Proud to be different
When it comes to managing its energy and property books, Argo is proud to be different. It is notable for combining the two books and has a team that has worked together for a long time, as Bermuda:Re+ILS found out.
“It is a real advantage when dealing with our brokers and clients that they are always dealing with the same people.”
Ann Holden, Argo
“If there are a few years of benign windstorm activity people will forget that 12 named windstorms made landfall in 2020.”
Nicholas Wills, Argo
Before 2017 Argo was active only in the high excess market, the model used by most carriers in Bermuda. That year, however, it decided to broaden its offering and started writing primary quota share and excess of loss coverage. To build up this business it hired a property direct and facultative (D&F) team from Ironshore in mid-2017.
The strategy paid off quickly. In 2017 Argo’s property D&F business generated gross written premiums of $16 million. By 2020, following its acquisition of the new property D&F team, gross written premiums had risen to $95 million.
Argo differs from many other carriers in managing its property and energy books as one portfolio. This means it needs only one reinsurance treaty across both businesses. “It means we don’t have to look for two lots of capacity, which makes it more efficient,” explains Nicholas Wills, head of property D&F insurance at Argo Insurance.
“It adds premium volume to the book and gives us better balance.”
“Underwriting property and energy is very different, just as Marriott is a very different business from Chevron—they are exposed to very different risks,” says Wills. The two do have complementary characteristics, however, that leads to benefits for Argo when managing them together.
“When the energy and property businesses are managed with separate treaties but on the same P&L account it creates a problem with scale on the energy side,” explains Ann Holden, Argo’s head of energy property insurance.
“All the energy business for Argo is written out of Bermuda, and managing it as part of the property D&F team has made the business sustainable.”
“The energy business generally does not add critical catastrophe exposure to the portfolio, thus complementing the property side,” adds Wills. “Managing the two together means there is more premium available to pay for losses, it gives us more scale. “Including energy makes it economical for us to reinsure property by diversifying the book.”
The success of the team is hard to quantify because it does not split the results by business line, making it impossible to assess how much the energy book has contributed, for example, compared to the property book. Instead, Argo prefers to look at the Bermuda business as a whole.
A different metric for success
“You can measure the success of the team by its longevity,” says Holden. “A lot of other reinsurers in Bermuda and beyond that run their property and energy businesses separately have had to close one or the other of them, whereas at Argo we have seen dramatic growth.”
Using the measure of longevity, Argo’s property D&F team is certainly among the most successful teams in Bermuda. The team includes six underwriters who have been together for more than five years, dating back to their time at Ironshore. None has left the team since joining Argo, and no new underwriters have been added.
Holden, a Canadian, has been managing energy portfolios for many years, having worked at Commonwealth Insurance and Liberty International Underwriters in Vancouver before moving to Bermuda to join Ironshore.
Wills worked at Lloyd’s in London and in the Australian insurance market before moving to Bermuda. Like Holden, he came to Argo when it acquired Ironshore’s D&F team. Wills and Holden have worked together for more than seven years, while some members of the team have been together for more than 10.
Holden says: “It is unique in this industry for a team of underwriters to remain together for so long. It is a real advantage when dealing with our brokers and clients that they are always dealing with the same people.”
The longevity of the team has been made possible by the strength of the relationships between the team members, and their personal qualities. The team reviews around 2,000 submissions in a year. “That is a lot of submissions, so the team needs to be very industrious,” notes Wills.
“Culture is very important to this team,” he adds. “We have a good mix of people in the team, including Bermudians, Britons and Canadians, a good balance of men and women, and people with very different backgrounds and experiences.
“That has been very positive for the team and if we added to the team we would be very careful to preserve that. A good resumé is important when you are hiring, of course, but the cultural consideration is more important.”
For these reasons, Argo is cautious about growing the team.
“We do not want to grow the business for the sake of it,” says Wills. “Our hiring plans will be dictated by the market—if we enter a truly hard market we may consider growing the team but we aren’t looking at that yet.”
Not yet a hard market
Wills is clear that he does not view the current environment as a hard market, although he concedes it is clearly hardening. Argo is still not able to charge what it wants to charge, or include the terms and conditions it really wants, he notes. Until that changes it cannot be considered a truly hard market.
“A hard market is when supply and demand do not meet each other,” he explains. “Right now, although supply is reducing, there is still usually more than enough to meet demand.
“We may see a truly hard market in 2021, although I am not confident that will happen. We certainly aren’t there yet.”
What 2020 has been, however, is an unprecedented year. COVID-19 is the most obvious manifestation of that, a truly global pandemic that by mid-November had caused more than 1.3 million deaths globally. What has been more unique about COVID-19, however, is the political response to the virus as global governments have tried to limit its spread. Economic shutdowns around the world have put the global economy under enormous pressure in a way that has never been seen before.
Meanwhile, there has also been record-breaking hurricane activity in terms of the overall number of named storms. Twelve storms made US landfall in 2020, the first time that has happened. “It shows the need to constantly review the approach to the business,” Wills says.
None of this necessarily means the market will continue to harden to the point that it satisfies Wills’ definition of a truly hard market.
“People in the reinsurance industry can tend to have short memories,” he notes. “If there are a few years of benign windstorm activity people will forget that 12 named windstorms made landfall in 2020 and that will be reflected in the rates.”