Mark Watson, the Chief Executive Officer (CEO) of Argo Group International Holdings, expects a lot of movement in the firm’s reinsurance program in 2019.
Speaking during the company’s first-quarter 2019 earnings call, Watson discussed Argo’s strong utilisation of reinsurance, underlining a number of different, determining factors around its reinsurance thinking.
“One is managing volatility, another is a substitute form of capital. And the third, is just looking at the price of reinsurance…we’re always looking to see if we can generate a better return on capital if we kept the risk net on our books, versus laying it off,” said Watson.
It remains to be seen exactly how reinsurance prices move at the upcoming mid-year renewals, with speculation high across the industry after disappointing renewals’ on the back of consecutive heavy cat loss years.
“Depending on how much reinsurance pricing goes up, we may want to decide to keep more net, particularly if we’re getting price increases as an insurer.
“So, my guess is that there will be a lot of movement in our reinsurance program this year. I suspect we will add more to some, and let others go, depending upon price. But so far, for our reinsurance programs that we’re buying, price has been pretty flat since the 1st of January,” said Watson.
Argo reported a 240% increase in net income in the first-quarter of 2019. At the same time, a decrease in the percent of net premiums retained was mostly driven by an increase in the ongoing strategic use of reinsurance, both traditional and alternative, as part of its overall risk management initiatives, and, as it relates to Property, a new fronted program.