Argo says catastrophes and COVID-19 losses to dent Q3 results

Bermuda headquartered international specialty insurance and reinsurance firm Argo Group expects third-quarter catastrophe events and additional contingency losses related to the COVID-19 pandemic will dent its upcoming results.

Argo has pre-announced an estimated $54 million of natural catastrophe losses from the third quarter, which it says are primarily related to Hurricanes Hanna, Laura and Sally, as well as the U.S. wildfires and Midwest derecho.

It expects the impacts to be roughly evenly split across its U.S. and International Operations and some reinsurance recoveries are perhaps being made against these losses.

Argo’s estimates of catastrophe losses are typically based on claims costs after ceded reinsurance recoverables and reinstatement premiums and pre-tax, meaning this figure has already factored in any sharing of these losses with its growing pool of third-party capital investors.

Argo has been steadily ramping up its use of third-party capital ever since it acquired Ariel Re, resulting in a situation where the company now experiences significant capital efficiencies through the use of lower-cost capital.

In fact, the company had said previously that, across its London and Bermuda underwriting platforms, as much as 50% of its underwriting capital is provided by third-party capital providers.

On top of the catastrophe losses for Q3, Argo has also pre-announced an estimated additional claims burden from the pandemic of approximately $17 million, as COVID-19 drove further losses primarily related to contingency exposures in Argo’s International Operations.