Transparency and consistency key to cedant buying strategy

As the reinsurance, ILS and retro markets continue to show signs of firming, Katie Partington Howarth, group head of ceded reinsurance at Argo Group, discusses the significance around a consistent, nimble approach.

As firming in the reinsurance market drives a more selective approach among reinsurers in terms of who they support, transparency and consistency are key to Argo’s approach, according to Katie Partington Howarth, group head of ceded reinsurance at Argo Group.

“At Argo, we really treat the capital that we’re getting from the reinsurers as our own. We try and really involve our reinsurance partners in our businesses and give them access to our underwriters so they understand our business fully and they trust the capital they’re putting with us,” she told The Insurer from the Hermitage Hotel in Monte Carlo.

Howarth also highlighted the importance of consistency and not to simply move with the cycle.

“Argo has been a consistent buyer throughout the reinsurance market cycles and I think we’ve seen other people of late come into the market, and although they may have very big premiums, I don’t think they’ve always been consistent in the way they buy or when they’ve bought within the market cycle,” she said.

“I think that’s a really good differentiating point that I hope our reinsurers remember if the market is firming,” she added.

However, rate movement in the underlying book among many cedants are prompting changes in buying strategies across the market.

While Howarth acknowledges this, she said that rate movements are only one part of how the group thinks about its reinsurance strategy and that the overall approach is much more complex than this.

“As the market is evolving Argo and Ariel are always trying to meet the market with really new product offerings. We’re trying to see what we can really offer our cedents on our business to make sure that we’re meeting the needs of the insurance and reinsurance markets,” she said.

“We really want to make sure reinsurance and retro is playing a really active part in making sure we can meet the demands of the market. So, as much as some hardening rates that we’re seeing in a few of our lines of business may give us more comfort about raising retentions, I would say that the overall strategy is a lot more complex than that.

“We really want to make sure we’re matching and meeting the product offerings so we can help our business stay in business,” she added.

On what is shaping up to be a significantly tighter ILS and retro market and the impact this is having on Argo’s buying strategy, Howarth said a lot of companies will be thinking about how to buy their retro programme.

“I think gone are the days of assuming that retrocession is a foregone conclusion and I think people really have to weigh the value of that purchase against what they’re seeing on the inwards pricing,” she said.

“I think the best strategy that we have at Ariel is to be open and to be flexible. We spend a lot of time really trying to take a look at our cost of capital and a big part of that is obviously our retro strategy as well and seeing how that imputes into our forward pricing. Companies that can be really nimble about managing their cost of capital and figuring that into their pricing are going to be very successful,” she added.