other incentives

2022
$m

161.1

(24.8)

(0.2)

136.1

2022
$m

11.4

1.1

7.7

20.2

2.1

22.3

2021
$m

103.7

(44.6)

59.1

2021
$m

7.5

0.8

10.4

18.7

0.3

19.0

Equity-based incentives – MIP
Prior to the IPO, a MIP was created. The purpose of the MIP was to provide an incentive scheme for the
founders and initial employees for their services in building the foundations of Conduit. The incentive is
based around shares in CML, which will be automatically exchanged for ordinary shares of CHL for an
aggregate value equivalent to up to 15% of the excess of the market value of CHL over and above the
Invested Equity, subject to the satisfaction of the vesting conditions. All outstanding and future grants have
an exercise period of four to seven years from the grant date. The fair value is estimated using a stochastic
Monte Carlo model.

CML issued 100,000 A1 shares and 100,000 A2 shares during the period ended 31 December 2020
at a subscription price of £1.72 and $2.26, respectively. Refer to note 18 for additional details.

The following table lists the assumptions used in the stochastic model for the MIP awards:

Assumptions

Dividend yield
Expected volatility1

Risk-free interest rate2

Expected life of instruments

Year ended 31
December 2022

Year ended 31
December 2021

range from
17.2% – 19.0%

range from
0.3% – 0.6%

range from
17.2% – 19.0%

range from
0.3% – 0.6%

range from 4 to 7
years

1.
2.

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

The shares were granted prior to the IPO and therefore discounts for business viability and lack of
marketability were also applied. There are significant risks associated with an IPO and the instruments are
also illiquid until the tranche vesting dates. Management therefore selected their best estimates at the time
for these discounts. These assumptions were highly judgemental and input from advisors was sought.
Management also considered alternative assumptions and concluded there was not a material impact on the
estimated valuation selected. The calculation of the equity-based incentive expense assumes no forfeitures

Conduit Holdings Limited Annual Report and Accounts 2022

122

Financial statements

Notes to the consolidated financial statements
continued

due to employee turnover, with subsequent adjustments to reflect actual experience. The assumptions and
estimated valuation selected resulted in 20% being expensed upfront for certain employees as this portion
was not tied to service conditions and was fully expensed in the period ended 31 December 2020.

Conditions of the MIP include:
• 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, with the estimated fair value recognised
in the consolidated statement of comprehensive loss, 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.

• Vesting conditions, other than market conditions linked to the share price of CHL, are not taken into

account when estimating the fair value.

• At the end of each reporting period Conduit revises its estimates of the number of shares that are

expected to vest due to non-market conditions and recognises the impact of the revision to original
estimates, if any, in the consolidated statement of comprehensive loss, with a corresponding adjustment
to shareholders’ equity.

Equity-based incentives – DSBP
A percentage of each employee's bonus is automatically deferred into shares as nil cost options. The nil cost
options vest annually in separate equal tranches over a three year period from the date of grant and do not
have associated performance criteria attached to the awards. These awards accrue dividend equivalents for
all dividends declared where the record date falls between the grant date and date of exercise, and are paid
at the time of exercise.

DSBP

Outstanding as at 31 December 2021

Granted

Forfeited

Outstanding as at 31 December 2022

8. Other operating expenses

Year ended 31 December

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

Audit fees

Other auditor services

Total

Number of
awards

764,575

(11,559)

753,016

2022
$m

2021
$m

0.9

0.1

1.0

0.8

0.1

0.9

During the year ended 31 December 2022, KPMG Audit Limited provided non-audit services in relation to
Conduit's 2022 interim review. Fees for non-audit services in the year ended 31 December 2022 totalled
$0.1 million (31 December 2021: $0.1 million).

9. Financing costs

Year ended 31 December

LOC and trust fees

Interest expense on lease liabilities

Total

Refer to note 17 for details of Conduit’s financing arrangements.

2022
$m

0.7

0.1

0.8

2021
$m

0.4

0.1

0.5

Conduit Holdings Limited Annual Report and Accounts 2022

123

Financial statements

Notes to the consolidated financial statements
continued

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

United Kingdom
CRSL is subject to normal UK corporation tax on all of its taxable profits. For the year ended 31 December
2022 and 2021 an immaterial tax profit arose.

11. Cash and cash equivalents

As at 31 December

Cash at bank and in hand

Cash equivalents

Total

2022
$m

21.5

91.4

112.9

2021
$m

24.4

43.1

67.5

Cash equivalents include money market funds and other short-term highly liquid investments with three
months or less remaining until maturity at the time of purchase. The carrying amount of these assets
approximates their fair value. Refer to note 17 for cash and cash equivalents provided as collateral under
Conduit’s financing arrangements.

