financial condition report...8 financial condition report (f) insurance business written by business...

1FinancialConditionReport

FinancialCondition

ReportARGOGROUPINTERNATIONALHOLDINGS,LTD.

June,2018

Updated and reissued 29th June 2018 incorporating Bermuda Monetary Authority feedback


TABLEOFCONTENTS

EXECUTIVESUMMARY...............................................................................................................4SECTIONI–BUSINESSANDPERFORMANCE..............................................................................6

I(a-c) NameandContactInformation.................................................................................................................................6

I(d-e)OwnershipdetailsandGroupStructure.....................................................................................................................7

I(f) BusinessbySegment.................................................................................................................................................8

I(g) PerformanceofInvestments.....................................................................................................................................9

SECTIONII–GOVERNANCESTRUCTURE.................................................................................12II(a) BoardandSeniorExecutives...................................................................................................................................12

II(b) FitnessandProprietyRequirements.......................................................................................................................23

II(c) RiskManagement&SolvencySelfAssessment......................................................................................................24

II(d) InternalControls......................................................................................................................................................29

II(e) InternalAudit...........................................................................................................................................................30

II(f) ActuarialFunction....................................................................................................................................................32

II(g) Outsourcing............................................................................................................................................................33

SECTIONIII–RISKPROFILE.......................................................................................................34III(a) MaterialRisk............................................................................................................................................................35

III(b) RiskMitigation.........................................................................................................................................................36

III(c) MaterialRiskConcentration....................................................................................................................................37

III(d) InvestedAssets........................................................................................................................................................38

III(e) StressTesting...........................................................................................................................................................39

SECTIONIV–SOLVENCYVALUATION.......................................................................................40IV(a)(b)ValuationBases.......................................................................................................................................................41

IV(c) RecoverablesfromReinsurance..............................................................................................................................42

IV(d) OtherLiabilities........................................................................................................................................................43

SECTIONV–CAPITALMANAGEMENT......................................................................................43V(a) EligibleCapital.........................................................................................................................................................45

V(b) RegulatoryCapitalRequirements............................................................................................................................48

V(c) InternalCapitalModelusedtoderiveECR.............................................................................................................50

SECTIONVI–SIGNIFICANTEVENTS..........................................................................................53


EXECUTIVESUMMARY

PurposeofDocument

• Thepurposeof this Financial ConditionReport (“FCR”) forArgoGroup InternationalHoldings,

Ltd.(“ArgoGroup,”the“Company”or“AGII”)istoprovideapublicdisclosureofthemeasures

governing the Company’s business operations, corporate governance framework, solvency,

financialperformanceandmanagementofsignificantevents.

• The Financial Condition Report is intended to provide additional information to the public in

relation to the Company’s business model, whereby the public may make an informed

assessmentonwhetherthebusinessisruninaprudentmanner.

• A copy of this Financial Condition Report is published on the Company’s website within a

prescribedperiodafterbeingfiledwiththeBermudaMonetaryAuthority(“Authority”).

ArgoGroup’sapproachtoRisk&SolvencyAssessment

• ArgoGroupappliesanOwnRisk&SolvencyAssessment (ORSA)processacross itsoperations.

Thepurposeof this process is to consider theorganization’s solvency and capital needsona

forward-lookingbasis in the lightof its assessmentof thepotential threatsandopportunities

facingthedeliveryofitsmulti-yearbusinessplanandstrategy.

• ArgoGroup Solvency Self Assessments (GSSA) are predominantly compiled from existing and

previouslyapprovedbusinessmaterialssuchasthequarterlyOwnRisk&SolvencyAssessment

(ORSA) risk reports, business plan, capital modeling output and other risk management

frameworkdocumentation.

• Theprocessidentifiesandanalyzesmaterialrisksandcomparesthesetoagreedrisktolerances

todeterminewheremanagementaction,suchasmitigationmayberequired.Theprocessalso

considers a range of stress tests, as well as capital evaluations using a range of models to

considertheimpactofsevereeventsoncapitaladequacyandliquidity.

• Asa resultof these studies,management is able to consider contingencyplansand response

plans to allow the organization to continue to meet its strategic objectives under extreme

conditions.


• TheriskreportingwithinArgoGroupisbaseduponagroup-widecyclewithregularreportingto

variousRiskCommittees.InpracticethismeansthateachRiskCommitteeagreesuponcertain

actions,whichare“tracked”throughtheircompletion.

ScopeofDocument

• ThisFinancialConditionreportisdesignedtoprovideanoverviewoftheBusinessPerformance,

GovernanceStructure,RiskProfile,SolvencyValuation,andCapitalManagementofArgoGroup

asawholeanditsinsurancecompanysubsidiaries,asidentifiedinAPPENDIXB.

• Thedocument also incorporates the FCR forArgoRe Ltd. (“ArgoRe”) basedonmodifications

grantedby theBermudaMonetaryAuthority allowing those requirements tobe incorporated

intoasinglereportforYE2017.

• All informationprovided in thisReport isbasedondatapresentedandpolicies,practicesand

proceduresimplemented,duringtheyearending2017,unlessotherwisestated.

• The reporthasbeen througha formal internal reviewandapprovalprocessby theEnterprise

Risk Management Committee and Disclosure Committee; as well as the President & Chief

ExecutiveOfficerandChiefRiskOfficerhavingprovidedattestations.

• It should be noted that this report does not contains information with respect to Ariel

ReinsuranceLtd.whichwasaBermudianregulatedentity.Thisentitywasde-registeredwiththe

BermudaMonetaryAuthorityasaClass3BreinsurerpriortoYE2017.

• ArgoGrouphaschosentoincorporateintothisreporttheinformationthatisrequiredforArgo

GroupU.S.tosubmitunderNationalAssociationofInsuranceCommissioners(NAIC)Corporate

GovernanceAnnualDisclosure(CGAD)requirementswhichbecameeffectiveasaresultof the

Virginia Legislature’s enactment of the Model Act during 2017. APPENDIX F is intended to

provideinformationastoAGUS’compliancewiththeapplicableCGADrequirements.

• Should a significant event occur after the filing date of this Financial Condition Report, a

“Subsequent Event” report will be submitted to the BermudaMonetary Authority within 14

days of the occurrence of the event and a copy of that report will be published on the

Company’s websitewithin 30 days from the date of submission to the Authority, or by such

otherdateasagreedbytheAuthority.


i) BusinessandPerformance-particularsregardingtheorganizationalstructure,insurancebusinessactivitiesandfinancialperformance

(a) Nameoftheinsurancegroup ArgoGroupInternationalHoldings,Ltd.

Nameofinsurers ArgoReLtd.

(b) Nameandcontactdetailsoftheinsuranceandgroupsupervisor GroupSupervisor Name: RalfKuerzdoerfer Jurisdiction: Bermuda EmailAddress: [email protected] PhoneNumber: +14412780698

(c) NameandcontactdetailsoftheApprovedGroupAuditor(StatutoryandGAAPreporting)

Organization: Ernst&Young Name: WimSchaffers Jurisdiction: UnitedStates EmailAddress: [email protected] PhoneNumber: +12052541606


(d) Ownershipdetails: SeeAPPENDIXA

OwnerName OwnershipPercentageDimensionalFundAdvisorsLP 9.99%VanguardGroupInc. 9.31%BlackRockInc. 8.33%FrontierCapitalManagementCo.LLC 5.66%ChamplainInvestmentPartnersLLC 5.30%TIAA 3.81%StateStreetGlobalAdvisors,Inc. 3.68%NorgesBankInvestmentManagement 2.97%FMRLLC 2.51%PzenaInvestmentManagementInc. 2.23%PeregrineCapitalManagementLLC 2.06%FiduciaryManagementInc. 1.99%NorthernTrustGlobalInvestments 1.85%ColumbiaManagementInvestmentAdvisersLLC

1.80%

JanusHendersonGroupPlc 1.77%

(e) Groupstructurechartdetailingthegroupstructure SeeAPPENDIXB


(f) Insurancebusinesswrittenbybusinesssegmentandbygeographicalregionduringthereportingperiod:

ArgoGroupInternationalHoldings,Ltd.(“ArgoGroup”)isaninternationalunderwriterofspecialtyinsuranceandreinsuranceproducts inthepropertyandcasualtymarket.ArgoGroupoffersacomprehensive lineofproductsandservicesdesignedtomeettheuniquecoverageandclaims-handlingneedsofitsclientsintworegionalsegments,USandInternational,andhasaglobalfootprintwithoperationsstrategicallylocatedinthemajorinsurancecentersoftheU.S.,Bermuda,London,ContinentalEurope,BrazilandDubai.Thefourmainbusinesssegmentsareasfollows:

ThetablebelowpresentsearnedpremiumsbygeographiclocationforArgoGroup,inaccordancewithGAAPprinciples,andArgoRe.,in linewithStatutoryAccountingprinciples.For thisdisclosure,wedeterminegeographic locationbycountryof thedomicileofoursubsidiariesthatunderwritethebusinessandnotbythelocationofourinsuredsandreinsureds.

ArgoGroupbySegment

GrossPremiumWritten NetPremiumWritten

Geography[inmillions](Prioryearinbrackets)

[inmillions](Prioryearinbrackets)

UnitedStates 1,509.8(1,277.7) 1,031.8(883.5) UnitedStates

International 1,187.3(886.8) 621.7(556.4) Bermuda,UK,Brazil,MaltaConsolidatedArgoGroupBSCR-SchIVA 2,697.2(2164,8) 1,653.5(1,440.2) US/UK/Bermuda/Brazil

/Malta[Source:ArgoGroupGAAPAccounts]

UnconsolidatedBermuda-basedentities

GrossPremiumWritten NetPremiumWritten

Geography[inmillions]

(Prioryearinbrackets)[inmillions]

(Prioryearinbrackets)

ArgoReLtd. 866.9(836.7) 717.4(724.3) Bermuda[Source:ArgoReLtd.StatutoryAccounts]


(g) Performanceofinvestmentsduringthereportingperiod:

TheCompany invests ina combinationofequitiesandhigh investmentgrade securities.TheCompanycovers its technicalprovisions

with investmentgradefixed incomesecurities.Thebalanceof theportfolio is invested inacapitalappreciationportfoliotomaximize

returnswhilepreservingsufficientcapitaltotakeadvantageofgrowthopportunities.

ThefollowingchartrepresentsthetotalinvestmentreturnforArgoGroupasifyear-end2017-inaccordancewithGAAPprinciples.All

numbersincludetradecapitalfromtheSyndicates1200and1910,andreturnsarecalculatednetofexpenses.

ArgoGroupYear-End2017(USDmillions)

InvestedAsset

TotalInvestmentReturn($)YE2016

Marketvalueof

InvestmentsYE2016

TotalInvestmentReturn(%)YE2016


Marketvalueof

InvestmentsYE2017


U.S.Government 11.3 382.5 0.0 1.9 631.5 0.3%

Non-U.S.Government (0.5) 206.9 (0.0) 12.4 196.2 6.3%States,Municipalities,andPoliticalSubdivision (0.7) 382.7 (0.0) 9.9 335.9 2.9%

CorporateSecurities - - - - - -(a)U.S.Government-backed

Corporate 0.0 0.7 0.0 0.0 0.3 4.6%(b)Non-U.S.Government-backed

Corporate (1.5) 31.2 (0.0) 2.5 37.0 6.8%

(c)FDICGuaranteedCorporate - - - - - 0.0%

(d)OtherCorporate 60.6 1,186.0 0.1 50.2 1,394.7 3.6%

Asset-backedSecurities 5.8 386.6 0.0 21.3 388.2 5.5%


Mortgage-backedSecurities - - - - - -

(a)ResidentialSubprime 0.2 5.8 0.0 0.2 1.0 23.0%

(b)ResidentialNon-subprime 1.3 76.0 0.0 2.3 121.4 1.9%

(c)Commercial 4.2 140.0 0.0 2.4 106.3 2.2%

MutualFunds 0.0 - - - - 0.0%

BankLoans 9.8 127.2 0.1 4.9 130.9 3.7%CatastropheBondsandInsurance-LinkedSecurities 0.4 6.6 0.1 0.1 - 0.0%

Others(Equity&Alternative) 76.1 1,391.9 0.1 129.5 1,399.5 9.3%

TOTALPORTFOLIO 167.1 4,324.3 0.0 237.7 4,742.9 5.0%

[Source:ArgoGroupGAAPAccounts]

The following chart represents the total investment return for Argo Re - Unconsolidated as of year-end 2017 - inaccordancewithGAAPprinciples.Allnumbersbelowexclude investment incomeassociatedwithaffiliated investmentandthereturnsarecalculatedasnetofexpenses.ArgoReYear-End2017(USDmillions)–Unconsolidated

InvestedAsset


Marketvalueof

InvestmentsYE2016


TotalInvestmentReturnYE2017

Marketvalueof

InvestmentsYE2017


U.S.Government (2.5) 119.7 (0.0) 1.1 90.8 1.2%

Non-U.S.Government 0.5 5.9 0.1 0.1 4.0 1.7%

States,Municipalities,andPoliticalSubdivision (0.3) 3.3 (0.1) 0.0 1.6 2.3%

CorporateSecurities - - - - - -(a)U.S.Government-backedCorporate - - - - - 0.0%

(b)Non-U.S.Government-backedCorporate 0.2 3.1 0.1 0.2 0.4 57.3%


(c)FDICGuaranteedCorporate - - - - - 0.0%

(d)OtherCorporate 14.2 288.6 0.0 8.6 188.2 4.5%

Asset-backedSecurities 0.7 46.3 0.0 0.8 31.6 2.7%

Mortgage-backedSecurities - - - (a)ResidentialSubprime 0.0 0.1 0.1 0.0 0.1 2.5%

(b)ResidentialNon-subprime 0.0 3.7 0.0 0.1 1.3 6.0%

(c)Commercial 0.1 26.2 0.0 0.4 16.8 2.4%

MutualFunds 0.0 - - - - 0.0%

BankLoans 3.3 48.4 0.1 1.5 54.4 2.7%

CatastropheBondsandInsurance-LinkedSecurities 0.4 6.6 0.1 0.1 - 0.0%

Others(Equity&Alternative) 8.8 176.6 0.1 12.3 200.6 6.1%

TOTALPORTFOLIO 25.4 728.5 0.0 25.3 589.9 4.3%

[Source:ArgoReStatutoryAccounts]

Detailsonmaterialincomeandexpensesincurred–inaccordancewithGAAPprinciples:

ForArgoGroupandArgoRe(onconsolidatedbasis),fixedmaturityinterest$97.1mm;Equitysecuritiesdividends$13.9mm;other$57.2mm.

Investment expenses, principally investment manager, accounting platform and risk management platform fees $28.2 mm. Net investment

income$140mm.

(h) Anyothermaterialinformation:

None.


ii) GovernanceStructure-particularsofcorporategovernance,riskmanagementandsolvency

self-assessmentframeworks

TheCompany’sgovernancestructureisestablishedto:

• Ensuretheenterpriseriskmanagementfunctionismaintainedathighstandards;

• Ensurethebusinessisoperatinginanefficientandeffectivemanner;and

• Aligncontrolproceduresforunitswithintheorganisationbasedontheriskstheycarry.

