Risk team of the Year, Argo Group
In a competitive field, Argo Group stands out because when tasked with deriving more value from the capital modelling function, its risk team enthusiastically rose to the challenge and ultimately achieved the goal.
In the words of our judging panel, Argo Group presenting a compelling case study of "transformation of their risk team from a compliance-focused function to a strategic business unit".
Argo Group's team demonstrated the value-adding potential of capital modelling, as well as clearly explaining how the process delivered for the business, commented the judges.
Capital modelling became an issue as it was felt the team's resources had been focused too strongly on meeting UK regulatory requirements. There was also a desire for the global business to get more insights from the model to inform business decisions.
The process of change kicked off with the capital modelling team being realigned from reporting to the chief actuary, and instead to the chief risk officer, Alex Hindson.
Hindson began the task by organising a strategy day and encouraged everyone to reconfirm the team's purpose, as well as creating a mission statement and vision as to how the capital model would be used. A functional charter was also produced, which was approved by the board risk committee.
Hindson explains: "We felt [the capital model] had been too focused on the liabilities side of the balance sheet, and we really needed to strengthen the assets side. That is quite unusual for P&C businesses and that stretched the team."
He adds: "We brainstormed what was holding us back and thought about where we spend most of our time - and where should we be spending most of our time.
"Quite a frightening amount of time was being spent on cleaning up data, and we stood back and asked ourselves why we do it that way and how we could change things around."
The results of the assessment identified a number of opportunities to improve capital modelling procedures.
For example, the process for capital allocation has been formally incorporated into the business planning cycle.
Capital model outcomes have also been integrated into underwriting performance management information. This has led to a repositioning of the capital modelling team within the business and increased its credibility and visibility for business leadership.
In order to enable asset-based capital allocation, market risk modelling has also been revisited, economic scenario generators evaluated and a new approach adopted.
Hindson says: "Now we are building out the strategic asset allocation capability that we did not have before, so we will be able to do portfolio optimisation of the assets, working with the investment team, which we have never been able to do before in-house."
Overall, he says the process has led to "more impactful output" from the team, without the need to hire extra people. "One of the biggest benefits has been on team morale they feel they are part of a bigger team which is valued by the executive," says Hindson.