12. Investments

As at 31 December 2022

Fixed maturity securities, at FVTPL

Short-term investments

US treasuries

US agency debt

US municipals

Non-US government and agency

Asset-backed

US government agency mortgage-backed

Non-agency mortgage-backed

Agency commercial mortgage-backed

Non-agency commercial mortgage-backed

Corporate

Total

Cost or
amortised
cost
$m

Unrealised
gains
$m

Unrealised
losses
$m

Estimated
fair value
$m

37.9

221.6

2.0

16.4

2.1

171.6

116.3

15.1

3.7

59.7

450.7

1,097.1

0.2

(11.6)

(0.2)

(1.2)

(0.1)

(7.8)

0.1

(15.8)

(2.3)

(0.5)

(7.0)

0.1

0.4

37.9

210.2

1.8

15.2

2.0

163.8

100.6

12.8

3.2

52.7

(29.3)

421.5

(75.8)

1,021.7

Conduit Holdings Limited Annual Report and Accounts 2022

124

Financial statements

Notes to the consolidated financial statements
continued

As at 31 December 2021

Fixed maturity securities, at FVTPL

Short-term investments

US treasuries

US agency debt

US municipals

Non-US government and agency

Asset-backed

US government agency mortgage-backed

Non-agency mortgage-backed

Agency commercial mortgage-backed

Non-agency commercial mortgage-backed

Corporate

Total

Cost or
amortised
cost
$m

Unrealised
gains
$m

Unrealised
losses
$m

Estimated
fair value
$m

8.9

172.9

2.0

13.4

2.2

170.3

0.1

95.5

19.4

3.2

59.0

469.2

1,016.0

0.2

0.3

(1.1)

(0.2)

(0.7)

(0.9)

(0.2)

(0.6)

(4.2)

8.9

171.8

2.0

13.2

2.2

169.7

94.6

19.2

3.2

58.4

465.2

(7.9)

1,008.4

As at 31 December 2022 other assets and other payables included $1.2 million and $1.2 million for
investments sold and purchased, respectively (31 December 2021: nil and $10.6 million, respectively).

Conduit determines the estimated fair value of each individual security utilising the highest-level inputs
available. Prices for the investment portfolio are provided via a third-party investment accounting firm
whose pricing processes and the controls thereon are subject to an annual audit on both the operation and
the effectiveness of those controls. Various recognised reputable pricing sources are used including pricing
vendors. The pricing sources use bid prices where available, otherwise indicative prices are quoted based on
observable market trade data. The prices provided are compared to the investment managers’ pricing.

Conduit has not made any adjustments to any pricing provided by independent pricing services or its third-
party investment managers for the year ended 31 December 2022 and 2021. The fair value of securities in the
investment portfolio is estimated using the following techniques:

LEVEL (I) – Level (I) investments are securities with quoted prices in active markets. A financial instrument
is regarded as quoted in an active market if quoted prices are readily and regularly available from an
exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent
actual and regularly occurring market transactions on an arm’s length basis.

LEVEL (II) – Level (II) investments are securities with quoted prices in active markets for similar assets or
liabilities or securities valued using other valuation techniques for which all significant inputs are based on
observable market data. Instruments included in Level (II) are valued via independent external sources using
directly observable inputs to models or other valuation methods. The valuation methods used are typically
industry accepted standards and include broker-dealer quotes and pricing models including present values
and future cash flows with inputs such as yield curves, credit spreads, interest rates, prepayment speeds and
default rates.

LEVEL (III) – Level (III) investments are securities for which valuation techniques are not based on
observable market data and require significant management judgement.

Conduit Holdings Limited Annual Report and Accounts 2022

125

Financial statements

Notes to the consolidated financial statements
continued

Conduit determines whether transfers have occurred between levels of the fair value hierarchy by re-
assessing the categorisation at the end of each reporting period. Transfers from Level (I) to (II) securities
amounted to $76.2 million and transfers from Level (II) to (I) securities amounted to $37.8 million during the
year ended 31 December 2022 using end of current period positions and estimated fair values. There were
no investments included in Level (III). There were no transfers between Level (I) and (II), and no investments
were included in Level (III) during the year ended 31 December 2021.