(a) BoardandSeniorExecutive:

i. Directors SeeAPPENDIXCforAGIIDirectorsandOfficers

DescriptionofsegregationoftheseresponsibilitiesArgoGroupBoard

1 GaryWoods Chairman Non-Executive

2 F.SedgwickBrowne Director Non-Executive

3 H.BerryCash(deceasedApril2018) Director Non-Executive

4 HectorDeLeon Director Non-Executive

5 MuralR.Josephson Director Non-Executive

6 KathleenNealon Director Non-Executive

7 JohnR.Power,Jr. Director Non-Executive

8 JohnH.Tonelli Director Non-Executive

9 MarkE.WatsonIII Director Executive

10 DeeLehane Director Non-Executive

11 Al-NoorRamji Director Non-Executive

ArgoReBoard

1 MarkE.WatsonIII Chairman Non-Executive(Affiliate)

2 DarrenArgyle Director Non-Executive(Affiliate)

3 NigelMortimer Director Executive

4 RyanMather Director Executive

5 MatthewWilken Director Executive

6 JoseA.Hernandez Director Non-Executive(Affiliate)


ArgoGroupOfficers

1 MarkE.WatsonIII PresidentandChiefExecutiveOfficer

2 Jay.S.Bullock ExecutiveVicePresident

andChiefFinancialOfficer

3 OscarGuerrero

(appointedAugust2017)

SeniorVicePresident

andDeputyChiefFinancialOfficer

4 RobertKatzman SeniorVicePresidentandChiefActuary

5 JoseA.Hernandez HeadofInternationalBusiness

6 AlexHindson ChiefRiskOfficer

7 RyanMather ChiefExecutive,Reinsurance

8 NigelMortimer ExecutiveVicePresident,

Strategy&BusinessDevelopment

9 MarkH.Rose SeniorVicePresident

andChiefInvestmentOfficer

10 AxelSchmidt GroupChiefUnderwritingOfficer

11 SusanSpivakBernstein SeniorVicePresident,InvestorRelations

12 CraigComeaux

(appointedAugust2017)

VicePresidentandCorporateSecretary

ArgoReOfficers

1 RyanMather ChiefExecutive,Reinsurance

2 DarrenArgyle ChiefFinancialOfficer

3 NigelMortimer President,Insurance

4 MatthewWilken President,Reinsurance

5 AlexHindson ChiefRiskOfficer

6 RonaldSwanstrom ChiefActuaryandLossReserveSpecialist

7 AxelSchmidt ChiefUnderwritingOfficer

ArgoGroupBoardofDirectors

TheBoardofDirectorsholdsatleastfourregularlyscheduledmeetingsperyear.Specialmeetingsarescheduledasnecessary. Directorsareexpectedtoattendmeetingsof theBoardandmeetingsof the


committees of the Board of which they are members. The independent directors hold regularlyscheduled meetings at which only independent directors are present ("executive sessions”) on aregularly scheduledbasis,not less than two timesayear toconsider suchmattersas theymaydeemappropriate.

The Chief Executive Officer, the Chief Financial Officer and the Corporate Secretary are present orotherwise available during Board meetings. In addition, with the concurrence of the Board, theChairpersonoftheBoardmayinviteoneormoremembersofmanagementtobeinregularattendanceat Board meetings and may include other officers and employees from time to time as appropriateunderthecircumstances.

ThefundamentalresponsibilityoftheBoardofDirectorsistoexerciseitsbusinessjudgmentinwhatitreasonably believes to be the best interests of the Company and its shareholders. The Board ofDirectors,byitselforthroughitscommittees:

a. Reviews and approves appropriate strategies, policies and business plans for the Companybased on the recommendations of the CEO and Senior Management and monitors theCompany’sperformanceagainstsuchplans;

b. Provides oversight for the Company’s framework for risk management and systems ofinternalcontroloverfinancialreportinganddisclosure;

c.EstablishescorporategovernancestandardsfortheCompany,includingtheCompany’sCodeofConduct&BusinessEthicsaswellasthePoliciesandProceduralGuidelines,whichsupportandgiveeffecttosame;

d. Provides oversight and evaluates performance and compensation for the CEO and SeniorManagement;

e.EstablisheseffectivesuccessionplansfortheCEOandSeniorManagement;

f. Establishes and enforces standards for director qualification and for prompt disclosure, asrequiredbyapplicablelaworregulation,ofanywaiversgrantedtodirectors;and

g. Monitors and provides oversight regarding the Company’s adherence to the Policies andProcedural Guidelines established for the following functions and operational areas: DataPrivacy and Information Security, Investments, Internal Audit, Compliance, Outsourcing,ActuarialandUnderwriting.

TheDirectors,assoonasmaybeaftereachappointmentorelectionofDirectors,electtheOfficersoftheCompany,aChairmanandaDeputyChairmanoftheBoardofDirectors.

TheChairmanortheDeputyChairmanoftheBoardofDirectors,asthecasemaybe,actsaschairmanatallmeetingsoftheMembersandoftheDirectorsatwhichhe/sheispresent.Intheabsenceofboththe


Chairman and the Deputy Chairman, a chairperson is appointed or elected by those present at themeeting.

TheChairmanoftheBoardsetstheagendafortheBoardmeetingswiththeunderstandingthatcertainitems necessary for appropriate Board oversight, such as annual budgets and long range plans,mustappearperiodicallyontheagenda.Boardmembersmaysuggestthatparticularitemsbeplacedontheagenda.

The Board receives quarterly reports on business performance and strategic plans from the ChiefExecutiveOfficerandthemanagementteam.

Boardreporting

ArgoGroupBoard receives periodic reports from theChief Executive as to thebusiness performanceandstrategicplansonaquarterlybasis.

TheBoardRisk&CapitalCommitteereceivesaquarterlyCompliancereportregardingthestatusoftheorganization’scompliancewithlaws,rulesandregulations,includingcompliancewiththeGroup’sCodeofConductandEthics.

Directorelectionandre-election

TheBoardisre-electedperiodicallyasgovernedbyNASDAQrulesandtheelectionprocessisoverseenby the Nominating Committee. The Nominating Committee of the Board is specifically charged withoverseeing the process for Director appointments and re-appointments as outlined in its CommitteeCharter.Theprocess isprescribedby theArgoGroupCorporateGovernanceGuidelinesandTermsofReference,availableontheArgoGroupwebsitealongsidetheCommitteeCharter.TheCompanydoesnotapplytermlimitstotheBoarddirectorships.

TermLimitsandRetirement

The Board does not believe that term limits for service as a director are in the best interest of theshareholders. As an alternative to term limits, theNominating Committee of the Board of Directorsreviewsannuallyeachdirector’seligibility,fitnessandproprietypriortorecommendinganydirectorforcontinuedserviceorre-electiontotheBoard.

TheBoarddoesnotbelievearequirementtomandatedirectorretirementbyacertainagewouldservethebestinterestsoftheshareholders.Therefore,thereisnomandatoryretirementagefordirectors.

BoardDiversityandEvaluationofBoardPerformance

TheBoardofDirectorsandeachofitscommitteesconductanannualself-evaluationtodeterminetheireffectiveness. The reviews focus on the performance of the Board of Directors as a whole and theperformance of each committee. The process considers themeasures taken to improve performanceincludingboardorcommitteetrainingprograms.Todate,theBoardhasnotdeterminedtheneedforaspecificBoardDiversityPolicy.TheNominatingCommitteeisresponsibleforestablishingtheevaluation


criteriaandimplementationoftheevaluationprocessandspecificallyconsidersthebreadthanddepthofexperienceoftheboardmembersintheirevaluations.

ArgoReBoard

The Corporate Governance arrangements described for the Argo Group Board, including roles,responsibilitiesandsegregationofdutiesareappliedconsistentlyacrosstheGroupincludingtoArgoReLtd.TheArgoReLtd.BoarddoesnothaveCommittees.TheGroupCommitteesprovideoversight forthisentity.

ArgoGroupBoardCommittees

For the year ending 2017, the standing Group Committees of the Board of Directorswere the AuditCommittee, the Executive Committee, the Human Resources Committee, the Investment Committee,theNominatingCommitteeandtheRisk&CapitalCommittee.

ExecutiveCommittee

TheExecutiveCommitteeconsistsofMessrs.Woods,DeLeonandWatson. TheExecutiveCommitteemayexerciseallpowersandauthorityoftheBoardofDirectorsintheoversightofthebusinessoftheCompany.

AuditCommittee

The Audit Committee consists ofMessrs. Browne, De Leon, Josephson and Power, each of whom is“independent” and meets the other requirements for audit committee membership as defined byapplicableNASDAQlistingrulesforauditcommitteemembers.TheAuditCommitteeassiststheBoardinitsoversightofthequalityandintegrityoftheaccounting,auditing,andfinancialreportingprocessesofthe Company. The Committee receives management reports on internal audit, internal controls andactuarialmattersonaquarterlybasis.

TheCommitteeat leastannually,obtainsandreviewsareportbytheoutsideauditfirmdescribing:1)thefirm’sinternalquality-controlprocedures;2)anymaterialissuesraisedbythemostrecentinternalquality-controlreview,orpeerreview,ofthefirm,orbyanyinquiryorinvestigationbygovernmentalorprofessional authorities, within the preceding five years, respecting one ormore independent auditscarried out by the firm, and any steps taken to deal with any such issues; and 3) all relationshipsbetweentheoutsideauditfirmandtheCompany.

The Committee engages in discussions with the outside auditor with respect to any disclosedrelationshipsorservicesthatmayaffecttheindependenceandobjectivityoftheauditorandtakestheappropriateactionstooverseetheindependenceoftheoutsideauditor.TheCommitteereviewsreportsonactuarialmattersonaquarterlybasis.TheAuditCommitteereviewsandevaluatestheperformanceof the leadpartnerof theoutsideaudit firmandpresents its conclusionswith respect to theoutsideauditfirmtotheBoard.


InvestmentCommittee

TheInvestmentCommitteeconsistsofMessrs.Ramjii,Cash(deceasedApril2018),Tonelli,WatsonandWoods.TheInvestmentCommitteeassiststheBoardintheoversightoftheCompany’skeyinvestmentobjectives, strategies and policies. In addition, the Investment Committee oversees the Company’sM&Aactivitiesandpolicies. The InvestmentCommittee receivesmanagement reportson investmentperformanceandinvestmentriskonaquarterlybasis.

The Investment Committee is responsible for approval of the Company’s Investment Policy, whichincludesinvestmentguidelinesandassetallocationrangesandinformstheBoardofanymodificationstotheInvestmentPolicy.

The InvestmentCommitteereviewsandapproves investment transactionsmadeby theCompanyanditsoutsideInvestmentManagers.

The Investment Committee oversees management’s administration of the Company’s investmentportfolio to ensure compliancewith the Investment Policy. The Investment Committee approves theCompany’s Derivative Policy, and any Policy revisions. The Investment Committee reviews periodicanalysisandreports frommanagementonpotentialhedgingprogramsandderivativetransactions.Asnecessary,theInvestmentCommitteereviewsanystrategicinvestments.

HumanResourcesCommittee

TheHumanResourcesCommitteeconsistsofMessrs.Cash(deceasedApril2018),DeLeon,PowerandWoods, each of whom is “independent” in accordance with the applicable corporate governancerequirementsofthelistingrulesofNASDAQ.TheHumanResourcesCommitteereceivesmanagementreportsontalentmanagementactivitiesonaregularbasis.

Members ofmanagement, and representatives fromoutside consultants,will attendmeetings at therequest of the Committee Chairman. The Human Resources Committee reviews and evaluates theperformance of the Chief Executive Officer and his or her salary, incentive payments and equitycompensationgrantdecisionswiththeBoardinexecutivesession.TheChiefExecutiveOfficermaynotbepresentduringvotingordeliberationsonanyaspectoftheChiefExecutiveOfficer’scompensation.DuringthemeetingsTheHumanResourcesCommitteeconsiders,reviewsandeditsthereceivedreportsonTalentManagementmatters.

Risk&CapitalCommitteeandOversight

TheRisk&CapitalCommitteeconsistsofMessrs.Browne,TonelliandWatsonandWoodsaswellasMs.Nealon and Ms. Lehane. The Board of Directors has the ultimate responsibility for overseeing andapproving the Company’s risk strategy, risk appetite and risk tolerance levels. The Risk & CapitalCommitteeprovidesoversightoftheCompany’spoliciesandproceduresrelatingtocomplianceandriskmanagement and also oversees the adequacy of the Company’s capital asmeasured against variousregulatoryandotherrequirementstakingintoaccountallriskstowhichtheCompanyisexposed.The


Risk&CapitalCommittee receivesmanagement reportson riskmanagementandcompliancemattersonaquarterlybasis.

The Risk & Capital Committee receives management reports on compliance matters and overseesenterprise risk management processes, including the risk management framework and governancestructureemployedbymanagementonaquarterlybasis.Theframeworkwill includethedefinitionofthe categories of risk, standards in relation to each category and the approach to risk tolerancesadoptedbytheCompany.

NominatingCommittee

TheNominating Committee consists ofMessrs. Browne, Power, Tonelli andWoods, each ofwhom is“independent”inaccordancewiththeapplicabledirectorindependencerulesofNASDAQ,ThepurposeoftheNominatingCommitteeisto(a)establishcriteriaforBoardmemberselectionandretention,(b)identifyindividualsqualifiedtobecomeBoardmembers,(c)recommendtotheBoardindividualstobenominatedorre-nominatedforelectionasdirectors,and(d)recommenddirectorsforappointmentstooneormoreoftheBoard’sstandingcommittees.

ArgoGroupExecutiveOfficers

TheOfficersoftheCompany,whomayormaynotbeDirectors,maybeappointedbytheBoardfromtimetotime.

TheOfficershavesuchpowersandperformsuchdutiesinthemanagement,businessandaffairsoftheCompanyasmaybedelegatedtothembytheBoardoranotherOfficerfromtimetotime.

TheauthorityofanyOfficerof theCompany,so longassuchOfficershallbephysicallypresent in theUnited States, shall be limited to providing oversight and recommendations and information to theBoard, but not to any third party, regarding the affairs of the Company pertaining to any of itsSubsidiariesincorporatedintheUnitedStatesandotherwisetoenabletheCompanytofulfillitsroleastheholderofsharesofsuchSubsidiaries.SuchOfficerwhilephysicallypresentintheUnitedStatesshallhave no authority (i) to negotiate or conclude contracts in the name of the Company (or any of itsSubsidiaries not incorporated in the United States) or otherwise bind the Company (or any of itsSubsidiaries not incorporated in theUnited States), or (ii) to conduct ormanage any activities of theCompany(oranyofitsSubsidiariesnotincorporatedintheUnitedStates),or(iii)toactinanywaywhichmight result in the Company (or any of its Subsidiaries not incorporated in the United States) beingconsideredtobeengagedinatradeorbusinessintheUnitedStateswithinthemeaningoftheUnitedStates InternalRevenueCode. AnypurportedactionorcontractdoneormadebysuchOfficeroranyotherdulyappointedOfficeroftheCompanyinviolationoftheserequirementsisconsideredtobenullandvoidabinitioandtheCompanyand/oranyofitsSubsidiariesshallinnowaybeboundoraffectedbyanysuchactionorcontract.

TheOfficersreceivecompensationastheDirectorsmayfromtimetotimedetermine.


TheSecretaryattendsallmeetingsoftheMembersandoftheBoard(anditscommittees)andpreparesminutesofsuchmeetingsandmaintainsthemintheappropriateCompanybooks/records.

