Argo sees Q4 losses at up to $38m from California wildfire & aggregates

Insurance and reinsurance group Argo Group International Holdings has delivered a preliminary estimate for its catastrophe losses in the fourth quarter of 2017, saying the majority are from the California wildfire events.

Argo, a provider of specialty insurance and reinsurance, said that it estimates a preliminary pre-tax catastrophe loss of between $34 million and $38 million due to fourth quarter 2017 catastrophe losses, net of ceded reinsurance recoverables, reinstatement premiums and profit commissions.

The California wildfires were the main catastrophe loss event globally of the fourth-quarter, with estimates suggesting an insurance and reinsurance industry exposure of as much as $12.5 billion, across the entire state and the most recent loss estimate being for up to $2.5 billion just from the Thomas wildfire in the south of the state.

Argo has taken its share of these losses from the Californian wildfires from October through December, resulting in this up to $38 million net of reinsurance impact.

However there were other impacts in Q4, largely from certain aggregate excess of loss contracts, that the re/insurer said had been hit by various 2017 catastrophe and weather related events.

Aggregate contracts could elevate some of the reinsurance and ILS industries loss totals for 2017, as some contracts had already been severely eroded by the hurricanes and other losses throughout the year, meaning Q4 needed relatively little catastrophe activity for these contracts to face a loss.

Argo is already claiming on one of its catastrophe bond layers, the $65 million Loma Reinsurance (Bermuda) Ltd. (Series 2013-1) Class C tranche. But its other remaining cat bond coverage did not cover wildfire losses, so despite being aggregate in nature it seems unlikely we’ll see any impact to the other tranches at this stage. It’s not clear whether Argo’s sidecar or other private ILS and collateralized reinsurance arrangements have been impacted at all by 2017 losses.

Argo noted that the ultimate net impact from Q4 catastrophes could rise, saying that it could “differ materially from Argo Group’s preliminary estimates.”