Loma Re cat bond and ILS add stability to Argo’s financial results

by Artemis on January 8, 2014

The recent issuance of international specialty insurance and reinsurance company Argo Group’s latest catastrophe bond transaction, Loma Reinsurance (Bermuda) Ltd. (Series 2013-1), adds attractive stability to its financial results, according to its CEO.

Loma Re (Bermuda) 2013-1 completed just before the end of 2013, a series of three tranches of catastrophe bond notes, furnishing Argo Group insurance and reinsurance subsidiaries with a new multi-year source of fully-collateralized reinsurance protection backed by capital market investors.

The cat bond runs for a four-year term and provides protection to Argo Group’s participating U.S. insurance units, Argo Re, and Lloyd’s Syndicate 1200 against U.S. hurricanes, earthquakes and convective storms and Canadian earthquakes.

The Loma Re (Bermuda) cat bond is innovative as well, being the first transaction in the markets history to use an annual aggregate loss calculation, combining both an indemnity trigger for the groups insurance business and an industry loss index trigger for its reinsurance business.

Through this unique trigger and loss calculation structure Argo is benefitting from both reinsurance and retrocessional reinsurance protection within the same catastrophe bond issuance. That is sure to be attractive to other potential cat bond issuers which have both insurance and reinsurance operations.

Argo clearly appreciates the protection that insurance-linked securities (ILS), cat bonds and the capital markets offer it. The firm said that it provides reinsurance protection for frequency of catastrophe losses as well as positioning it to take advantage of market opportunities, by allowing it to efficiently replace capital otherwise required to transfer the risk of frequent and sizeable events.

Argo Group President and Chief Executive Officer Mark E. Watson III commented; “We were pleased to expand our participation in the ILS market as a key part of our catastrophe risk management program. The aggregate coverage and term of the Loma Re protection adds attractive stability to Argo’s financial results.”

Read all about Loma Reinsurance (Bermuda) Ltd. (Series 2013-1) in our catastrophe bond and ILS Deal Directory.

Argo also recently renewed its fully-collateralized reinsurance sidecar, Harambee Re, for the 2014 underwriting year, further demonstrating its desire to diversify its sources of risk capital and to leverage third-party capital within its underwriting.

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