The fair value hierarchy of Conduit's investment portfolio is as follows:

As at 31 December 2022

Fixed maturity securities, at FVTPL

Short-term investments

US treasuries

US agency debt

US municipals

Non-US government and agency

Asset-backed

US government agency mortgage-backed

Non-agency mortgage-backed

Agency commercial mortgage-backed

Non-agency commercial mortgage-backed

Corporate

Total

As at 31 December 2021

Fixed maturity securities, at FVTPL

Short-term investments

US treasuries

US agency debt

US municipals

Non-US government and agency

Asset-backed

US government agency mortgage-backed

Non-agency mortgage-backed

Agency commercial mortgage-backed

Non-agency commercial mortgage-backed

Corporate

Total

Level I
$m

Level II
$m

37.9

210.2

1.8

15.2

2.0

163.8

100.6

12.8

3.2

52.7

Total
$m

37.9

210.2

1.8

15.2

2.0

163.8

100.6

12.8

3.2

52.7

51.3

370.2

421.5

299.4

722.3

1,021.7

Level I
$m

Level II
$m

Total
$m

3.1

171.8

5.8

2.0

13.2

2.2

169.7

94.6

19.2

3.2

58.4

8.9

171.8

2.0

13.2

2.2

169.7

94.6

19.2

3.2

58.4

117.1

348.1

465.2

292.0

716.4

1,008.4

Refer to note 17 for investments provided as collateral under Conduit’s financing arrangements.

Conduit Holdings Limited Annual Report and Accounts 2022

126

Financial statements

Notes to the consolidated financial statements
continued

13. Interests in structured entities

Unconsolidated structured entities in which Conduit has an interest
As part of Conduit’s investment activities, it invests in unconsolidated structured entities. Conduit does not
sponsor any of the unconsolidated structured entities. The business relations of Conduit with the structured
entities set out below do not give rise to consolidation because the criteria for control pursuant to IFRS 10,
as contained in our consolidation principles, are not met.

A summary of interests in unconsolidated structured entities is as follows:

As at 31 December

Fixed maturity securities, at FVTPL

Asset-backed

US government agency mortgage-backed

Non-agency mortgage-backed

Agency commercial mortgage-backed

Non-agency commercial mortgage-backed

Total

2022
$m

163.8

100.6

12.8

3.2

52.7

2021
$m

169.7

94.6

19.2

3.2

58.4

333.1

345.1

The fixed maturity structured entities are used to meet specific investment needs of borrowers and
investors which cannot be met from standardised financial instruments available in the capital markets,
providing liquidity and diversification. While individual securities may differ in structure, the principles
of the instruments are similar and it is appropriate to aggregate the investments into the categories
detailed above.

The risk that Conduit faces in respect of the investments in structured entities is similar to the risk it faces
in respect of other financial investments held on the consolidated balance sheet. Fair value is determined
by market supply and demand, which is driven by investor evaluation of the credit risk of the structure and
changes in the term structure of interest rates which can change the expectation of cash flows associated
with the instrument and, therefore, its value in the market.

The maximum exposure to loss in respect of these structured entities would be the carrying value of the
instruments that Conduit holds. Generally, default rates would have to increase substantially before Conduit
would suffer a loss. This assessment is made prior to investing and regularly through the holding period for
the security.

Refer to note 17 for investments provided as collateral under Conduit’s financing arrangements.

Conduit Holdings Limited Annual Report and Accounts 2022

127

Financial statements

Notes to the consolidated financial statements
continued

14. Losses and loss adjustment expenses
Losses and loss adjustment expenses

As at 31 December 2020

Incurred losses:

Current year

Exchange adjustments

Incurred losses and loss adjustment expenses

Paid losses:

Current year

Paid losses and loss adjustment expenses

As at 31 December 2021

Incurred losses:

Current year

Prior year

Exchange adjustments

Gross losses
and loss
adjustment
expenses
$m

Reinsurance
recoveries
$m

Net losses
and loss
adjustment
expenses
$m

191.0

(0.3)

190.7

19.1

(48.9)

171.6

(48.9)

390.9

(39.1)

(4.8)

(0.9)

(1.1)

142.1

(0.3)

141.8

19.1

122.7

351.8

(5.9)

(0.9)

Incurred losses and loss adjustment expenses

385.2

(40.2)

345.0

Paid losses:

Current year

Prior year

Paid losses and loss adjustment expenses

As at 31 December 2022

42.4

55.1

97.5

459.3

(12.5)

(76.6)

42.4

42.6

85.0

382.7

Conduit did not book any additional case reserves for the year ended 31 December 2022 and 2021. Net
losses and loss adjustment expenses as at 31 December 2022 had an estimated duration of 3.1 years
(31 December 2021: 2.7 years).

Further information on the calculation of loss reserves and associated risks are provided in the risk
disclosures section. The risks associated with reinsurance contracts are complex and the impact of an
unreported event could lead to a significant increase in Conduit’s loss reserves. Conduit believes that
the loss reserves established are adequate, however a 20% increase in estimated losses would have
a $91.9 million adverse impact on profit (31 December 2021: $34.3 million).

The 2022 losses were driven by another year of higher-than-average catastrophe losses combined with a
number of large losses impacting the industry. Conduit's most significant loss events for the current year
stemmed from Hurricane Ian's landfall in Florida as a category 4 hurricane, and the ongoing war in Ukraine
impacting both property and specialty segments via classes such as aviation, war on land, and marine war.
Conduit recorded $45.4 million and $25.0 million respectively for these events, net of outwards reinsurance.