TheOfficersoftheCompanyhavesuchpowersandperformsuchduties inthemanagement,businessandaffairsoftheCompanyasmaybedelegatedtothembytheDirectorsoranotherOfficer.

ii. Descriptionofremunerationpolicyandpracticesandperformance-basedcriteriagoverningtheboard,seniorexecutiveandemployees

The Company’s compensation program is designed to link pay to both business and individualperformance and is intended to retain superior, productive employees and to attract new talentnecessarytocontinuetheCompany’sprofitablegrowth.

Themainobjectivesofourexecutivecompensationprogramareto:

•LinkpaytobothCompanyandindividualperformance;

•Alignanexecutive’sgoalswiththeCompany’sstrategicgoalsandtheinterestsofshareholders;

• Provide a competitive compensationprogram that allows theCompany to attract and retainsuperiortalentinthecompetitivespecialtyinsurancemarketplaceinwhichitoperates;and

•Appropriatelymanagerisk.

When determining the appropriate level of compensation for Named Executive Officers (NEOs), theHuman Resources Committee considers not only the separate components of the compensationpackage and the incentive provided by each, but also aNEO’s aggregate level of compensation. Thiscompensation philosophy allows the Human Resources Committee to determine the best mix ofcomponentstoincentivizeandrewardthedesiredperformancefromeachNEO.

Astheretentionof itsNEOs isaHumanResourcesCommitteepriorityandthere isanawarenessthattheymayhaveotheremploymentopportunities,theCompany’scompensationdecisionsarealsobaseduponitsrecognitionoftheexistenceofthecompetitiveenvironmentforhighlyqualifiedexecutives inthespecialtyinsurancemarketplace.

Thecompensationprogram includes threemaincomponents—base salary, cash incentiveawardsandlong-termincentiveawards.

The Company considers growth in book value per share, inclusive of cash dividends paid to ourshareholders,tobethemostcomprehensiveassessmentofourabilitytocreateshareholdervalue.TheCompany believes that its NEOs are instrumental in achieving these results and the compensationpackagesdesigned for themare intendedbothto rewardthemfor theircurrentachievementsandtomotivatethemtocontinuetoexcelinthefuture.

Annual incentivecompensation isdeterminedusing individual targetawardsadjustedatyear-endandbasedon factors related to both theCompany’s financial performance and individual achievement in


ordertodeterminethefinalamountoftheaward.Targetawardsareestablishedatthebeginningoftheyearalongwithapre-taxoperatingincomegoalfortheCompany.Attheendoftheyear,theindividualtarget awards are multiplied by the percentage of plan pre-tax operating income achieved by theCompanytocalculatepreliminaryawards.Preliminaryawardsarethensubjecttoupwardordownwardadjustment by up to 30%, if deemed appropriate by the Human Resources Committee in order torecognizeindividualachievementofpre-determinedannualobjectivesnotcapturedbytheCompany’sfinancialresults.

Long-term incentive compensation is determinedbyusing individual target awards established at thebeginning of the year, modified by the growth in book value per share goals for the Company andindividualperformanceobjectivessetbytheHumanResourcesCommittee.Attheendoftheyearthetarget awards are adjusted based on the percentage of book value per share growth, inclusive ofdividends, achieved by the Company and theHuman Resources Committee’s evaluation of individualachievementofthepre-determinedlong-termindividualobjectives,withpayoutsrangingfrom25%to150%ofanexecutive’stargetaward.One-halfofanindividual’stargetawardisadjustedbasedonbookvalue per share growth, inclusive of dividends, and the full target award is then modified by anevaluationofindividualperformance.

ThemembersoftheGroupBoardarenotemployeesoftheCompanyandaretherefore,notsubjecttotheCompany’scompensationprogram.TheGroupBoardoverseesthecompensationoftheCompany’sofficersandbyreferenceto industrybenchmark informationandcorporategovernancearrangementsdefinestheremunerationsetfortheDirectors.

Board members of Argo Re Ltd. are employees of the Company and are therefore subject to theCompany’scompensationprogram.

iii. Descriptionofthesupplementarypensionorearlyretirementschemesformembers,theboardandseniorexecutives

PensionBenefits

Name PlanName

NumberofYears

ofCreditedService

PresentValueof

AccumulatedBenefitasof12/31/2017

PresentValueof

AccumulatedBenefitasof12/31/2018

MarkE.WatsonIII ArgoGroupUSRetirementPlan 3.42 $86,384 $95,124

MarkE.WatsonIIIArgoGroupUSPensionEquilizationPlan 3.42 $133,552 $151,552

[Source:ArgoGroupProxy]


InNovemberof2003, theCompanyamendedboth itsRetirementPlan,adefinedbenefitplan,and itsPensionEqualizationPlan,aplanwhichprovidedretirementbenefitswhichwouldhavebeenpayableundertheRetirementPlanbutforthelimitsimposedbytheCode,tofreezebenefitsasofFebruary29,2004.Noadditionalbenefitshavebeenaccruedsincethatdate.

ThechangesinthevaluesoftheaccumulatedbenefitsforMr.Watsonduring2017wereduesolelytothechangeinthepresentvalueofthevestedbenefitthatexistedatFebruary29,2004.

Pleaserefertofootnote16oftheConsolidatedFinancialStatementsincludedinourForm10-Kfortheyear endedDecember31, 2017, for details regarding valuationmethodandmaterial assumptions fortheplans.

Non-qualifiedDeferredCompensation

Name

ExecutiveContributioninlastfiscal

year($)

Registrantcontributionsinlastfiscal

year($)

Aggregateearningsinlastfiscalyear($)

Aggregatewithdrawals/distributions

($)

Aggregatebalanceat

lastyearend($)

MarkE.WatsonIII $51,900 $59,442 $424,231 $- $2,501,863JayS.Bullock $24,638 $26,781 $54,401 $- $387,899JoseHernandez $6,000 $19,800 $1,103 $- $26,903KevinRehnberg $7,923 $22,108 $12,080 $- $123,299

[Source:ArgoGroupProxy]UndertheCompany’s401(k)Plan,adefinedcontributionplan,thecontributionmadebytheCompanyonbehalfofeligibleU.S.employeesisequaltothesumof:

a. 100%of the first 5% of eligible pay that the employee contributes per pay period to theplan;and

b. 1%oftheemployee’seligiblepay.

During 2017, the Internal Revenue Code limited the maximum amount of compensation used tocalculatebenefitsunderadefinedcontributionplanto$270,000andthemaximumdollaramountofthe401(k)contributionthatcouldbemadeto$18,000plusanadditional$6,000foremployeesovertheageof50.TheCompany’sSupplementalExecutiveRetirementPlan(“SERP”)providesretirementbenefitstoits U.S. employeeswhichwould be payable under the 401(k) Plan but for the limits imposed by theInternalRevenueCode.Theinvestmentreturnonanindividual’sSERPbalanceiscalculatedasthoughthe funds in the account were invested, as directed by the individual, from among substantially thesamefundsavailableundertheArgoGroupU.S.401(k)Plan.


During2017,theCompanycreditedtheaccountmaintainedforeachU.S.NEOforthefollowing:

a. ThedifferencebetweentheCompanymatchingcontributionwhichwouldhavebeenmadeto the individual’s account under the Company’s 401(k) Plan based upon the individual’s401(k)electionhadhisorhercontributionsunderthatplannotbeen limitedbyreasonoftheCodeandtheamount thatwasactuallycreditedto the individual’saccountunder theCompany’s401(k)Plan;

b. A supplemental Company contribution equal to 1% of the excess of the NEO’s eligiblecompensation for the 2017 fiscal year less the maximum amount of compensationpermittedtobetakenintoaccountundertheCode($270,000forthe2017fiscalyear);

c. Investment income calculated as though the funds in the account were invested, asdesignatedbytheindividual,fromsubstantiallythesamefundsthatareavailableundertheCompany’s401(k)Plan;and

d. Inaddition,executivesundertheageof50whoelecttocontributemorethanthe$18,000allowedundertheCodeandexecutives50yearsoldorolderwhoelecttocontributemorethanthe$24,000allowedundertheCodecancontributeupto5%ofthepayearnedafterthelimitisreachedtotheSERP.

OtherArgoGroupPensionarrangements

ItshouldbenotedthatthemajorityofNamedExecutiveOfficers(NEOs)arelocatedintheUnitedStatesandotherNEOsdonotbenefitfromArgoGrouppensionarrangements.

Non-employeedirectors ofArgoGroupandArgoManagingAgency Limiteddonotbenefit fromArgopensionschemes.ArgoReLtd.doesnothavenon-employeedirectors.

iv. Anymaterialtransactionswithshareholdercontrollers,personswhoexercisesignificantinfluence,theboardorseniorexecutives

In 2013, our Surety unit received a submission through its established broker network requestingconsiderationfortheissuanceofapproximately$13mmofsuretybondsonbehalfofKineticaPartners,LLC (“Kinetica”) in connection with a Gulf of Mexico pipeline project. Mr. Gary Woods, who is theChairmanofourBoardofDirectors,isthechairmanoftheboardofdirectorsofKineticaandbeneficiallyowns 10% of Kinetica through a family trust. The submission was underwritten and priced in theordinarycourseofbusinessbytheSuretyunit.

Thetermsandconditionsofthesuretybondsthatwereissued,andthepremiumchargedtoKineticaforissuanceof thebonds,wereconsistentwiththoseroutinelyappliedandchargedforsimilarlysituatedrisks accepted by our Surety Unit for unrelated third parties. In accordance with the Surety unit’scustomaryrequirementsinconnectionwiththeissuanceofsuretybonds,KineticaandMr.Woods,inhispersonal capacity, among others, executed our Surety unit’s standard form of indemnity agreementholding our Surety unit harmless against any and all losses and expenses incurred resulting from theissuanceofthesuretybonds.


(b) FitnessandProprietyRequirements i. Descriptionofthefitandproperprocessinassessingtheboardandseniorexecutives

ArgoGroupFitandProperProcess

Argo Group assesses the professional competence of its board members, controllers and officers,includinginsurancemanagers,auditors,actuaries,andtheprincipalrepresentatives(collectivelydefinedherein as “Key Functionaries”), specifically focusing on their prior conduct and degree of skill andcompetence,by:

•Followingathoroughandrobustselectionprocess;• Completing a full and thorough screening of the successful candidate comprising variouscheckswhichvaryaccordingtotheleveloftherole;

• Ongoing monitoring of professional competence, inter alia, via a development focusedappraisalprocessperiodicallyandonanongoingbasis;and

• Implementing ongoing training and development to ensure fitness and propriety ismaintained.

ItistheCompany’spolicythatKeyFunctionaries,atalltimes,complywiththefollowingrequirements:

1. Theirprofessionalqualifications, knowledgeandexperienceareadequate toenable soundandprudentmanagement(i.e.theyarefittoundertaketheirrole);and

2.Theyareofgoodreputeandintegrity(i.e.theyarepropertoundertaketheirrole).

TheCompany’sHeadofHumanResourcesensuresthatthefollowingprocessesandcriteriaareadheredtowith respect toKeyFunctionariesanddoes soas requiredorappropriate inpartnershipwithArgoGroup’sBoardand/orNominatingCommittee:

•Whether the person has relevant experience, sufficient skills, knowledge and soundness ofjudgmenttoproperlyundertakeandfulfilltheparticulardutiesandresponsibilitiesofhis/heroffice.

•Considerationofthediligencewithwhichacontrollerorofficerisfulfillingorislikelytofulfilltheirdutiesandresponsibilities.

•Whetherthepersonhashadexperienceorsimilarresponsibilitiespreviously,andtheirrecordinfulfillingthem.

•Whetherthepersonhasappropriatequalificationsandtraining,asapplicable.Astosoundnessof judgment,ArgoGroup looksto, interalia, thedegreeofbalance, rationalityandmaturitydemonstratedintheperson’spreviousconductanddecision-taking.

•Theprobityofthepersonconcerned.


•Theperson’s reputationand character inter alia,whether thepersonhas a criminal record;convictionsforfraudorotherdishonesty.

•Whetherthepersonhascontravenedanyprovisionofinsurance,banking,investmentorotherlegislationdesignedtoprotectmembersofthepublicagainstfinancialloss,duetodishonesty,incompetenceormalpractice.

•Whetherthepersonhasbeeninvolvedinanybusinesspracticesappearingtobedeceitfuloroppressive or improper or which otherwise reflect discredit on his method of conductingbusiness.

• A person’s record of compliance with various non-statutory codes insofar as they may berelevant to the registration criteria and to the interests of policyholders and potentialpolicyholders.

•Whether thepersonhasbeencensuredordisqualifiedbyprofessionalor regulatorybodies,e.g.theCharteredPropertyCasualtyUnderwriters,CasualtyActuarialSociety,TheInstituteofCharteredAccountantsofBermuda,orcorrespondingbodiesinotherjurisdictions.

ii. Descriptionoftheprofessionalqualifications,skills,andexpertiseoftheboardand

seniorexecutivestocarryouttheirfunctionsSeeAPPENDIXC

(c) RiskManagementandSolvencySelf-Assessment i. Descriptionoftheriskmanagementprocessandprocedurestoeffectivelyidentify,

measure,manageandreportonriskexposuresArgoGroupRiskManagement

Enterprise Risk Management (ERM) is a company-wide process sponsored by Argo’s Board thatidentifiesassesses,monitors,managesandreportsrisksthatcouldmateriallyinfluenceArgo’sabilitytodeliveritsstrategicobjectives.ERMisintendedtobeabusinessenablerthatenhancestheCompany’sperformance and shareholder value as well as a means of providing assurance to the Board andshareholdersthatvariousregulatoryandlegalrequirementsaremet.

TheCompanyconsiderstheimplementationofaneffectiveriskmanagementframeworkasastrategicimperative,notonlytomeetregulatoryrequirementssuchasthoselaidoutintheBermudaMonetaryAuthority’s (“BMA”) Group Rules (for Argo Group) and Code of Conduct (for Argo Re) and theregulations in Countries in which the Company conducts business, but also to gain a competitiveadvantagebyimprovingitsunderstandingofitsownrisksandcapitalrequirementsforsolvencyonaperriskandanaggregatedbasis.

InsupportoftheRiskManagementFramework,theCompany:


• Ensures that risks aremade visible by ensuring they are identified, assessed,managed andmonitoredonanongoingbasis;

•Articulatesaclearriskappetiteintermsofitsabilityandwillingnesstotakerisk;•Assignsclearaccountabilityformanagingrisksandensuresthosewiththeseaccountabilitiesestablishpoliciesandproceduresformanagingmaterialriskswithinriskappetite;and

•Actswhenmaterialrisksfalloutsideitsagreedriskappetite.

The Company’s vision for risk management is that – “Risk intelligence enables Argo to achieve itsstrategicobjectivesbytakingappropriaterisksandexploitingopportunities”.

Insupportofthisvision,ArgooperatesaRiskManagementFrameworkwhichseekstoenhance:

• Risk Governance & Culture – to ensure clear accountabilities are defined and a risk awarecultureisfosteredinlinewithArgo’sPurposeandValues;

• Risk Identification and Prioritization – to ensure current and emerging risks that couldmaterially impact its financialresources,volatilityofresourcesortheviabilityof itsbusinessmodelareunderstoodandarticulatedinatimelymanner;

•RiskAppetite,TolerancesandLimits–toensureclearboundariesforacceptablerisktakingaredefinedbytheBoard;

• RiskManagement and Controls – to ensure consciousmanagement decisions are taken tosecureopportunitiesandbringthreatswithinacceptablebounds;

•RiskReportingandCommunication–toensurecommunicationofriskinformationtodifferentlevelsintheorganizationtosupportdecision-making.

