Argo to report $47m of Q1 catastrophe and COVID losses

Argo Group, the Bermuda headquartered specialty insurance underwriter, has pre-announced an expectation of reporting $47 million of catastrophe and pandemic losses from the first-quarter of 2021, largely from its legacy reinsurance business.

Natural catastrophes and severe weather are expected to amount to roughly $43 million of the total, which is largely said to be from winter storm Uri’s impacts in the United States in February.

Argo explained that roughly half of the natural catastrophe losses from Q1 came from its International Operations, which includes losses related to reinsurance company Ariel Re, which Argo had sold during 2020.

On top of this, for the first-quarter, Argo also expects to report $4 million of losses related to the COVID-19 pandemic, which it said are largely related to contingency exposures in Argo’s International Operations.

All of Argo’s loss estimates are pre-tax and after reinsurance coverage has been considered, although its not clear if any recoveries are being made at this time.

Argo recently said that it aims to scale back its use of third-party reinsurance capital, as the company looks to retain more of its profitable business and move forwards after the shedding of Ariel Re.

It’s assumed the Ariel Re exposure comes from mid-year renewal reinsurance covers that were in place, as Argo retained responsibility for its legacy book when it sold Ariel Re to private equity backers last November.

There could therefore have been some third-party capital arrangements in place, sharing in the performance of Ariel Re’s 2020 renewal book, so there’s a chance some investors may have taken some attritional losses in supporting Argo’s exposure to the winter storms.