The prior year benefited from reserve releases in the property segment, as reserves established for prior
year catastrophe events were refined due to updated information and also a lack of reported claims. General
IBNR releases in the specialty segment also contributed to the favourable development of the prior year.

The estimation of the ultimate loss and loss adjustment expense liability is a complex process which
incorporates a significant amount of judgement. It is reasonably possible that uncertainties inherent in the
reserving process, delays in insureds or ceding companies reporting losses to Conduit, together with the
potential for unforeseen adverse developments, could lead to a material change in estimated losses and loss
adjustment expenses.

Conduit Holdings Limited Annual Report and Accounts 2022

128

Financial statements

Notes to the consolidated financial statements
continued

The breakdown of net losses and loss adjustment expenses is shown below:

As at 31 December 2022

Outstanding losses

Losses incurred but not reported

Total

As at 31 December 2021

Outstanding losses

Losses incurred but not reported

Total

Gross losses
and loss
adjustment
expenses
$m

Reinsurance
recoveries
$m

98.1

361.2

459.3

(22.8)

(53.8)

(76.6)

Gross losses
and loss
adjustment
expenses
$m

Reinsurance
recoveries
$m

26.0

145.6

171.6

(48.9)

Net losses
and loss
adjustment
expenses
$m

75.3

307.4

382.7

Net losses
and loss
adjustment
expenses
$m

26.0

96.7

122.7

15. Right-of-use lease assets
Right-of-use lease assets primarily relate to leased properties for Conduit's offices in Bermuda and office
equipment. Conduit has not received any rent concessions as a result of COVID-19.

Right-of-use assets

Balance and net book value as at 1 January 2021

Additions

Depreciation

Balance and net book value as at 31 December 2021

Depreciation

Balance and net book value as at 31 December 2022

Lease liabilities

As at 31 December

Less than one year

Between one and five years

Total undiscounted lease liabilities

3.0

(0.1)

2.9

(0.7)

2.2

2021
$m

0.6

2.6

3.2

2022
$m

0.6

2.0

2.6

The discounted lease liability as at 31 December 2022 was $2.4 million (31 December 2021: $2.9 million).
Conduit does not face significant liquidity risk with respect to its lease liabilities.

Conduit Holdings Limited Annual Report and Accounts 2022

129

Financial statements

Notes to the consolidated financial statements
continued

Amounts recognised in the consolidated financial statements

Year ended 31 December

Consolidated statement of comprehensive loss

Interest expense on lease liabilities

Depreciation of right-of-use assets

Total

Consolidated statement of cash flows

Lease payments

2022
$m

0.1

0.7

0.8

2021
$m

0.1

0.2

0.6

0.1

16. Intangible assets
Intangible assets are comprised of computer software capitalised on the basis of the costs incurred to
acquire and bring into use the specific software. Computer software is a technological asset and subject to
obsolescence, therefore management expects to utilise the asset over its remaining useful life of 11 years.

Cost

Net book value as at 31 December 2020

Additions

Net book value as at 31 December 2021

Additions

Net book value as at 31 December 2022

0.2

0.9

1.1

0.3

1.4

17. Financing arrangements
Letters of credit and trust accounts
CRL is a non-admitted reinsurer in the US and Canada. Terms and conditions of certain reinsurance
contracts with US and Canadian cedants require CRL to provide collateral for outstanding insurance
contract liabilities, including unearned premiums and losses and loss adjustment expenses. The collateral
can be provided by LOCs or by assets in trust accounts. Refer to note 9 for details of interest expense
associated with these LOCs included in financing costs. Additional information about Conduit's exposure
to interest rate and liquidity risk is included in the "Risk disclosures" section.

Standby letter of credit facility
During July 2021, CRL, as the borrower, entered into a $125.0 million standby letter of credit facility led
by Lloyds Bank Corporate Markets PLC. CHL will guarantee the obligations of CRL with respect to the
standby letter of credit facility. Terms of the standby letter of credit facility contain standard qualitative
representations and require certain standard financial covenants be adhered to, including: a maximum
consolidated debt to capital ratio of CHL of 35.0%; a minimum consolidated tangible net worth of CHL; and
a minimum A.M. Best rating of "B++" for CRL. CRL had the option to increase the aggregate amount of the
commitment under the facility up to $150.0 million. This was exercised on 22 December 2022, with a new
option put in place to increase the facility up to $175.0 million. As at 31 December 2022, $92.0 million
(31 December 2021: $18.9 million) was outstanding under the standby letter of credit facility and is secured
by cash and cash equivalents and investments of $110.7 million (31 December 2021: $27.8 million).