TheCompany’sRiskManagementStrategyistoensurethatallstaffhasaccesstotheappropriatetools,processesandtrainingtoenablethemtomakeinformedandtimelyrisk-takingdecisions.Thisimpliesfivekeyprinciplesadoptedinthemannerinwhichtheframeworkisimplemented:

“Risksaremadevisible.”

“Risksarediscussedandunderstood.”

“Risksareowned.”

“Appropriateactionistaken.”

“ArgoGrouplearnsfromitsrisktaking.”

TheriskmanagementfunctionisprovidedwithauthoritythroughtheChiefRiskOfficerto:

• Provide the infrastructure and information systems required to create a sustainable riskmanagementframework;

•DeliveranOwnRisk&SolvencyAssessment(“ORSA”)processcapableofinformingtheBoardandseniormanagementontheCompany’ssolvencyandriskprofileonanongoingbasis;and


•TheriskmanagementframeworkestablishedbythisPolicyensuresasoundgovernanceandinternal control system is established for the purpose of complying with the BermudaMonetaryAuthorityGroupRules(forArgoGroup)andCodeofConduct(forArgoRe).

ii. Descriptionofhowtheriskmanagementandsolvencyself-assessmentsystemsare

implemented and integrated into the insurer’s (reinsurer’s) operations; includingstrategicplanningandorganizationalanddecisionmakingprocess

ArgoGroupORSAReportingProcess

ArgoGrouphasrecognizedthevalueofformalizingitsriskandcapitalreportingandhasestablishedanongoing Own Risk & Solvency Assessment (ORSA) process. The process is based upon two cycles ofreporting,quarterlyandannual. TheORSAprocess is closelyaligned to thebusinessplanningprocessand informstheriskandcapital implicationsof thisprocess,andultimately, thepotential implicationsfortheorganization’ssolvency.TheORSAprocessisthemechanismthroughwhichtheInternalModelinformsthebusinessplanningprocess.

EachquarteralesscomprehensiveORSAriskreportisproducedthatprovidesstatusupdatespresentedbytheChiefRiskOfficertotheGroupRisk&CapitalCommitteewhereriskexposuresarecomparedtotherisktolerances,materialbreachesarepresented,recommendedmitigationstrategies,andmaterialemerging risks arediscussed in the contextof thebusinessplans.A similar regularORSAprocesshasbeenestablishedfortheLloyds’ManagingAgency,ArgoReandArgoUS.

On an annual basis, a comprehensive risk report is produced for Argo Group. The Group reportincorporatesperspectivesforArgoReandArgoUS.SeparateAnnualORSAReportsareproducedfortheLloyds’ManagingAgencyandArgoGlobalSEasrequiredby localSolvency2regulations.Thetimingofthe production, approval and issuance of these reports is governed by the applicable regulatorytimetables.

Argo Group’s Risk Assessment Process (RAP) is driven by the organization’s strategic goals andobjectives.Materialrisksarerankedandprioritizedbasedonestablishedcriteriaandevaluatedonbothan inherent (i.e.pre-riskmitigation controls inplace)and residual (i.e.post-riskmitigation controls inplace)basis.

The findings and recommendations that result from Argo Group’s risk and solvency self-assessmentprocess are a key source of information for strategic decision-making, regulatory reviews as well asdisclosurestosupervisoryauthoritiesandkeystakeholders.

iii. Descriptionoftherelationshipbetweenthesolvencyself-assessment,solvencyneeds,andcapitalandriskmanagementsystems


ArgoGroupSolvencySelfAssessmentandRisk&CapitalManagement

ArgoGrouprecognizesthatdevelopingEnterpriseRiskManagement(ERM)isalong-termprocesswithastep-wise continuous improvement approach required to build gradually on the adoption of riskmanagementprocessesacrosstheorganization.ArgoGrouphasthereforedefinedaRiskManagementStrategytoensureERMadoptioncreatesariskawareculturewithkeymilestonesthroughto2020.

The vision for 2020 is an organization where all staff within the organization has access to theappropriate tools, processes and training to enable them to make informed and timely risk-takingdecisions.Thisimpliesthat:

• Risksaremadevisible.• Risksarediscussedandunderstood.• Risksareowned.• Appropriateactionistaken.• Argolearnsfromitsrisktaking.

In order to deliver this vision and strategy, a number of key risk management initiatives have beenincorporatedintoanoverallmulti-yearriskmanagementimprovementplan.

Risk reporting is integral to the Argo Group’smanagement information system, and takes place at anumber of different levels throughout the business. It provides senior management, the Board andother relevant external parties (e.g. regulators, rating agencies)with sufficient information to enablethemtoassess(1)theactuallevelofriskintegratedintothebusinessplanand(2)theeffectivenessofthecontrolenvironment.

The Risk&Capital Committee of the Board ofDirectorsmeets quarterly to discussArgoGroup’s riskassessmentofmaterialrisksandanysignificantchangetotheoverallArgoGroupriskprofile,includingactionsbeingtakentomitigateorcontrolkeyriskexposures.

TheriskreportingwithinArgoGroupisbaseduponagroup-widecyclewithregularquarterlyreportingto various Risk Committees. In practice this means that each Risk Committee agrees upon certainactions,whichare “tracked” through their completion.A feedback loopexists toensure that if aRiskCommitteerequestsadditionalanalysisorachangetotheformatofaregularriskreport,theresponsiveaction to this request is “tracked” through its completion and the Risk Committee confirms itsacceptanceoftheresponsiveaction.

TheChiefRiskOfficeristheowneroftheRiskReportingprovidedtoRiskCommittees.

•InternalReporting

RiskisreportedanddiscussedinternallyatArgoGroupinvariousways,withthefollowingbeingsomeofthemoresignificantones:


1) Quarterly ORSA Risk Reporting presented to the Board of Directors by the Risk & CapitalCommittee. This Report focuses on material changes in the risk profile of all risks includingemergingrisks.Riskexposuresarereportedagainstagreedtolerances.ThisalsooccursfortheLloyd’sManagingAgencyandArgoUSandimplementationisprogressingforArgoRe.

2) Annual ORSA Reporting. This Report provides a summary of how the risk profile of theorganization has changed over a 12-month period and the implications for its capital andsolvency, leading to recommendations for action where appropriate. The GSSA Report nowincorporatestherequirementsrelatedtoArgoRe(CISSAReport)andArgoUS(NAICSummaryReport).SimilarreportingexistsfortheLloyds’ManagingAgencyandArgoGlobalSE.

3)QuarterlyLossReserveReviewReport-appliestoallactivelinesofbusiness.

4) Quarterly Group Underwriting Review Report – primarily based upon the minutes of thequarterly Argo Group Property, General Liability and Professional Liability UnderwritingCommitteemeetings.

5) Quarterly business units Operating Reviews Reports - focuses on strategic reviews ofquarterlyunderwritingandclaimsresultsrelativetoapplicablebusinessplans.

6)Quarterlyinvestmentreports–providedtotheBoardinvestmentcommitteeforoversightoftheinvestmentportfolio,itsperformanceandriskprofile.

•ExternalReporting

RiskisreportedanddiscussedexternallyatArgoGroupinmanyforums,withsomeofthemoresignificantonesbeing:

1)Quarterly/AnnualriskdisclosuresinForm10-QandForm10-Krespectively.2)Presentations/meetingsto/withinsuranceregulatoryauthorities.3)AnnualratingagenciesreviewwithA.M.BestandStandard&Poor’s(S&P).

SolvencySelfAssessmentApprovalProcess

ArgoGroupSolvencySelfAssessments(GSSA)arepredominantlycompiledfromexistingandpreviouslyapprovedbusinessmaterialssuchasthequarterlyOwnRisk&SolvencyAssessment(ORSA)riskreports,businessplan,capitalmodelingoutputandotherriskmanagementframeworkdocumentation.

Thereviewandsign-offoftheGSSAreportismanagedbytheRiskManagementFunction,withdetailedreview by Risk Owners across the businesses sitting on the ERM Steering Committee. The approvalaffirmstheaccuracy,coverageandnecessarydetailwithinthereport,foritsuseasapointofreference,aswellasthereport’sutilizationinfuturedecisionmakingbytheBoardandmanagement.

The GSSA is shared with the members of the Argo Group, Argo Re and Argo Group US Boards andapprovedbytheArgoGroupChiefRiskOfficer.


(d) InternalControls i. Descriptionoftheinternalcontrolsystem

ArgoGroupInternalControls

The Company defines internal controls as a process, conducted by its Board, Key Functionaries andemployees,designedtoprovide"reasonableassurance"thatbusinessobjectivesareachieved.

Thisisaccomplishedby:

•Securingcompliancewithapplicablelaws,regulationsandcontrolprocesses;•Ensuringprocessesareefficientandeffective;• Ensuring that sufficient and reliable financial and non-financial information is available toeffectivelymanagethebusiness;and

•Ensuringthatadequatepoliciesandproceduresareinplace,particularlythoserelatedtothecompany’s key business functions i.e. IT, accounting, financial reporting, riskmanagementandcompliance.

Elementsof the controls environment include integrity, ethical values,management'soperating style,delegationofauthority,aswellastheprocessesformanaginganddevelopingpeopleinthebusiness.

ArgoGroupmaintainsaCorporateCodeofConduct&BusinessEthics.ThisisanimportantfoundationofitsinternalcontrolsystemthatisapplicabletocompliancewithLawsandRegulations,andPoliciesandProceduresforConflictsofInterest,InsiderTrading,Anti-MoneyLaundering,Anti-Trust,Anti-BriberyandAnti-Corruption,Gifts&Entertainment, Political Contributions,DataPrivacy and Information Security,OutsourcingandConfidentiality.CorporatetrainingisprovidedtoCompanyemployeesanditsrelevantthirdpartyvendorsregardingthesubjectofthePoliciesandProcedures.

The InternalControlsSystem isdesignedandoperates toassist theBoardandSeniorManagement inthe fulfillmentof their respective responsibilities foroversightandmanagementof theCompany.TheInternalControlsSystemprovidesthemwithreasonableassurancefromacontrolperspectivethatthebusiness is being operated consistent with (a) the strategy and risk appetite set by the Board, (b)businessobjectives,(c)policiesandprocedures,and(d)lawsandregulations.

TheCompanyhasinplaceaWhistleblowingProcedurethatencouragesproactivereportingofillegalorunethicalbehaviors.ItistheCompany’spolicytoensurethatallKeyFunctionariesandemployeesareaware of and have access to the Company whistleblowing hotline (“AlertLine”) for the purpose ofreportinganyillegalorunethicalactonaconfidential,anonymousbasis.Suchreportsmayalsoaddressany concerns regarding financial statement or other disclosures, accounting, internal accounting ordisclosurecontrols,auditingmattersorviolationsoftheCompany’sCodeofConduct&BusinessEthics.

ii. Descriptionofhowthecompliancefunctionisexecuted


ArgoGroup’sComplianceFunction

ArgoGrouphasestablishedtwoareasfortheperformanceofitsCompliancefunction.AtaGrouplevel,the Corporate Compliance function, reporting to the Group Chief Risk Officer oversees complianceactivities for International operations. In parallel, Argo Group US operates a Regulatory Compliancefunction, reporting to the General Counsel, overseeing compliance activities for the various U.S.domestic insurersandmanaginggeneralagencieswithin theGroup. Argobelieves thisorganizationalstructureoptimizesitsabilitytomaintaineffectiveandefficientcompliancefunctions.

TheCompliancefunctionensuresthatappropriatepolicieshavebeenestablishedandthatcompliancemonitoringisoccurringrelativeto:Anti-Bribery&Anti-Corruption(ABC),Anti-MoneyLaundering(AML),Anti-Fraud, Code of Conduct & Business Ethics, Conflict of Interest, Fit and Proper, InternationalSanctions, Anti-Trust, Data Privacy and Information Security. Compliance with international sanctionrequirementsincludestheapplication of the Bermuda Sanctions Regime, United Nations (UN), European Union (EU), United Kingdom (UK) and United States (US) sanctions requirements.

TheCorporateCompliancefunctionreportstotheBoardRisk&CapitalCommitteeonaquarterlybasis.Its remit is captured within its Board Risk & Capital Committee approved functional charter andincludes:

• Managing regulatory relationshipswith theBermudaMonetaryAuthority (BMA)as theGroupSupervisoryandregulatoryauthorityforArgoReLtd.;

• Managingotherkeyinternationalregulatoryrelationships;• EnsuringthatArgoGroupevaluatesitsongoingcompliancewiththeBermudaGroupRulesand

InsuranceCodeof Conduct (ICC) andperiodically informmanagementof improvement actionplansrequired;

• MaintainingpolicygovernanceintermsofprovidingaGroup-levelPolicyframework;• Providingsecondlineofdefenseasregardscompliancemonitoringoversight;• ProvidingregulatorycompliancetrainingandadvicetomanagementandstaffofArgoGroup’s

non-U.S.operations;• ProvidingComplianceassurancereportingtoBoard(s)andCommittee(s)withintheArgoGroup;• Monitoringandadvisingonregulatorydevelopmentsandchanges;and• Designing effective, efficient and economic solutions to the way in which regulatory

requirementsareimplemented.

(e) InternalAudit

Descriptionofhowtheinternalauditfunctionisimplementedandhowitmaintainsitsindependenceandobjectivitywhenconductingitsfunctions


ArgoGroupInternalAuditImplementation

The internal audit function is establishedby theAuditCommitteeof theBoardofDirectors. TheVicePresident - Head of Internal Audit reports on a quarterly basis to the Audit Committee. The AuditCommitteeisresponsiblefor:

•Approvingtheinternalauditcharter;•Approvingtheriskbasedinternalauditplan;•Approvingtheinternalauditbudgetandresourceplan;•ReceivingcommunicationfromtheVicePresident-HeadofInternalAuditontheinternalaudit

function’sperformancerelativetoitsplanandothermatters;• Approving decisions regarding the appointment and removal of the Vice President - Head of

InternalAudit;•ApprovingtheremunerationoftheVicePresident-HeadofInternalAudit;and•MakingappropriateinquiriesofmanagementandtheVicePresident-HeadofInternalAuditto

determinewhetherthereisinappropriatescopeorresourcelimitations.

The Vice President - Head of Internal Audit communicates and interacts directly with the AuditCommittee,includinginexecutivesessionsandbetweenAuditCommitteemeetingsasappropriate.

The Internal Audit activity of Argo Group is responsible for periodically evaluating the processes ofcontrolling operations throughout the organization. This responsibility is carried out in three distinctsteps:

• Ascertaining that the design of the process of controlling, as it has been established andrepresentedbymanagement,isadequate;

• Determining, through compliance testing and other procedures, that the process is, in fact,functioningasintendedinaneffectiveandefficientmanner;and

•Reporting theresultsofauditworkperformedandofferingrecommendations for improvingthecontrollingprocess.

The frequency and scope of auditing the controlling process is determined by Argo Group’s InternalAudit department in connection with the Company’s senior management and as approved by theCompany'sAuditCommittee.

