This content initially published on The Royal Gazette on March 21, 2017, and is republished here with their permission.
Any shifts in the geopolitical environment in the US and Europe that limit access to the insurance sector through tariffs, taxes and selective prohibitions, could harm businesses, communities and infrastructure projects.
That is the warning from Mark Watson, chief executive officer of Bermudian-based Argo Group Holdings.
In a message to Argo shareholders he commented on sweeping political changes that have the potential to reshape global business.
And he cautioned that any measures that result in limiting access to insurance will likely prove harmful on a wider scale.
Bermuda’s international business sector is directly responsible for about $1.5 billion, or a quarter of the island’s annual gross domestic product, with insurance and reinsurance the bedrock.
The island would feel the effect of any restrictions or impingement imposed on the insurance sector as a result of geopolitical shifts.
Britain’s decision to leave the European Union, together with proposals by US President Donald Trump linked to his “America First” clarion call, have the potential to bring changes across international commerce.
Mr Trump has pledged $1 trillion in new infrastructure spending in the US, while threatening to retreat into trade protectionism.
The change in the US administration has opened speculation on where business is headed “and whether prosperity is better served by competition or protection”, noted Mr Watson in his letter to shareholders.
“Where prosperity is concerned, access to capital and sharing of risk are of intrinsic value to the national good. Most nations do not on their own have enough capital to drive and protect all the growth required or possible. That’s why insurance was invented,” he said.
“If tariffs, taxes and selective prohibitions become the tools of national interest they once were, access to insurance could be unduly limited as it once was.
“Without insurance, communities, businesses and projects will grind to a halt. Even if promised infrastructure improvements are backed by public funding, their engagements will carry risks that will have to be hedged with adequate insurance.”
Regarding Britain’s vote to leave the EU, a process that will be formally triggered on March 29, Mr Watson said it had deep implications.
“No matter how hard or soft Brexit implementation proves to be, important questions of jurisdiction and authority will see shifts in power that change trade alliances, rates and routes.”
Last year, Argo Group acquired Ariel Re to give it a second Lloyd’s of London syndicate.
Mr Watson noted that Argo Group has licensed insurance operations in Britain and continental Europe, and the company does not expect significant disruptions to its insurance activity.
He added: “We believe that regulatory changes affecting our business will be introduced over years, not months. As changes become better known, we will take any steps needed to accommodate a restructured international configuration.”
Mr Watson said that as geopolitical decisions influence the shape and scope of global business, the nature of risk itself changes dramatically.
“Our industry rides on the tide of commerce. Our duty is to know where conditions are in flux, and to assess if we can help businesses mitigate their risks with sensibly priced coverage.”
Argo saw its gross written premiums grow last year by 7.6 per cent to $2.16 billion, and its after-tax operating income improve by $13 million to $121 million.
“Our company continues to improve and grow, with overall underwriting revenues ahead of plan and a strong Argo brand built through the discipline, generosity and innovative spirit of our exceptional team,” said Mr Watson.