Uncommitted letter of credit facility
During September 2021, CRL entered into a $75.0 million uncommitted letter of credit facility with Citibank
Europe PLC. Terms of the uncommitted letter of credit facility include standard qualitative representations.
As at 31 December 2022, $37.0 million (31 December 2021: $3.9 million) was outstanding under the
uncommitted letter of credit facility and is secured by cash and cash equivalents and investments of
$49.7 million (31 December 2021: $6.6 million).

Conduit Holdings Limited Annual Report and Accounts 2022

130

Financial statements

Notes to the consolidated financial statements
continued

Trust accounts
Several trust account arrangements have been established in favour of policyholders and ceding companies
to provide collateral or comply with the security requirements of certain contracts. As at 31 December 2022,
$127.4 million (31 December 2021: $29.9 million) of cash and cash equivalents and investments were
restricted in favour of third parties.

Additional letter of credit and trust funding requirements
For the year ended 31 December 2022, $87.8 million (31 December 2021: $58.8 million) of collateral requests
and collateral amendments in respect of that financial year were received subsequent to the year end date.
These collateral requests will be completed in the normal course of business and will be funded during the
subsequent year using cash and cash equivalents and/or investments.

18. Share capital
Authorised share capital

Authorised common shares of $0.01 each

Authorised A1 shares of £0.01 each

Authorised A2 shares of $0.01 each

As at 31 December 2022 and 2021

Number

10,000,000,000

100.0

100,000

10,000,200,000

100.0

Allotted, called-up and fully paid

Common
shares
number

A1 shares
number

A2 shares
number

Total
number

Issued

165,239,997

100,000

165,439,997

As at 31 December 2022 and 2021

165,239,997

100,000

165,439,997

Total
$m

1.7

The number of common shares in issue with voting rights (allocated capital less own shares held) as at 31
December 2022 was 160,141,174 (31 December 2021: 165,207,174).

CHL holds 18,000 A1 and A2 shares at 31 December 2022 and 2021. The A1 and A2 shares have no voting
rights attached. Subject to vesting conditions, discussed in note 7, the A1 and A2 shares will be automatically
exchanged for ordinary shares of CHL.

Own shares

As at 31 December 2020

Repurchased

As at 31 December 2021

Repurchased

Purchased by EBT

Number held
in treasury

(32,823)

(725,000)

(0.2)

(3.4)

Number held
in trust

Total number
of own shares

Total
$m

(32,823)

(725,000)

(0.2)

(3.4)

(4,341,000)

(16.5)

(4,341,000)

(16.5)

As at 31 December 2022

(757,823)

(3.6)

(4,341,000)

(16.5)

(5,098,823)

(20.1)

Shares repurchased by CHL and the EBT will be held as own shares to meet future obligations under CHL’s
variable incentive schemes. See note 22 for information on shares held by the EBT.

Dividends

Interim 2021

Final 2021

Interim 2022

Record date

Payment date Per share $

20 August 2021

10 September 2021

25 March 2022

22 April 2022

19 August 2022

9 September 2022

0.18

29.7

29.6

See note 23 for information with respect to dividends declared subsequent to 31 December 2022.

Conduit Holdings Limited Annual Report and Accounts 2022

131

Financial statements

Notes to the consolidated financial statements
continued

19. Other reserves
Other reserves consist of the following:

As at 31 December 2020

Equity-based incentives

As at 31 December 2021

Equity-based incentives

Transfer from share premium to contributed surplus

As at 31 December 2022

Other reserves include Conduit’s equity-based incentive expense.

Other
reserves
$m

Share
premium
$m

Total other
reserves
$m

0.3

1,055.4

1,055.7

0.3

0.6

1,055.4

1,056.0

2.1

1,055.4

(1,055.4)

2.1

1,058.1

Share premium includes any premiums received on issue of share capital. The transaction costs that are
attributable to the issuance of new shares incurred in forming Conduit are treated as a deduction from share
premium. The share premium was transferred to contributed surplus during May 2022 after approval by
Conduit's shareholders at the AGM.

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

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

Year ended 31 December

Loss for the period

Basic weighted average number of shares

Dilutive effect of equity-based incentives

Diluted weighted average number of shares

Basic and diluted loss per share

2022
$m

2021
$m

(89.7)

(42.0)

Number

163,441,264

165,239,907

167,093

163,608,357 165,239,907

Per share $

(0.55)

(0.25)

Equity-based incentive awards are only treated as dilutive when their conversion to common shares would
decrease earnings per share or increase loss per share from continuing operations. Incremental shares from
ordinary restricted share options where relevant performance criteria have not been met are not included
in the calculation of dilutive shares.

Conduit Holdings Limited Annual Report and Accounts 2022

132

Financial statements

Notes to the consolidated financial statements
continued

22. Related party disclosures
These consolidated financial statements include CHL and the entities listed below:

Subsidiary undertakings

CHL

CRL

CRSL
CML1

CSL

EBT

Domicile

Bermuda

England and Wales

Bermuda

Jersey

Principal Business

Holding company, Ultimate parent

General insurance business

Support services

Employee benefit trust

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.