Independence:

The internal audit function remains free from interferencebyanyelement in theCompany, includingmatters of audit selection, scope, procedures, frequency, timing, or report content to permitmaintenanceofanecessaryindependentandobjectivementalattitude.

Internalauditorshavenodirectoperationalresponsibilityorauthorityoveranyoftheactivitiesaudited.Accordingly, theydonot implement internal controls, developdetailed stepsnecessary to implement


procedures,installsystems,preparerecords,orengageinanyotheractivitythatmayimpairtheinternalauditor’sjudgment.

Auditorsarerequiredtomaintainindependenceofmentalattitudeintheconductofallassignedwork;tobeobjective,fair,andimpartial;andtoconductthemselvessothatclientsandthirdpartieswillseeourofficeinthisway.InternalAuditorssignaConflictofInterestStatementuponinitialemploymentinthe department and renewed annually thereafter. Each staff member must promptly notify theirInternalAuditmanagerortheCEOoftheCompanyinwritingconcerninganysituationthatwouldimpairthestaffmember'sortheoffice'sindependenceonanaudit,orthatmightleadotherstoquestionit.

Ifastaffmemberhasanydoubtaboutwhetherasituationmayconstituteimpairment,heorsheshouldresolve the question in favor of disclosure. Tomaintain independence, any auditor (including seniormanagement)whotransferstoInternalAuditfromtheCompany’sauditableareasmaynotperformanyaudittesting,reviewworkpapers,or issueauditreports forthatauditableareaforoneyearafterthetransfer.

The Vice President - Head of Internal Audit confirms to the Audit Committee, at least annually, theorganizationalindependenceoftheinternalauditfunction.

(f) ActuarialFunction Descriptionofhowtheactuarialfunctionisimplemented

ArgoGroup’sActuarialFunction

ActuarialFunction(AF)isresponsiblefor:

•EstimatingandreportingtheTechnicalProvisionstotheBoard;•ProvidinganopinionontheUnderwritingPolicy;•Providinganopinionontheadequacyofreinsuranceandotherriskmitigationarrangements;and

• Contributing to, and report on, the Risk Management System (principally regarding thecalculationofthecapitalrequirements).

The decisions of the Actuarial Function are free from the influence of other functions, includingmanagement.TheFunctionsroleholdershavetherelevantqualifications,experienceandknowledgeoftherisksinherentinthebusiness.TheGroupActuarialfunctionisledbyaChiefActuaryandisresourcedtoaddressall reserving requirementsacross theGroup.TheChiefActuary reports to theBoardAuditCommitteeonaquarterlybasiswithrespecttoreservingmattersActuarial functionholders, includingtheChiefActuaryarequalifiedFellowsofappropriatenationalActuarialsocieties.

Actuarial reserving processes arewell defined and closelymanaged. Procedures for quarterly review,discussionandfinancialreportingofreservesareinplaceandmanagedthroughthoroughprocessesand


ultimatemanagementsignoff.Eachbusinessunithasatleastonepricingactuarywhoisresponsibleforthe pricing adequacy at both a portfolio level and,where appropriate, at an individual account level.These pricing actuaries and their managers work closely with the Underwriting teams to review thepricingmodelsandtodeterminetheexpectedlosscostsassociatedwiththevariousproductswithinthebusinesses.ThereisclearfunctionalseparationbetweenthepricingandreservingteamsandbetweentheActuarialfunctionasawholeandboththeUnderwritingandClaimsfunctions.

ACapitalModelingteamis inplaceandworkscloselywiththeERMfunctiononthemanagementandoversightoftheinternalECM.

(g) Outsourcing

i. Description of the outsourcing policy and information on any key or importantfunctionsthathavebeenoutsourced

ArgoGroupOutsourcing

It is Argo Group’s Policy to manage its relationships with all of its outsourced service providers, inaccordance with the Bermuda Monetary Authority’s (“BMA”) Group Rules and Insurance Code ofConduct(ICC),andthelawsandregulationsofthecountriesinwhichtheCompanyconductsbusiness.Thisisachievedbyembeddingintotheorganizationadequatesystemsandcontrolstomitigatetherisksassociatedwithoutsourcingactivities.ArgoReappliesaconsistentOutsourcingPolicytotheGroup.

Whenrelyingonathirdpartyorotheraffiliatedentitytoperformoperational functionsrequiredbyaregulatororessentialtoregulatedactivities,ArgoGroup:

•MaintainsoversightandaccountabilityforthesefunctionsasiftheywereperformedinternallyandsubjecttotheCompany’sownstandardsforcorporategovernanceandinternalcontrols;and

•Notifies,whererequiredbyapplicablelawsandregulations,theRegulatorofanyoutsourcingagreements formaterial functions and submits those agreements to the Regulator prior tosigning.

The Company also ensures that any service agreements to perform material outsourced functionsinclude:

•Termsofcompliancewithjurisdictionallawsandregulations;• A requirement for cooperation with the Regulator and any other relevant competentauthority;and

•Timelyaccesstodataandrecords.


ArgoGrouphasanumberofstrategic relationshipswithserviceproviders for theprovisionofkeyservices.Thekeyservicescurrentlyoutsourcedinclude:

• Underwritingsupportservicesincludingdataentryandreconciliation;• FinancialReporting&Accountingsupportservices;• Catastropheriskmodelingservicesincludingdataentryandreconciliation;• ArangeofaspectsofInformationTechnology;and• Taxfunctionoperations.

ii. Descriptionofmaterialintra-groupoutsourcing

Intra-GroupOutsourcing

Argo Group has established a number of intra-group shared services arrangements to facilitate thecreation of centers of excellence in the provision of functional activities. In each case a service levelagreement is put in place between parties formally describing the intent of the agreement. Theseservice level agreements come under the same Outsourcing Policy and Procedure as externalarrangementsandaresubjecttolegalreview.

TheprimaryagreementsarewithArgonautManagementServicesInc.(AMSI)providingservicesfromitsUnitedStatesoperationsinsupportofotherareasofArgoGroupandwithArgoManagementServicesLimited (AMSL)providing services from itsUnitedKingdomoperations forotherareasofArgoGroup.Theseagreementsareinplacetosupportarangeofsmallergroupoperationswhereestablishinglocalfunctionalexpertiseisnotjustifiedbasedonthescaleofthebusinessoperations.

Serviceswhichmight typically be provided under these agreements include: Information Technology,InternalAudit,EnterpriseRiskManagement,FinancialPlanning&Accounting,InvestmentManagement,Legal,Marketingand/orActuarial.Thenatureofeachagreementvariesbasedonthetypeandscaleofeachoperationtowhichitisintendedtoapply.

(h) Anyothermaterialinformation:

ArgoReappliesthesameprocessestoIntra-GroupOutsourcingasArgoGroup.

iii) RiskProfile-particularsonexposuresonunderwritingrisk,marketriskincludingoffbalancesheetexposures,creditrisk,liquidityrisk,operationalriskandothermaterialrisks

(a) Materialrisksthattheinsurerisexposedto,includinghowtheserisksaremeasuredandanymaterialchangesthathaveoccurredduringthereportingperiod:


MaterialRisk

TheobjectiveofArgoGroup’sEnterpriseRiskManagementandGovernanceFrameworksaretoensurethat:

1.Allreasonablyforeseeablematerialrisks,includingfinancialandnon-financial,onandoff-balancesheetandcurrentandcontingentexposuresareidentified;

2.Thepotentialimpactofsuchmaterialrisks,includingmaterialrisksaffectingcapitalrequirementsand capital management, short-term and long-term liquidity requirements, policyholderobligationsandoperationalstrategiesandobjectivesareassessed;and

3. Policies and strategies are developed andmaintained tomanage,mitigate and reportmaterialriskseffectively.

The risk taxonomy is intended to broadly define Argo Group’s universe of risks by classifying riskcategoriesandriskcauses.Thisclassificationservestodriveconsistencyintheevaluationofrisksacrossbusiness units and enable ameaningful rollup of operating unit risks to Argo Group level risks. Theclassification considers four major categories of risk, which are Insurance Risk, Financial Risk,Operational Risk and Strategic Risk. These in turn are broken down into risk causes as defined inAPPENDIXD.ThisisthebasisofArgoGroup’sriskregisterandriskassessmentprocess.

Argo Group uses a Risk Assessment Process to assess, investigate, aggregate and prioritize key risksacrosstheorganization.Thistoolencompassesgranularriskscenarios(e.g.,aneventthatmayleadtoanegativeimpactonearnings,capitalorbusinessprospectsofArgoGroup,whenandifitoccurs)acrossall risk types.RiskRegistersarecompletedat thebusinessunit level, thenrolleduptoaconsolidatedlevel.

Argo Group evaluates risk scenarios based on their inherent riskiness (Gross risk), as well as theirresidualriskiness(Netrisk).ArgoGroup’sapproachtoriskrankingandprioritizationisbasedona5-levelscoring system forboth Impactand Likelihood. Riskevaluation considers twokeyaspects, Impact, interms of financial and reputational consequences, and Likelihood in terms of the probability ofoccurrence.

Impact is scored from Very High (VH) through to Very Low (VL) based on objective and consistentcriteria.TheapproachisconsistentinallareasofArgoGroup;however,thespecificfinancialmetricsarescaled toeachbusinessunit’soperation. Themethodologyusedensures relevance foreachbusinessunitorentityconsidered,butenablesanaggregationtotheGroup-level.Reputationalriskmeasuresareconsistentacrossallentities.

TheLikelihoodofarisk’soccurrenceisalsoconsideredona5-pointscalefromVeryHigh(VH–onceperyearormore)toVeryLow(VL-1in100year’sevent).ThisapproachallowsthedevelopmentofaHeatMapwitha5by5grid,mapping the risks to threezones forprioritizationpurposes.Risk tolerance isthereforedefinedbytheboundaryofRedandAmberareas.RiskswithintheGreenareaareconsidered


tobecurrentlynotmaterial.Riskswithinthe‘Redzone’requireescalationtotheBoardforimmediatemanagementactionintermsofdeterminingappropriatemitigation.SeeAPPENDIXE.

TheCompany’smainriskcategoriesasdefined intherisktaxonomyare Insurance,Strategic,FinancialandOperationalrisk:

• InsuranceRisk–Theriskoflossoradversechangeinthevalueofliabilitiesduetotherandom

timing / frequency or severity of insured events; inadequate pricing or reserving practices.Insurance Risk specifically includes Catastrophe risk, Non-Catastrophe Underwriting Risk andReservingRisk.

• StrategicRisk-Theriskthatsignificantearningsand/orcapitalimpactmaterializesduetopoormanagementdecisions,ineffectiveexecution,orinadequateresponsivenesstomacro-economicconditionsandcompetition.StrategicriskspecificallyincludesGroupRiskandReputationalRisk.

• FinancialRisk–The riskof lossoradverse change in the company’s financial strengthdue tomarket, credit or liquidity risks. Financial Risk specifically includes Market Risk (investmentportfolio risk, concentration risk), foreign exchange, reinsurance default, account receivablesdefault,asset-liabilitymatchingandliquidityrisk.

• OperationalRisk–Theriskoflossarisingfrominadequateorfailedinternal/externalprocesses,people,orsystemsintheCompanyoperations.Operationalriskspecificallyincludesregulatorycomplianceriskandmodelrisk.

Theoutcomeoftheriskidentification/prioritizationprocessascapturedinArgoGroup’sCorporateRiskRegisterisconsistentwiththeriskassessmentresultscomingfromtheEconomicCapitalModel(ECM).ThethreemostmaterialriskexposurestoArgoGroupfromtheriskprofile,asconfirmedbytheECMareReserveRisk,MarketRiskandCatastropheRisk.Therehavebeennomovementsinthelast12monthsintheriskprofilethatArgoGroupconsiderstobematerial.

(b) Howrisksaremitigatedincludingthemethodsusedandtheprocesstomonitortheeffectivenessofthesemethods

RiskMitigation

The Risk Assessment Process applies to the consideration of the operation of controls and othermitigationstrategiestomanagerisksappropriatelywithinagreedrisktolerancesandlimits.Thisprocessensures that material risks are described using consistent terminology for impact and likelihood,articulatedwithintheriskmanagementframework.

Theprocessensuresthatcontrolsandmitigationstrategiesaredocumentedforeachmaterialriskandthat RiskManagers acknowledge ownership for themaintenance and operation of controls. In somecases,controlswillbelongtostaffwithinotherfunctionsordepartmentsandthereforeaControlOwnerwill be identified, who needs to interact proactively with a RiskManager to ensure that the controlenvironmentremainseffective.

The Risk Assessment includes a Control Self-Assessment whereby the business determines theeffectiveness of the controls against two dimensions, the control design rating and the control


implementation rating. This Assessment providesmore clarity and transparency on the evaluation ofcontrolsthatinfluencetheriskscoringofGrossandNetRisklevels.

NewriskcontrolsareestablishedbytheCompanyinresponsetochangesinthebusinessenvironmentandagreedriskappetiteandrisktolerances.Continuingtomaintainastructuredreinsuranceprogramisa key element of Argo Group’s risk mitigation strategy and is managed through the ReinsuranceCommitteeoftheExecutive.

Where an action is identified as required to improve a control, implement a mitigation strategy orrespondtoachangedriskprofile,theactionplanisclearlyarticulatedandassignedanActionOwneraswell as a deadline. The Action Owner is responsible for taking the action and ensuring itsimplementation.Periodicreviewsoccurinordertomonitorandreportontheactionstatusandescalatesignificantdelaysinthecompletionofanaction.

Internal Audit periodically reviews the enterprise risk management framework and ensures thatappropriatecontrolsareinplaceformanagingmaterialriskexposures.BoththeRiskManagementandInternal Audit functions report periodically on the effectiveness of the enterprise risk managementrespectivelytotheBoardAuditCommitteeandtheBoardRisk&CapitalCommittee.

(c) Materialriskconcentration

RiskConcentration

Concentration Risk is the risk of exposure to losses associated with inadequate diversification ofportfoliosofassetsorobligations.Concentrationriskcanariseinboththeassetandliabilitysideofthebalancesheetaswellas inoff-balancesheet itemsandcanoriginate fromaseriesofsourcessuchasnatural orman-made catastrophes or unprecedented economic events, individual risk exposure, or acombinationofriskexposuressuchascredit,investment,underwritingandliquidity.

Thetwomostmaterialareasofriskconcentrationarerelatedto(a)catastropheriskexposuresand(b)counterpartyandcreditexposures.

(a) Catastropheriskexposures

TheCompany issubjecttoclaimsarisingoutofcatastrophesthatmayhaveasignificanteffectonourbusiness,resultsofoperationsand/orfinancialcondition.Catastrophescanbecausedbyvariousevents,including tornadoes, hurricanes, windstorms, tsunamis, earthquakes, hailstorms, explosions, poweroutages, severe winter weather, wildfires andman-made events. The incidence and severity of suchrandomly occurring catastrophic events are inherently unpredictable. The extent of losses from acatastrophe isa functionofboththetotalamountof insuredvalues intheareaaffectedbytheeventandseverityoftheevent.

(b) Counterpartyandcreditexposures


With respect to investments, top-down indicators such as strategic asset allocation thresholds aredefinedandcloselymonitoredtoensurebalancedinvestmentportfolios.Considerationisgiventocreditquality,sectorsandgeographiclocations.

