Argo Group is expecting to reduce the level of ceded reinsurance it purchases in 2021 and beyond by exiting poorly performing lines, exiting the reinsurance business and reducing its use of third-party capital layers.
Speaking during an investor presentation last week, Argo’s Chief Financial Officer Scott Kirk explained how the reduced need for ceded reinsurance increases the company’s earnings without any meaningful change in the trajectory of its risk profile.
The specialty re/insurer will also look to reduce its property exposures and reduce its gross limit across a number of insurance lines.
Additionally, Kirk stated how a reduced need for ceded reinsurance increases earnings without any meaningful change in the trajectory of the groups risk profile, and will be a key driver of net earned premiums as it moves forward through 2021 and beyond.
Chief Executive Officer Kevin Rehnberg added that exposures as a group were significantly higher last year and as the 2020 year of account for Ariel runs out through this year, the company’s also had the opportunity to reset some of the reinsurance for this business.
“In the past we had a need to buy a lot of cover, based on the cat exposure with Ariel Re,” Rehnberg noted.
“When you have a very large program like that your retentions are higher, and those have been lowered over time in the course of the last renewal season. One because the exposure is not as high and two, the type of reinsurance programs that we have are different.
“The 2020 year of account does play out through the course of this year for risks that were written either 4/1 or in some instances through 7/1, so those accounts would be exposed through that portion of the year.”
He added that, despite the significant and highly unexpected winter storm in Texas, Argo’s need for overall insurance and how it puts the reinsurance programs together did change, reducing the PML’s across the organisation and moving away from Ariel’s book.
“So across the board it is lower exposure and we do have lower retentions on the new programs going forward.”