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

Employee benefit trust
The EBT was established with the sole purpose of administering Conduit's equity-based incentive schemes.
The trustee operates the trust for the benefit of Conduit's employees, all in accordance with an established
trust deed. While Conduit does not have legal ownership of the EBT, the trust is consolidated in Conduit's
accounts due to the ability that Conduit has to influence the actions of the trust.

Funding for the trust is provided by CHL through a non-interest bearing loan facility. The facility may only
be used by the trustee for the purpose of achieving the objectives of the EBT. During the year ended 31
December 2022, advances of $16.5 million (31 December 2021: nil) were made to the trust.

CHL common shares purchased by the EBT will be held for the benefit of employees under CHL's variable
incentive schemes. During the year ended 31 December 2022 the trust purchased common shares of
4,341,000 (31 December 2021: nil).

Key management compensation
Remuneration for key management, Conduit’s Executive and Non-Executive Directors, was as follows:

Year ended 31 December

Cash compensation

Equity-based incentives

Directors fees and expenses

Total

2022
$m

4.7

1.4

0.8

6.9

2021
$m

6.3

0.3

0.6

7.2

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

IncubEx, Inc.
Effective 9 April 2021, CHL executed a stock purchase agreement with IncubEx, a product and business
development firm with a focus on designing and developing new financial products in global
environmental, reinsurance and related commodity markets. CHL purchased 624 shares of IncubEx’s
Series A-3 preferred stock, with a par value of $0.0001 per share, for an aggregate purchase price of
$50,000, or $80.08 per share.

The current Executive Chairman of CHL is also a founder and current Chairman of IncubEx. The terms and
conditions of the stock purchase agreement are equivalent to those that would prevail in an arm’s length
transaction. The investment in IncubEx is included in other assets in the consolidated balance sheet and
is recorded at cost, which approximates fair value.

Conduit Holdings Limited Annual Report and Accounts 2022

133

Financial statements

Notes to the consolidated financial statements
continued

23. Subsequent events
Dividends
On 22 February 2023, Conduit’s Board of Directors declared a final dividend for 2022 of $0.18
(approximately £0.15) per common share, which will result in an aggregate payment of $28.8 million. The
dividend will be paid in pounds sterling on 21 April 2023 to shareholders of record on 24 March 2023 (the
“Record Date”) using the pound sterling / US dollar spot exchange rate at 12 noon on the Record Date.

Uncommitted letter of credit facility
During January 2023, Conduit Re increased its $75.0 million uncommitted letter of credit facility with
Citibank Europe PLC to $100.0 million.

Conduit Holdings Limited Annual Report and Accounts 2022

134

Additional information

Additional performance measures (the “APMs”)

Conduit presents certain APMs to evaluate, monitor and manage the business and to aid readers’
understanding of Conduit's financial statements and methodologies used. These are common measures
used across the (re) insurance industry and allow the reader of Conduit's financial reports to compare those
with other companies in the (re)insurance industry. The APMs should be viewed as complementary to,
rather than a substitute for, the figures prepared in accordance with IFRS. Conduit’s Audit Committee has
evaluated the use of these APMs and reviewed their overall presentation to ensure that they were not given
undue prominence. This information has not been audited.

Management believes the APMs included in the consolidated financial statements are important for
understanding Conduit’s overall results of operations and may be helpful to investors and other interested
parties who may benefit from having a consistent basis for comparison with other companies within the
(re)insurance industry. However, these measures may not be comparable to similarly labelled measures used
by companies inside or outside the (re)insurance industry. In addition, the information contained herein
should not be viewed as superior to, or a substitute for, the measures determined in accordance with the
accounting principles used by Conduit for its audited consolidated financial statements or in accordance
with IFRS.

Below are explanations, and associated calculations, of the APMs presented by Conduit:

APM
Net loss ratio

Net acquisition expense ratio

Explanation
Ratio of net losses and loss adjustment
expenses expressed as a percentage of net
premiums earned in a period.

Calculation
Net losses and loss adjustment
expenses / Net premiums earned

Ratio of net acquisition expenses charged
by insurance brokers and other insurance
intermediaries to Conduit expressed as
a percentage of net premiums earned in
a period.

Net acquisition expenses / Net
premiums earned

Other operating expense ratio

Ratio of other operating expenses
expressed as a percentage of net premiums
earned in a period.

Other operating expenses / Net
premiums earned

Combined ratio (KPI)

Accident year loss ratio

Underwriting year loss ratio

The sum of the net loss ratio, net acquisition
expense ratio and other operating expense
ratio. A combined ratio below 100%
generally indicates profitable underwriting,
whereas a combined ratio over 100%
generally indicates unprofitable
underwriting, each prior to the
consideration of total net investment return.