ArgoGrouphasestablishedan InvestmentPolicy,approvedbytheBoard InvestmentCommittee.ThisPolicy governs the allocation of assets and prohibits exposures in excess of certain risk tolerances.Twenty-threeseparateconcentrationlimitsaremonitoredandreportedagainst.Compliancewiththeserisk tolerances is confirmed within the quarterly ORSA report provided to the Board Risk & CapitalCommittee.

Somespecificmaterialriskconcentrationlimitsthataresubjecttoenforcementinclude:

- Maximum investment in a single entity or asset is $5 mm without specific InvestmentCommitteeapproval;

- Maximumallocationtohedgefunds,privateequityordirectlymanagedassetsislimitedto15%ofGAAPequity;

- Non-investmentgradecreditislimitedto25%ofGAAPequity;and- Emergingmarketdebtislimitedto15%ofGAAPequity.

ArgoGroupcontractswithavarietyofinvestmentmanagers,eachwithindividualinvestmentmandates.Any breach of investment management mandates would be reported within a month and if a risktoleranceisbreached,theexistenceofsuchbreachwouldbeescalatedtotheInvestmentCommittee.ArgoGrouphas remained in compliancewith its InvestmentPolicy for theentiretyof theFCRannualperiod.

(d) Howassetsareinvestedbyandonbehalfofaninsurancegroupinaccordancewiththeprudentpersonprincipleasstatedinparagraph12(1)(a)oftheseRules

Consistentwiththe“prudent-personprinciple,”theArgoGroupInvestmentOfficerinvestsonlyinthoseinstruments that any reasonable individual with objectives of capital preservation and return oninvestmentwouldown.ThisprinciplerequiresthatArgoGroup’sInvestmentOfficer,indeterminingtheappropriate investment strategy and policy, may only assume investment risks that he can properlyidentify, measure, respond to, monitor, control, and report while taking into consideration theapplicable capital requirements and adequacy, short-term and long-term liquidity requirements, andpolicyholderobligations.Further,ArgoGroupensuresthatinvestmentdecisionshavebeenexecutedinthebestinterestofbothitspolicyholdersanditsshareholders.

ArgoGrouphasestablishedan InvestmentPolicy,approvedbytheBoard InvestmentCommittee.ThisPolicygovernstheallocationofassetsandprohibitsexposures inexcessofcertainrisktolerancesandthisPolicyisreviewedbytheCommitteeonanannualbasis.TheBoardRisk&CapitalCommitteealsoreceivesaquarterlyORSAReportcomparinginvestmentexposureswiththeapprovedrisktolerances.

(e) Thestresstestingandsensitivityanalysistoassessmaterialrisks,includingthemethodsandassumptionsused,andtheoutcomes


Stress&ScenarioTestingFramework

TheStress&ScenarioTesting Framework (SSTF) is considered independentof, yet complimentary to,theGroupEconomicCapitalModel (ECM). The stress tests aredeveloped independentlyof theECMandtheSSTFisusedasatoolforindependentECMvalidation.

The purpose of the SSTF is to apply a variety of deterministic stress and scenarios to the Group’smaterial risks and analyze the impact on targeted earnings and capital. Stress-testing and scenarioanalysisaretoolstoevaluatetheimpactofsevere,butplausibleevents.

Methods include sensitivity analysis, hypothetical or historical scenario analysis, usingdeterministic/analytic or stochasticmeans. Stress-testing and scenario analysis are intended to assistArgoGroupmanagementtodefinethefirm’srisktolerances,maintainexposuresatacceptable levels,informbusinessandcapitalplanning,and/ortoestablishstrategy.EvaluatingrisksinthiswayisessentialtotheArgoGroupOwnRisk&SolvencyAssessment(ORSA)processaswellas informingbusinessandcapitalplanningprocesses.

TheSSTFprovidessignificantinsightintoboththeopportunitiesandthepotentialvulnerabilitiesofArgoGroup'sbusiness strategy. TheSSTFworks in tandemwithother riskmanagementand financial toolsandprocesses(e.g.capitalmodels,catastrophemodels,portfoliomanagementtools,etc.)andprovidestheopportunitytooffer,transparentinsighttoArgoGroupseniormanagement,theBoard,andexternalstakeholders,confirmingthatArgoGroupisoperatingwithinitsstatedriskappetiteandrisktolerances.

TheSSTFprocesscalculatesquantitativeestimatesoftheimpactonbothearningsandcapitalacrossasetofstressescoveringbothindividualandcombinedscenariosattheArgoGrouplevel.Thesestressescaptureabroadarrayofrisksacrosssixdifferentriskcategories,namelycatastrophe,non-catastropheunderwriting,reserve,market,non-investment-relatedcredit,andoperationalrisk,andareselectedbyeachriskowneraccordingtotheirrelevancetoArgoGroup’sriskprofile.Themagnitudeoftheimpactonearningsiscalculatedatdifferentlevelsofseverity,namelyeventsthatwouldbeestimatedtooccuronce in every 5, 20, 100 and 200 years (representing the 80th percentile, 95th percentile, 99thpercentileand99.5thpercentilerespectively).Themagnitudeoftheimpactoncapitaliscalculatedforanextremeeventoccurringoncein200years(99.5thpercentile).

Theearningsbaseline is calculatedas the current yearbusinessplanexpectationofUSGAAPPre-TaxOperatingIncome,whichis:expectedunderwritinggain/lossplusnetinvestmentincome.Thisbaselineisupdatedinlinewithbusinessplanupdates.

The capital baseline has two components – available capital and required capital – each of which isevaluatedasofthemostrecentyearend.AvailablecapitalreflectsthefinancialresourcestheCompanyhastoabsorbvolatilityofitsassetsand/orliabilities.Requiredcapitalreflectsoneyearofbusinesstobewritten during one future year. The estimate of the stress is deducted at a given severity from thebaselineearnings figure tocalculate thepost-stressearnings impact. Thepost-stressavailablecapitalimpact iscalculated, forexample,bysummingtheavailablebaselinecapitalandthe99.5thpercentile


earnings impact. If the baseline available capital is $1,500mmand the 99.5th percentile post-stressearningsimpactforagivenstressisnegative$(150)mm,thepost-stresscapitalpositionwillbe$1,350mm. Using the post-stress available capital figure, a post-stress Capital Adequacy Ratio (CAR) iscalculated. Thisratioreflectsthepost-stressrequiredcapitalestimaterelativetotheavailablecapitalestimate,whichwillvarydependingonthestressandthecapitalcalculationbasisand iscomparedtotheArgoGroupriskappetite.

TheSSTFDashboardwas firstestablished in2015and is subject toannualupdates.Theresultsof theSSTFDashboardarereviewedwithmovementsintheestimatedstressimpactsmonitoredovertime.

Thestresses/scenariosarerunthroughtheSSTFanalysisonapre-taxbasis.Inotherwords,thepotentialtaxbenefitofalossisnotincludedinthepost-stressmeasuresofeitherearningsorcapital.Individualrisksscenariosdonotreflectanydiversificationbenefitsandultimatelymayoverstatepotentiallosses.Theultimategoaloftheframeworkisnottohaveanexactmeasureofthepotentialloss,buttoinformArgoGroupexecutivemanagementonadirectionalbasiswherethemainrisksarewithinArgoGroupandwhereattentionshouldbefocused.

The outcome of the twenty two stress tests completedwithin theORSA process for the year ending2017was thatall stress testsprior tomanagement responseplansensures that theCapitalAdequacyRatios(CAR)aremaintainedaboveourtargetriskappetiteof125%ofregulatorycapitalpost-eventatthe 1/200 year return period, except in a single scenario associated with extreme claims inflation.Allowing for the application ofmanagement actions across the various stress tests, all the CARs areconfirmedtobeabovethetargetlevel.

(f) Anyothermaterialinformation: None

iv) SolvencyValuation-particularsofthevaluationbases,methodsandassumptionsontheinputsusedtodeterminesolvency

(a) Thevaluationbases,assumptionsandmethodstoderivethevalueofeachassetclass,inaccordancewithGAAPprinciples,areasfollows:• U.S.TreasurySecurities:ThefairvaluesoftheCompany’sU.S.Treasurysecuritiesarebased

onquotedmarketpricesinactivemarkets.• U.Sgovernmentagencies: ComprisedprimarilyofbondsissuedbytheFederalHomeLoan

Bank,FederalhomeLoanMortgageCorporate,andFederalNationalMortgageAssociation.Fairvaluearederivedfromobservabledatathatmayincludedealerquotes,marketspreads,yield curves, live trading levels, tradeexecutiondata, credit informationand the security’stermsandconditions,amongotherthings.

• Non-U.S.governmentandgovernmentagencies:Comprisedoffixedincomeobligationsofnon-U.S.governmentalentities.Fairvaluepricesarederivedfromobservabledatathatmayincludedealerquotes,marketspreads,yieldcurves,livetradinglevels,tradeexecutiondata,creditinformationandthesecurity’stermsandconditions,amongotherthings.


• States andPolitical Subdivisions: Comprised of fixed incomeobligations ofU.S. domiciledstate andmunicipal entities. Fair valueprices arederived fromobservabledata thatmayincludedealerquotes,marketspreads,yieldcurves,livetradinglevels,tradeexecutiondata,creditinformationandthesecurity’stermsandconditions,amongotherthings.

• Corporatedebt:Comprisedofbonds issuedbyor loanobligationsofcorporationsthatarediversifiedacrossawiderangeofissuersandindustries.Fairvaluepricesarederivedfromobservabledata thatmay includedealerquotes,market spreads, yield curves, live tradinglevels, trade execution data, credit information and the security’s terms and conditions,amongotherthings.

• Mortgage-backed securities: Comprised of residential and commercial mortgagesoriginatedbyU.S.governmentagencies(sueastheFederalNationalMortgageAssociation)andcommercialentities.Fairvaluemeasurementsfromarefromthird-partypricingserviceusing observable data that may include dealer quotes, market spreads, cash flows, yieldcurves, live trading levels, trade execution data, market consensus prepayment speeds,creditinformationandthesecurity’stermsandconditions,amongotherthings.

• Asset-backed securities: Principally comprised of collateralized loan obligations,automobile loan receivables, credit card receivables, equipment receivables and homeequity loans. Fair value prices are derived from observable data thatmay include dealerquotes, market spreads, yield curves, live trading levels, trade execution data, creditinformationandthesecurity’stermsandconditions,amongotherthings.

• Equitysecurities:ComprisedofU.S.andforeigncommonandpreferredstocksandmutualfunds. Prices are obtained from third-party pricing services using quoted prices in activemarkets.The fairvaluesof theCompany’smutual fundsarebasedonthenetassetvalue(NAV). The remaining fair value measurements are from the National Association ofInsuranceCommissioner’sSecurityValuationOfficeand frombrokersusingestimatesandassumptions.

• OtherInvestmentsreportedatfairvalue:Comprisedofforeignregulatorydepositsheldintrust in jurisdictionswhere there is a legal and regulatory requirement tomaintain fundslocally inorder toprotectpolicyholders. Lloyd’s is theappointed investmentmanager forthefunds.Theseassetsareinvestedinshort-termgovernmentsecurities,agencysecuritiesandcorporatebondsandarevaluedbyLloyd’s.

• OtherInvestments: Comprisedoffunds invested inarangeofdiversifiedstrategies.TheCompanydoesnotmeasureitsinvestmentsthatareaccountedforusingtheequitymethodofaccountingatfairvalueunlessanother-than-temporaryimpairmentisrecorded.

• Short-term Investments and cash equivalents: Short-term investments include moneymarket funds,commercialpaper, interest-bearingtimedepositsandbondswithmaturitiesoflessthan12monthsfromthedateofpurchase.

• Cash:Cash includescash inbanks. Interest-bearingcashdepositsarecategorizedas short-terminvestments.

• Foreignexchangecurrency forwardcontracts:The fairvalueof foreignexchangecurrencyforward contracts are priced from quoted market prices for similar exchange-tradedderivativesthatutilizeindependentmarketdatainputs.

((b)Thevaluationbases,assumptionsandmethodsusedtoderivethevalueoftechnicalprovisionsandtheamountofthebestestimate.Theamountoftheriskmarginaswellasthelevelofuncertaintytodeterminethevalueofthetechnicalprovisionsshouldbe

included


Argo Group has estimated the technical provisions, valued off the Bermuda EBS basis, and is closelyfollowingthetemplateprovidedbytheBMA.ThetechnicalprovisioncalculationsstartwithGAAPlossreservesbyreservingclasswithanymarginremovedandmakinganappropriateallowanceforeventsnotinthedata.Theamountofdiscountinthereservesiscalculatedbasedonpaymentpatternsderivedfrom Argo data and the yield curves provided by the BMA. Premium provisions are based on theapproachusingUnearnedPremiumreserves(UPR)andDeferredAcquisitionCosts(DAC)aswellasanypremium expected to be collected in the future. To calculate the risk margin, Argo Group uses theapproach employed in the template.As indicated in the actuarial opinion, the best estimate of thetechnicalprovisionsforArgoGroupInternationalHoldingsLtd.is$3,117mm(prioryearwas$2,725mm)asshownonline19oftheGroup’sstatutoryeconomicbalancesheet.Thetechnicalprovisionsincludeariskmarginof$215mm(prioryearwas$202mm).Duetothecorporatestructure,wehavedeterminedthattheArgoReLtd.’stechnicalprovisionsandreservemarginareidenticaltothatforArgoGroup.[Source:EconomicBalanceSheetandLossReserveSpecialistReport]

(c) Descriptionofrecoverablesfromreinsurancecontracts,includingspecialpurposeinsurersandotherrisktransfermechanisms

Reinsurancerecoverablesrepresentamountsofpaidlossesandlossadjustmentexpenses,casereservesand incurred but not reported (“IBNR”) amounts ceded to reinsurers under reinsurance treaties.Reinsurancerecoverablesalsoreflectamountsthatareduefromtradecapitalproviders.At December 31, 2017, Argo Group’s reinsurance recoverable balance – in accordance with GAAPprinciples-totaled$2093.3mm,netofanallowancefordoubtfulaccounts.ReinsurersratedAorhigheraccountsfor$1,680.8mm,or80%ofthereinsurancerecoverablebalanceatDecember21,2017.Therewas a 51.5% increase in prior year reinsurance recoverables, largely associated with the significantcatastropheeventactivity in the secondhalfof2017.Given theshort tailnatureof theseclaims, it isanticipatedtobeashort-termeffect.AtDecember31,2017,ArgoRe’sreinsurancerecoverablebalance–inaccordancewithGAAPprinciples-totaled$240.7mm,netofanallowancefordoubtfulaccounts.ReinsurersratedAorhigheraccountsfor$184.3mm,or77%ofthereinsurancerecoverablebalanceatDecember31,2017.Management has concluded that all balances (net of any allowances for doubtful accounts) areconsideredrecoverableasofDecember31,2017.

