Argo’s Corry: Casualty remains disciplined with continued rate increases needed

Argo’s recently appointed head of casualty David Corry has said casualty market conditions remain “rational” and “disciplined”, though a continued surge in claims severity across the market means that rate increases will need to be sustained.

Speaking to The Insurer TV in an wide-ranging interview at last week’s WSIA Underwriting Summit in Phoenix, Arizona, Corry also detailed Argo’s new operating structure and provided an update on the firm’s “go-forward strategy”.

Discussing casualty market conditions and concerns that have emerged in recent months around reserve adequacy and loss development, primarily on accident years 2015 to 2020, Corry acknowledged it is an issue Argo has contended with and addressed.

“We felt as best we can [we] actually put that behind us,” he said, noting the roughly $1bn loss portfolio transfer Argo struck with Enstar in August 2022.

“But certainly, you're seeing the publicly traded companies, the carriers are announcing some development. [It] depends on the carrier, but it seems to be accident years 2015 through 2019 through 2020,” Corry noted.

“We still see some sustainment of momentum in rate increases, and we believe they're necessary, not only for inflationary, but also for the potential unknown development and also increases in case reserves just across the board,” he explained.

Severity up more broadly than just nuclear verdicts

Corry said that the rise in casualty severity is not limited to isolated cases, but is fairly broad.

“It isn't so much the nuclear verdict issue. It is just the rising tide of all claims that are being settled today in the casualty spectrum,” he noted.

Corry called casualty market conditions “rational and stable with respect to terms and conditions” and said that carriers are more disciplined than they have been in the past.

“There are some things that we just can't predict, and some of that is in the judicial area, and jury verdicts and settlements,” he commented, saying that “capacity management” through actions like ventilation is critical to managing those issues.

“I think our brokers are comfortable delivering that message to the retailers,” he continued.

“As long as you can message that early in the process, whether it's a renewal or a new account, if you can come up with solutions – and it may be a shorter limit than you traditionally did – I think that most of the brokers are very comfortable that they can build capacity above you.”

Corry also said Argo was working to be more precise in communicating its appetite to the market.

“I think it's important that the underwriters are out in the marketplace explaining to our brokers on a daily basis the classes of business that we feel like we can make money at and perform well for them,” he commented.

There is also work underway at Argo internally among management, actuarial teams and underwriters to establish clarity on the firm’s appetite and the exact classes of business it is writing, “so there are no surprises here”.

“We're monitoring that on a monthly and a quarterly basis through some metrics internally, and then I think that allows the brokers to understand what we're asking for when our underwriters go visit them,” Corry said.

“Everybody's time is precious. And so, if the underwriter can come into their office and say ‘this is what I'd like, and these are what I really don't want to work on’, the brokers are okay with that and will give you what you want,” he added.

Broad market dislocation not expected

Corry said that with growing concerns around older casualty accident years, he doesn’t expect too much dislocation in the segment generated by carriers taking remedial actions.

“Regardless of market cycles, there's always carriers that have to re-underwrite a book of business or fine tune a book of business,” he said, pointing out the fragmented nature of the industry in general.

“There is no dominant carrier with market share. So, as this has happened through the evolution of business … I don't really see a sea change happening or one carrier exiting that's going to necessarily, you know, have a lot of other carriers gravitate to that business, it seems so transactional,” he added.

Corry also said that if a carrier is exiting a class of business, it then raises questions about the quality of the accounts the insurer might be letting go.

Argo’s new simplified operating structure

Corry discussed the simplification of Argo’s organisational structure following the closing of its takeover by Brookfield Re in November, which has included consolidating 12 distinct units into three towers – casualty, financial lines/surety, and specialty.

Alongside Corry, Greg Chilson leads the financial lines and surety “tower” while former SiriusPoint executive Ari Chester leads the specialty segment.

The casualty segment includes primary general liability, excess liability, environmental liability, Argo’s construction industry vertical and workers’ compensation, which operates under the Rockwood banner.

“What it's allowed us to do … since last November is standardising a lot of our processes internally and making it easier focusing on our brokers externally to make it easier to do business with Argo,” Corry explained.

Under the previous operating structure with 12 distinct units, Corry said there was less clarity between brokers and underwriters with regards to the best ways to access Argo.

“What we're trying to do is, by each product, really narrow the underwriters that are assigned to those brokers, and make it easier for the brokers over time to build more working relationships,” he explained.

Corry said he and the Argo management team spent the WSIA Underwriting Summit focused on communicating to trading partners what to expect from Argo under new leadership and ownership and the “go-forward strategy”.

“And I think that puts them at more of a comfort level of doing business with us based on the changes in the organisation,” Corry explained.

Exploring potential use cases for AI

Discussing the recent explosion of interest in AI, Corry said it can help his firm become more efficient and be useful for data mining to evaluate pricing and claims information, among other use cases.

“There are so many data points, and the challenge is how do you manage that data? The AI software helps you – you can mine [for] certain keywords or phrases, you can put metrics around data points around success and failures, whether that be binds to quotes, close to submissions, try to be more efficient,” he noted.

“Are we at the point where the AI software is going to make an underwriting decision? I don't think a commercial line is quite there yet. I think that is probably closer in the personal lines area. Maybe personal auto is a good example of that,” he continued.

“I see [it] evolving in commercial lines where potentially it could certainly weed out as the submissions come in or it may weed out some submissions before an underwriter even sees it,” he added.

Corry said AI is likely to have a more immediate impact on professional lines as a potential exposure, as professionals lean more heavily on AI in ways that can create liability exposure.

“We see it as a useful tool in underwriting and also on the client side where the tools can help us segregate claims as they come in, where we should fast track certain claims where others are some key attributes, those claims need to go to a specialised individual or a specialised claim unit quicker,” he noted.