Ratio of the net accident year ultimate
liability revalued at the current balance
sheet date expressed as a percentage of
net premiums earned in a period.

Ratio of net losses and loss adjustment
expenses of an underwriting year (or
calendar year) expressed as a percentage
of net premiums earned in a period.

Underwriting profit (loss)

Profit or loss directly related to the
underwriting activities of Conduit.

Net loss ratio + Net acquisition
expense ratio + Other operating
expense ratio

Accident year net losses and loss
adjustment expenses / Net premiums
earned

Underwriting year net losses and
loss adjustment expenses / Net
premiums earned

Net premiums earned – net losses
and loss adjustment expenses – net
acquisition costs

Conduit Holdings Limited Annual Report and Accounts 2022

135

Additional information

Additional performance measures (the “APMs”)
continued

Explanation

APM
Total net investment return (KPI) Conduit's principal investment objective is
to preserve capital and provide adequate
liquidity to support the payment of losses
and other liabilities. In light of this, Conduit
looks to generate an appropriate total net
investment return. Conduit bases its total
net investment return on the sum of non-
operating cash and cash equivalents and
fixed maturity securities. Total net
investment return is calculated daily and
expressed as a percentage.

Calculation
Net investment income + Net
unrealised gains (losses) on
investments + Net realised gains
(losses) on investments / Non-
operating cash and cash equivalents +
Fixed maturity securities, at beginning
of period

Return on equity (KPI)

Total shareholder return (KPI)

Dividend yield

RoE enables Conduit to compare itself
against other peer companies in the
immediate industry. It is also a key
measure internally and is integral in the
performance-related pay determinations.
RoE is calculated as the profit for the
period divided by the opening total
shareholders' equity.

Total shareholder return allows Conduit to
compare itself against other public peer
companies. Total shareholder return
is calculated as the percentage change in
Common Share price over a period, after
adjustment for Common Share dividends.

Calculated by dividing the annual dividends
per Common Share by the Common Share
price on the last day of the given year and
expressed as a percentage.

Profit (loss) after tax for the period/
Total shareholders' equity, at
beginning of period

Closing Common Share price -
Opening Common Share price +
Common Share dividends during the
period / Opening Common Share price

Annual dividends per Common Share /
Closing Common Share price

Conduit Holdings Limited Annual Report and Accounts 2022

136

Appendix

Glossary

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

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.

100 year return period A 1% probability of a
catastrophe loss event of a certain size (or greater)
occurring in any given year.

Broker An intermediary who negotiates contracts
of insurance or reinsurance, receiving a commission
for placement and other services rendered.

250 year return period A 0.4% probability of a
catastrophe loss event of a certain size (or greater)
occurring in any given year.

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

ABIR The Association of Bermuda Insurers and
Reinsurers (ABIR) represents the public policy
interests of its members.

Additional case reserves (ACRs) ACRs represent
Conduit's estimate for losses related to specific
contracts which Conduit believes may not be
adequately reported, or adequately covered in the
application of IBNR.

BSCR Bermuda Solvency Capital Requirement.

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

Cedant A ceding insurer or a reinsurer that writes
and issues a policy to an (re)insured and
contractually transfers (cedes) a portion of the risk
to a reinsurer or retrocessionaire.

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.

CEO Chief Executive Officer

CFO Chief Financial Officer

CHL Conduit Holdings Limited.

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.

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

AGM Annual General Meeting of CHL shareholders.

CML Conduit MIP Limited.

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

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

Combined ratio The sum of the net loss ratio, net
acquisition expense ratio and other operating
expense ratio. A combined ratio below 100%
generally indicates profitable underwriting, whereas
a combined ratio over 100% generally indicates
unprofitable underwriting, each prior to the
consideration of total net investment return.

BCAR The AM Best measure of capital adequacy.

Common shares common shares of CHL of $0.01
par value per share.

Best Capital Adequacy Rating (BCAR) Depicts the
quantitative relationship between a rating unit’s

Company Conduit Holdings Limited.

Conduit Holdings Limited Annual Report and Accounts 2022

137

Appendix
Glossary
continued

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.

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.

CRO Chief Risk Officer.

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.

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 expenses Costs incurred for
the acquisition or the renewal of insurance policies
which are deferred and amortised over the term of
the insurance contracts.

Diluted earnings (loss) per share Calculated by
dividing comprehensive profit (loss) for the year
attributable to shareholders by the weighted
average number of common shares outstanding
during the year, excluding treasury shares, plus the
weighted average number of common shares that
would be issued on the conversion of all potentially
dilutive equity-based compensation awards.