RatingsperA.M.Best ReinsuranceRecoverables[PrioryearinBrackets]

(inmillions)%ofTotal %Changefrom

YE2016ForArgoGroup

ReinsurersratedA+orbetter 1046.9[784.9] 50.00% 33.40%ReinsurersratedA 633.9[422.7] 30.30% 50.00%ReinsurersratedA- 86.3[79.9] 4.10% 8.00%ReinsurersratedbelowA-ornotrated 326.2[98.1] 15.60% 232.50%

TotalYE2017 2093.3(1385.6) 100.00% 51.5%


[Source:ArgoGroupForm10-K]

RatingsperA.M.Best ReinsuranceRecoverables[PrioryearinBrackets]

(inmillions)%ofTotal %Changefrom

YE2016ForArgoRe

ReinsurersratedA+orbetter 133.5[139.1] 50.0% -4.0%ReinsurersratedA 50.8[40.6] 30.3% 25.0%ReinsurersratedA- 19.0[15.2] 4.1% 25.2%ReinsurersratedbelowA-ornotrated 37.4[2.1] 15.6% 1681.0%TotalYE2017 240.7[197.0] 100.0% 22.2%

[Source:DerivedfromArgoGroupForm10-Kfigures]

(d) Thevaluationbases,assumptionsandmethodsusedtoderivethevalueofotherliabilitiesArgoGroup’sotherliabilitiestotal$31.7mm,inaccordancewithGAAPprinciples,mostofwhichareatfairvalueoraproxytofairvalue.ArgoReapproachisconsistentwithGroupmeasurementandisincludedintheafore-mentionedtotal.

(e) Anyothermaterialinformation:None

v) CapitalManagement-particularsregardinganassessmentofcapitalneedsandregulatorycapitalrequirements

(a) EligibleCapital i. Descriptionofthecapitalmanagementpolicyandprocesstodeterminecapitalneeds

forbusinessplanning,howcapitalismanagedandanymaterialchangesduringthereportingperiod

CapitalManagement&Planning

ArgoGroupactivelyplansandmanages its capitalonanongoingbasis followingArgoGroup’sCapitalManagement&Planning(CM&P)process.ArgoGroup’sCM&Pprocessconsiderstheneedsofarangeofstakeholdersincludingpolicyholders,ratingagencies,regulators,distributionpartners,banksandotherlenders,publicdebt-holders,publicequityholdersandmanagement/employees. In fulfillingthegoalsof CM&P, the Argo Group Treasury/Corporate Finance Department along with other relevant ArgoGroupexecutivecarefullybalancetheinterests,sometimescompeting,ofthesestakeholders.


TheCapitalManagement&Planning (CM&P)process is intendedtomaintaincapital levels toaddressthefollowingcapitaluses:

• ProtectionofpolicyholderinterestsineachofArgoGroup’sunderwritingentitiesandineachoftheregulatoryregimesinwhichArgoGroup’svariousbusinessesoperate;

• Obtainandmaintain ratings fromtheratingagencies thatdemonstrateArgoGroup’s financialstrengthandenableArgoGrouptoserveasacompetitivemarketforitsclients,producersandpolicyholders;

• Enable Argo Group’s senior business leaders to develop business plans and provide capitalsupportforapprovedpremiumgrowth;

• Provide intermediateand/orultimateholding company liquidity through,amongother things,dividendsand/orloansfromsubsidiaries;

• Provide intra-company liquidity through intra-company loans, down-stream capitalcontributions,up-streaminternaldividends,oracombinationthereof;

• PotentiallyraisecapitalfromvarioussourcesofexternalcapitalavailabletoArgoGroup;• Deploy excess capital, if any, and/or the proceeds of any capital raises, to various potential

internal or external uses of capital, including stock repurchases, stock dividends and/or debtrepayment;and

• Seek to optimize Argo Group’s capital structure, weighted average cost of capital, and risk-adjusted returns for the benefit of, and with due regard to the need to balance the multi-facetedandsometimescompetinginterestof,ArgoGroup’svariousconstituents.

ArgoGroup (in'000s)-YE2016 (in'000s)-YE2017EligibleCapital Tier1 $1,298,728 $1,248,629Tier2 $480,847 $571,519Tier3 $0 $0Total $1,779,575 $1,820,148[Source:ArgoGroupBSCR]

ArgoRe (in'000s)-YE2016 (in'000s)-YE2017

EligibleCapital

Tier1 $1,474,138 $1,400,669

Tier2 $0 $0

Tier3 $0 $0

Total $1,474,138 $1,400,669[Source:ArgoReBSCR]

The Argo Re Ltd. Tier 2 and Eligible Capital values for YE2016 has been restated compared to theFinancialConditionReportissuedforYE2016,followingtheidentificationofareportingerror.


DescriptionoftheeligiblecapitalcategorizedbytiersinaccordancewiththeEligibleCapitalRules

EligibleCapital

UndertherespectivesystemsappliedtoArgoReas(re)insurerandArgoGroupasanInsuranceGroupsupervisedbytheBMA,allcapitalinstrumentsatArgoGroupandArgoReareclassifiedaseitherbasicorancillarycapital,whichinturnareclassifiedintooneofthreetiersbasedontheir“lossabsorbency”characteristics.Highestqualitycapital isclassifiedasTier1Capital; lesserqualitycapital isclassifiedaseitherTier2CapitalorTier3Capital.Underthisapproach,notlessthan80%ofTier1Capitalandupto20%ofTier2CapitalmaybeusedtosupporttheCompany’sminimumsolvencymarginforanentity’sgeneralbusiness.EligibleCapitalisbasedonBermudaEconomicBalanceSheet(“EBS”)basis.However,Tier2Capital,whichispartiallybasedonHybridCapital,ispulledfromtheConsolidatedFinancialswhichareinaccordancewithGAAPprinciples.

Thereafter,aminimumof60%ofTier1Capitalandamaximumof15%ofTier3Capitalmaybeusedtosatisfy the filingentity’sECR.AnycombinationofTier1,2or3Capitalmaybeused tomeet theTCL.With respect to Argo Group, the Insurance (Prudential Standards) (Insurance Group SolvencyRequirement)AmendmentRules2012provideforaphase-inoveraperiodofsixyears,startingat50%oftheamountdeterminedandincreasingin10%increments.WheretheBMAhaspreviouslyapprovedthe use of certain instruments for capital purposes, the BMA’s consent must be obtained if suchinstrumentsaretoremaineligibleforuseinsatisfyingtheminimummarginofsolvencypertainingtoanentity’sgeneralbusinessanditsEnhancedCapitalRequirement.

iii.(a) (in‘000s)

ArgoGroup-EligibleCapitalbyRegulatorySubmissions

Limits:MSMECR

MinimumMarginofSolvency

[PriorYearinBrackets]

EnhancedCapitalRequirement[PriorYearinBrackets]

Tier1min80%/60% 1,248,629[1,298,778] 1,248,629[1,298,778]

Tier2max20%/40% 312,157[324,695] 571,519[480.847]

Tier3max15% [0] [0]

Total 1,560,787[1,623,473] 1,820,148[1,779,575][Source:ArgoGroupBSCR]


iii.(b)

(in‘000s)

ArgoRe-EligibleCapitalbyRegulatorySubmissions

Limits:MSMECR

MinimumMarginofSolvency

[PriorYearinBrackets]

EnhancedCapitalRequirement[PriorYearinBrackets]

Tier1min80%/60% $1,400,669[1,474,138] $1,400,669[1,474,138]

Tier2max20%/40% 0 0

Tier3max15% 0 0

Total $1,400,669[1,474,138] $1,400,669[1,474,138]

[Source:ArgoGroupBSCR]

Descriptionoftheeligiblecapitalcategorizedbytiers,inaccordancewiththeEligibleCapitalRulesusedto meet the Enhanced Capital Requirement (“ECR”) and the Minimum Margin of Solvency (“MSM”)definedinaccordancewithsection(1)(1)oftheAct

$256.6mmofJuniorSubordinatedDebenturesand$139.6mmofSeniorNotesareclassifiedasTier2CapitalandappliedtotheECRforArgoGroup.

This includesaprincipalbalanceof$91.8mmunsecured JuniorSubordinatedDebentureswhichwereassumedthroughtheacquisitionofMaybrookeHoldingsS.A.during2017.ThisdebthassubsequentlybeenassignedtoArgoReLtd.aspartoftheongoingliquidationofMaybrookeHoldingsS.A.ThisdebthasbeenclassifiedasTier2CapitalforArgoGroup.

AllothereligiblecapitalisTier1.

iv. ConfirmationthateligiblecapitalissubjecttotransitionalarrangementsasrequiredundertheEligibleCapitalRules

The$172mmofTrustPreferred Indentures (TRUPS)and$91.8mJuniorSubordinatedDebenturesaresubjecttotransitionalarrangementsto2026.TheBermudaMonetaryAuthorityrecognizedtheselegacyhybrid capital instruments under Insurance (Group Supervision) Rules 2011 and the Insurance(EligibleCapital)Rules2012.However, it ispossiblethattheseinstrumentswillberedeemedpriortotheirmaturitydatesastheCompanycontinuestoreviewitsfundingoptionsonaperiodicbasis.

v. IdentificationofanyfactorsaffectingencumbrancesaffectingtheavailabilityandtransferabilityofcapitaltomeettheECR


ThecapitaladequacyevaluationsperformedbyArgoarecompletedforArgoGroupandforeachentitywithin Argo Group. However, Argo Group recognizes that it may have adequate capital in totalitywithout this capital having the required flexibility to allow it to be transferred from one entity toanotherintheperiodfollowingamajorevent.

Argo Re, the Bermuda Class 4 risk bearing entity, is not licensed or admitted as an insurer in anyjurisdictionotherthanBermuda.Becausemanyjurisdictionsdonotpermitinsurancecompaniestotakecredit for reinsurance obtained from unlicensed or non-admitted insurers in statutory financialstatementsunlessappropriate security is inplace,ArgoReanticipates that its reinsurance clientswilltypicallyrequireittopostaletterofcreditorothercollateralforincurredlosses.Argo is required to maintain assets on deposit with various regulatory authorities to support itsinsuranceandreinsuranceoperations.Wethereforemaintainassetspledgedascollateralinsupportofirrevocable letters of credit under the reinsurance agreements for reported loss and loss expensereserves.Thecomponentsfortheseassetsare:

• Securitiesondepositforregulatoryandotherpurposes• Securitiespledgeascollateralforlettersofcredit• SecuritiesondepositsupportingLloyd’sbusiness

Argo has repeated a Capital Fungibility Analysis as of YE2017 on the same basis as performed forYE2016.TheexerciseinitiallyconsideredthestatutoryaccountingbasisforeachentitywithintheGroup,inordertounderstandlocalregulatoryrequirements.

Excess capital levels in eachmajor company are identified, and the regulatory action levelswith RiskBasedCapital(RBC)orotherregulatorycapitalrequirementsareshownforeachmajorcompany.

Subsequently, inordertotestthetransferabilityofcapitalunderanumberofstressconditions,stressscenarioswere applied to the capital structures taken from the Stress& Scenario Testing Framework(SSTF)forsingleeventsandcombinationsofevents. Inordertoevaluatethe impactonthecapitalofeach entity of such group-wide events, the loss scenarioswere apportioned to each entity based ontheirexposuretotheriskcategoryinquestion.

Foreachscenario,thecapitaladequacyoftheimpactedentitiespost-eventandtheconclusionsintermsof potential capital movements required was considered. A high-level capital response plan waspostulatedtakingintoaccounttheunderlyingconstraintsoncapitalmovementdocumentedaspartofthe fungibility analysis. The analysis concluded that capital could be reallocated between entities toaddressashortfall,althoughwheretheCapitalAdequacyRatioatGrouplevelfellbelowtheapproved

riskappetite,externalsourcesofcapitalmayberequiredtobesecured.CapitalAdequacyRatioisbasedonAvailable Capital relative toRequiredCapital. TheAvailable Capital is valuedoff theBermuda EBSbasis.


vi. IdentificationofancillarycapitalinstrumentsthathavebeenapprovedbytheAuthorityTheBMAhasapprovedthefollowingcapitalinstrumentsas"OtherFixedCapital":

• Aggregateprincipal amountof Junior SubordinatedDebentures issuedArgoGroupUS, Inc. toArgonautCapitalStatutoryTrustI,andIIItoX,amounttoapproximately$144.3mm;and

• Principal amount of Junior Subordinated Debentures issued byMaybrooke Holdings S.A. andassignedduring2017toArgoReLtd,amountingto$91.8mmforArgoGroup.

• PrincipalamountofSeniorNotesissuedbyArgoGroupUS,Inc.amountingto$139.5mm.

TheseamountsareenteredintotheCapitalandSurplusscheduleoftheGroupBSCRas‘Hybrid’CapitalInstruments.

vii. Identificationofdifferencesinshareholder’sequityasstatedinthefinancialstatementsversusavailablestatutorycapitalandsurplus

StatutoryCapital:

The only differences identified with respect to shareholder’s equity result from the exclusion ofGoodwill, IntangibleAssets,PrepaidExpenses,andOtherNon-Admitted(Fixed)Assets,whichcomplieswith the applicable BMA regulations. Furthermore, Hybrid Capital Instruments are factored into thereconciliation.

Capital&Surplus:

Due to recent changes made by the BMA to regulations and the categorization of certain assets,Deferred Acquisition Costs (DAC) are now an element of Statutory Accounting and entered under‘SundryAssets’intheBalanceSheet.

ForFY2015BSCRfiling,theBMAimplementedsignificantchangestotheStatutoryFinancialStatements(SFS)includingbutnotlimitedto:

• DeferredAcquisitionCosts(DAC)havebeenreclassifiedasan‘admittedasset’fromapreviousnon-admittedassetclassification,andreportedasa‘sundryasset.’

• Contingentliabilities(CL)areliabilitiesarenowreflectedasa‘sundryliability’inArgo’sstatutoryaccounting.

(b) RegulatoryCapitalRequirements

i. ArgoGroup–AmountoftheECRandMSMattheendofthereportingperiod:


YE2016 YE2017

(in‘000s) (in‘000s)

MinimumMarginofSolvency $840,753 $1,106,526

EnhancedCapitalRequirement $888,259 $1,106,526

GroupBermudaSolvencyCapitalRequirementRatio 200% 195%

GroupEnhancedCapitalRequirementRatio 200% 164%

[Source:ArgoGroupBSCR]

ii. ArgoRe–AmountoftheECRandMSMattheendofthereportingperiod:

YE2016 YE2017

(in‘000s) (in‘000s)

MinimumMarginofSolvency $362,134 $358,688

EnhancedCapitalRequirement $896,600 $933,199

BermudaSolvencyCapitalRequirementRatio 164% 150%

EnhancedCapitalRequirementRatio 164% 150%

[Source:ArgoReBSCR]

The Argo Re Ltd. Solvency capital requirement ratio for YE2016 has been restated compared to theFinancialConditionReportissuedforYE2016,followingtheidentificationofareportingerror.

ii. Identificationofanynon-compliancewiththeMSMandtheECR

Therehavebeenno incidentsofArgoGrouporArgoRenon-compliancewith theMinimumSolvencyMarginorEnhancedCapitalRequirementduringthereportingperiodforthe2017FCR.

iii. Descriptionoftheamountandcircumstancessurroundingthenon-compliance,theremedialmeasurestakenandtheireffectiveness


As no incidents of non-compliance have occurred during the reporting period for the 2017 FCR, noremedialmeasureswererequired.

iv. Wherethenon-compliancehasnotbeenresolved,descriptionoftheamountofthenon-complianceattheendofthereportingperiod

Asno incidentsofnon-compliancehaveoccurredduring the reportingperiod for the2017FCR, therearenoopenactionsrelatedtosuchanevent.