DSBP The deferred share bonus plan is an equity-
based incentive plan where a certain percentage of
employee bonuses is deferred into nil-cost options.

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 Common Share by the Common
Share price on the last day of the given year and
expressed as a percentage.

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

EBT The Conduit Group EBT is a trust established
for the sole purpose of administering Conduit's
equity-based incentive schemes.

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.

Estimated ultimate premiums written Premium
reported by ceding companies, supplemented by
management’s judgement on the estimate provided.

Excess of loss (XOL, XL) or non-proportional
Reinsurance that indemnifies against all or a
specified portion of loss and loss expenses in excess
of a specified monetary amount or other threshold,
known as the cedant's retention or reinsurers
attachment point, generally subject to a negotiated
reinsurance contract limit.

Conduit Holdings Limited Annual Report and Accounts 2022

138

Appendix
Glossary
continued

Facultative reinsurance The cedant cedes, and the
reinsurer assumes, all or part of the risk under a
single insurance contract.

FVTPL Fair value through profit or loss.

Gross Premiums Earned Equal to gross premiums
written less the change in unearned premiums. It is
the portion of the gross premium applicable to the
expired portion of the policies reinsured.

Gross Premiums Unearned The gross premiums
that are related to the unexpired portion of the risk
period after the balance sheet date that are
deferred and amortised to future accounting.

Gross Premiums Written (GPW) Amounts payable
by the cedant before any deductions, which may
include taxes, brokerage and commission.

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

IASB International Accounting Standards Board.

IFRS International Financial Reporting Standard(s).

Incurred But Not Reported (IBNR) Reserve for
anticipated or likely losses that may result from
insured events which have taken place, but which
have not yet been reported and/or possible
adverse.

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.

LOC Letter of credit.

Long-tail A type of liability that carries a long
settlement period.

Losses and oss adjustment expenses 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.

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.

Market value Refers to (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.

Net acquisition expense Net expenses charged
by insurance brokers and other insurance
intermediaries.

Net acquisition expense ratio Ratio of net
acquisition expenses charged by insurance brokers
and other insurance intermediaries to Conduit
expressed as a percentage of net premiums earned
in a period.

Net loss ratio Ratio, in percent, of net losses and
loss adjustment expenses to net premiums earned.

OEP Occurrence exceedance probability, the
probability that the largest loss in a year exceeds
a certain amount (of loss).

Other operating expense ratio Ratio of other
operating expenses expressed as a percentage
of net premiums earned in a period.

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139

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

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

Treaty reinsurance A form of reinsurance in which
the ceding company makes an agreement to cede
certain business and the reinsurer, in turn, agrees to
accept all business qualifying under the agreement,
known as the “treaty”.

Ultimate loss ratio The ratio of total incurred losses
to total premiums earned.

Unearned premium The portion of premium income
that is deferred and amortised to future accounting
periods.

US GAAP Accounting principles generally accepted
in the United States.

VaR Value at Risk.

Appendix
Glossary
continued

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 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
10%. 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.

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

Return on Equity (RoE) RoE is calculated as the
profit for the period divided by the opening total
shareholders' equity.

Renewal price index (RPI) Internal methodology
that management uses to track trends in premium
rates of a portfolio of reinsurance contracts.

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

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

TCFD The Task Force on Climate-Related Financial
Disclosures (TCFD) was created by the G20
established Financial Stability Board in December
2015 to improve the quality, quantity and
consistency of climate-related disclosures. To
achieve this, it developed a reporting framework
which consists of a number of recommendations
structured into four pillars: governance, strategy,
risk, and metrics and targets.

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140

Appendix

Advisers and contact information

Conduit Holdings Limited
Bermuda Company Registration Number 55936

Office address
Ideation House
94 Pitts Bay Road
Pembroke
HM08 Bermuda

T: +1 441 276 1000

Registered address
Clarendon House
2 Church Street Hamilton
HM11 Bermuda

Shareholder contacts
Company Secretary
Greg Lunn
E: legal@conduitre.bm

Investor relations
E: info@conduitre.bm

Registrar
Computershare Investor
Services (Bermuda) Limited
The Pavilions
Bridgwater Road
Bristol BS99 6ZY
United Kingdom

T: +44 370 702 0000

Advisers
Financial advisers
Kinmont Limited
5 Clifford Street
London, W1S 2LG
United Kingdom

Brokers
Peel Hunt
100 Liverpool Street
London EC2M 2AT

Berenberg
60 Threadneedle Street
London EC2R 8HP
United Kingdom

Panmure Gordon & Co
One New Change
London EC4M 9AF
United Kingdom

Auditors
KPMG Audit Limited
Crown House
4 Par-la-Ville Road
Hamilton, HM 08
Bermuda

Bankers
HSBC Bank Bermuda Limited
37 Front Street
Hamilton HM 11
Bermuda

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141