(c) ApprovedInternalCapitalModelusedtoderivetheECR

i. Description of the purpose and scope of the business and risk areas where theinternalmodelisused

ArgoGrouphas adopted an 'internal' economic capitalmodel (ECM). Thepurposeof themodel is toprovideArgo'sexecutivemanagementandBoardwithaninternalviewoftheeconomiccapitalrequiredto run the company and assume the risks associated with operating the Group. The ECM has beendevelopedoveranumberofyears,cognizantofSolvency2requirementsplacedonSyndicate1200,butadaptedtotheneedsof thewholeArgoGroup.TheECMisusedtocalculatetheGroupSolvencySelfAssessment(GSSA)asreportedwithintheannualGSSAreportandassociatedBSCR.

The ECM is not used to calculate regulatory capital and therefore has not been submitted to theBermudaMonetaryAuthorityforformalapproval.

TheECMisconstructedofanumberofriskcategorymodules,whichseektoreplicatetherisksfacedbyArgoGroup.Theseconsistofthefollowingmodulesandsub-modules:

UnderwritingRisk

ReserveRunoffRisk

MarketRiskFXRisk

LiquidityRisk

OperationalRisk

StrategicRisk

DiversificationRisk

Non-CatastropheRisk

SpreadRisk People,Process&SystemsRisk

ReputationalRisk

Diversificationamongsub-risks

CatastropheRisk

InvestmentDefaultRisk

ExternalEventRisk

OtherStrategicRisk

Diversificationamongrisks

InterestRateRisk

GroupRisk

ii. Whereapartialinternalmodelisused,descriptionofhowitisintegratedwiththeBSCRModel


ArgoGroupoperatesa'full'economiccapitalmodelasoutlinedabove.TheECMisusedtocalculatetheGSSAcapital,butisnotusedinrelationtotheBSCRregulatorycapitalcalculation.TheECMis,therefore,notintegratedwiththeBSCRmodel.

iii. DescriptionofmethodsusedintheinternalmodeltocalculatetheECRAfullstochasticcapitalmodelisusedforallriskcomponents.

· Parametric underwriting risk distributions fitted considering business planningassumptionsandpastdata

· Reinsurancetermsandconditionsmodeledexplicitlyusinglosssimulations· Reserveriskdistributionsfittedconsideringbootstrappingresults· Externalproprietary catastrophemodelbased catastrophemodelingevents and losses

used· Integrated Economic Scenario Generator (ESG) to supply effects of macroeconomic

variables· Creditdefaultriskmodeled,consideringratingofcounterparties· Operationalriskmodeled,consideringlikelihoodandseverityofeventsinthecorporate

riskregister· 1-200VaRmetricusedforinternaldefinitionofsolvencycapitalrequirement(SCR)· Economiccapitaltargetdefinedas25%overtheSCR

iv. Descriptionofaggregationmethodologiesanddiversificationeffects

AggregationswithintheEconomicCapitalModelarebasedonCopuladependencystructuresbetween:

· Attritionalandlargelosses· Accidentyears· Classesofbusiness· Reserveandunderwritingrisk· Insuranceriskandoperationalrisk

Additional dependency is enforced through consistent use of Economic Scenario Generator (ESG)throughoutthemodel.Additionalriskdrivendependencyis includedbetweencreditdefault likelihoodandindustrycatastrophelosses.

v. DescriptionofthemaindifferencesinthemethodsandassumptionsusedfortheriskareasintheinternalmodelversustheBSCRModel

Themost significant difference between the internal capital model and the BSCR is that the ECM isbasedonstochasticmodelingapproaches,whereastheBSCRisadeterministicmodel.

TheECMalsohasthefollowingfeatures:

• UtilizestheCompany'sownriskprofileratherthangenericindustryfactors.


• ConsidersallsourcesofriskthattheCompanyconsidersitselftobeexposedto.• Recognizesexplicitlytheimpliedvolatilityandreinsurancebenefits.• IncorporatesCompany-specificandrepresentativedependencyassumptions.• Allowsgranularmodelingofspecificlinesofbusinessandbespokemodeloutputfor

managementpurposes.

vi. Descriptionofthenatureandsuitabilityofthedatausedintheinternalmodel

TheEconomicCapitalModeldrawsoninformationfromthreesources:

1.)TheInputsAccessdatabaseispopulatedbyvariousdataownersinlinewithArgo’sstatisticalqualitystandards (SQS) requirements (either through the ECM interface or directly from Microsoft Exceltemplates).DatafromthissourceisfedintotheECMdirectlyusingSQLlinks.Datasourceshavebeensubject to reviewthrough the independentmodelvalidationprocessconductedby theenterprise riskmanagementfunction.

2.)CatastrophemodelingdatasimulatedfromAIRandRMSmodels.Thesearebothproprietarymodelsandsubjecttoexternalindependentvalidation.DatafromthissourceisfedintoIgloodirectlyusingSQLlinks.

3.)EconomicScenarioGenerator(ESG)dataprovidedquarterlyfromTowersWatson,ourESGproviderofchoice.Thismodelhasbeendocumentedandreviewedseparately.Thedataisprovidedintheformofastand-alonemodelfeedprovidedintotheECMcalculationkernel.

The sources of data and their reliability have been evaluated through InternalModel validation andfound, subject to minor findings reported in the validation report, to be appropriate and fit for thepurposeintended.

vii. Anyothermaterialinformation:Argo Group uses its Economic Capital Model to calculate its 'internal' economic capital for GSSAeconomiccapitalcalculationpurposesandaspartofitswiderenterpriseriskmanagementframework.

ArgoGrouphasestablishedanInternalModelValidationPolicyandhascompletedindependentmodelvalidation.ThisvalidationismanagedbytheEnterpriseRiskManagementfunctionwhichisseparateintermsoffunctionalreportinglinesfromtheCapitalModelingfunction.The2016ValidationReportwaspresentedtotheInternalModelSteeringCommitteeandthefindingsapproved.

ThepurposeofArgoGroupInternalModelValidationisto:

• Provideconfidenceintheappropriatenessofthemodelfortheintendeduseswithinthe ArgoGroupriskappetitearticulatedformodelerror.• Establishanappropriatelevelofcomfortaroundtheoutputofthemodelfor:


-SettingandmonitoringofregulatoryandeconomiccapitalforArgoGroupandappropriateentities;

-Evaluatingstrategicdecisions;-Informingcapitalallocation;-Stochasticassessmentofriskexposuresversusagreedtolerancelimits;and-Reinsuranceoptimization.

• Abilitytousethemodelforregulatoryfilings.• Identifyweaknessesandpotentialimprovementsinthemodeltoenhancethemodel's

designandresults.• Understandandseektomitigatemodelrisk.

vi) SignificantEvent-particularsandexplanationsofasignificanteventincluding,butnotlimitedtothefollowing:

(a) Descriptionofthesignificantevent

• MaybrookeHoldingsS.A.wasliquidatedonApril6,2018.• AFCL,Inc.wassoldtoArgoManagingAgencyLimited(AMA)onFebruary12,2018,anditsname

waschangedtoArgoGlobalInsuranceServices,Inc.• Ariel CorporateMember Limited is in the process of being contributed to Argo Underwriting

AgencyLimited.OnMay24,2018,itbecameasubsidiaryofArgoGroupandisintheprocessofbeingcontributedinstagesdowntoArgoUnderwritingAgencyLimited.

• ArielReProperty&Casualty, theparentofAriel CorporateMember Limitedwill bedissolvedfollowingthecontributionofArielCorporateMemberLimited.

• At the timeof filing,Ariel ReUK Limited is in theprocessof beingdissolvedwith completionanticipatedbyendofJuly2018.

(b) Approximatedate(s)orproposedtimingofthesignificantevent

Notapplicable.

(c) Confirmationofhowthesignificanteventhasimpactedorwillimpact,anyinformationprovidedinthemostrecentfinancialconditionreportfiledwiththeAuthority

Notapplicable.

(d) Anyothermaterialinformation:

TheBermudaMonetaryAuthorityapprovedonthe16thJune2017,inaccordancewithInsurance(GroupSupervision) Rules 2011 the treatment of Junior Subordinated Deferrable Interest Debentures (JSDD)previously held by Maybrooke Holdings S.A. (formerly Ariel Holdings Ltd.) as ‘Other Fixed Capital’equatingto$91.8mmforutilizationbyArgoGroupandassatisfyingtheeligibilitycriteriastipulatedforTier2AncillaryCapital.


ArgoGroupInternationalHoldingsInc.relistedontheNewYorkStockExchange(NYSE)onthe7thofMay2018, de-listing at the same time from theNASDAQexchange. For the reporting period theNASDAQlistingrequirementsremainedinforce.

Insupportofitsinternationalbusinessstrategy,onMarch13,2018,ArgoGroupInternationalHoldings,Ltd.acquiredAriscom,anItalianspecialtyinsurer.


APPENDIXA-Ownership

InstitutionalOwnership-ArgoGroupInternationalHoldings,Ltd.(NASDAQ–AGII)

OwnershipInformationSharesOutstanding 29,360,313ShortInterestShares 193,589Float(%) 96.86InstitutionalOwnership(%) 109.16MutualFundOwnership(%) 58.25InsiderOwnership(%) 3.14Top10InstnHolders(%) 53.79


Company Shares %Out Value($)DimensionalFundAdvisorsLP 2,932,831 9.99 165,118,385VanguardGroupInc. 2,733,510 9.31 153,896,613BlackRockInc. 2,444,405 8.33 137,620,002FrontierCapitalManagementCo.LLC 1,660,406 5.66 93,480,858

ChamplainInvestmentPartnersLLC 1,557,105 5.3 87,665,012

TIAA 1,118,136 3.81 62,951,057StateStreetGlobalAdvisorsInc. 1,080,741 3.68 60,845,718NorgesBankInvestmentManagement 872,935 2.97 49,146,241

FMRLLC 737,815 2.51 41,538,985PzenaInvestmentManagementInc. 655,789 2.23 36,920,921

PeregrineCapitalManagementLLC 604,496 2.06 34,033,125FiduciaryManagementInc. 583,078 1.99 32,827,291NorthernTrustGlobalInvestments 543,408 1.85 30,593,870ColumbiaManagementInvestmentAdvisersLLC 527,577 1.8 29,702,585

JanusHendersonGroupPlc 519,501 1.77 29,247,906WellsFargoFundsManagementLLC 503,134 1.71 28,326,444

WEDGECapitalManagementLLP 496,253 1.69 27,939,044NuveenInvestmentsInc. 482,341 1.64 27,155,798FayezSarofim&Co. 432,226 1.47 24,334,324ChartwellInvestmentPartnersLLC 401,352 1.37 22,596,118InvescoLtd. 401,247 1.37 22,590,206VictoryCapitalManagementInc. 373,143 1.27 21,007,951ThriventInvestmentManagementInc. 353,689 1.2 19,912,691

CortinaAssetManagementLLC 345,509 1.18 19,452,157InvestmentCounselorsofMaryland,LLC 343,670 1.17 19,348,621


APPENDIXB–OrganizationChart


APPENDIXC–ExecutiveLeadership

ArgoGroupBoardofDirectors

GaryV.Woods–Chairman

GaryV.WoodsbecameadirectorofArgoGroupInternationalHoldings,Ltd.,in2000andhasservedasChairmanoftheBoardofDirectorssince2001.Mr.WoodshasbeenPresidentofMcCombsEnterprisessince1979.Healsoservesontheboardsofdirectorsof theSouthwestResearch Institute, theCancerTherapy and Research Center Foundation and the South Texas Blood and Tissue Center.Mr.Woodsbrings to the Board an entrepreneurial background with experience in overseeing complex businessorganizations.AsPresidentofMcCombsEnterprises,Mr.Woodshassuccessfullyfundedandpromotednumerousgrowthcompaniesinadiversearrayofindustries,bothdomesticallyandinternationally.

F.SedgwickBrowne–Director

F. Sedgwick Browne became a director of Argo Group International Holdings, Ltd., in 1999 and alsoservedasVice-ChairmanoftheBoardofDirectorsfrom2003until2007.HeretiredascounselatSidleyAustinBrown&WoodLLP(nowknownasSidleyAustinLLP),alawfirm,in2004.Mr.Brownepreviouslywas a partner atMorgan, Lewis&Bockius, LLP, andprior thereto at LordDay& Lord, Barrett Smith,wherehespecialized inthe insuranceandreinsurance industry.Mr.Browne isalsoapasttrusteeanddirectoroftheSwissReinsuranceUSGroupandoftheWinterthurSwissInsuranceUSGroup.

H.BerryCash–Director(DeceasedApril2018)

H.BerryCashbecameadirectorofArgoGroupInternationalHoldings,Ltd.,in2005.Mr.CashhasbeenageneralpartnerofInterWestPartners,aventurecapitalfund,since1985.Mr.CashhasalsoservedontheBoardofDirectorsofCienaCorporationsinceApril1994,SiliconLaboratories Inc. sinceDecember1997,andFirstAcceptanceCorporationsinceNovember1996.Mr.Cashalsoservedasadirectorof i2Technologies,Inc.fromJanuary1996untilAprilof2009.

HectorDeLeon-Director

HectorDeLeonbecameadirectorofArgoGroup InternationalHoldings,Ltd., in2003.Mr.DeLeon istheChairmanoftheBoardofDirectorsofDeLeon&Washburn,P.C.,alawfirmbasedinAustin,Texas,which he founded in 1977. Prior to 1977,Mr. De Leon was the General Counsel of the Texas StateInsurance Board. From February 1985 to November 1997,Mr. De Leon served as a director of TitanHoldings,Inc.,apubliclytradedpropertyandcasualtyinsuranceholdingcompany.

MuralR.Josephson-Director

Mural R. Josephson became a director of Argo Group International Holdings, Ltd., in 2004. Mr.Josephson retired fromKemper InsuranceCompanies ("Kemper") in2002.Duringhis5-year tenureatKemper,heheldkeymanagementpositions,includingSeniorVicePresidentandChiefFinancialOfficerandSeniorVicePresidentofFinance.Prior to joiningKemper,Mr. Josephsonheldseveral senior level


positions at KPMG, including 19 years as an audit partner.While at KPMG, hewas amember of theNational InsurancePracticeCommitteeandamemberoftheProfessionalPracticeReviewCommittee.Mr. Josephson has been a director of HealthMarkets, Inc., an insurance holding company, sinceMay2003and is currentlyChairmanof itsAuditCommittee.Hewasalsoadirectorof SeaBrightHoldings,Inc., an insurance holding company traded on the NYSE until February 2013, and its wholly ownedsubsidiary, SeaBright Insurance Company, from July 2004 until February 2013 andwas serving as theChairmanofitsAuditCommittee.

DeeLehane-Director

Dee Lehane's international career includes significant experience dealing with strategic issues andtechnology-led business change at global insurance companies. Shewas previouslyManaging PartnerGlobal Insurance Industry for Accenture, where she worked for over 20 years. She is currently theIndependent Chair of the Debt Market Integrator, a Cabinet Office venture serving a number ofgovernmentdepartmentsandChairmanofORICInternational,theInsuranceIndustryRiskConsortium.ShehaspreviouslyservedontheboardsofAvivaLifeandPensionsInsuranceIrelandandAvivaHealthInsuranceIreland,includingrolesontheAudit(Chair)andRiskCommittees.

KathleenNealon-Director

KathleenA.NealonbecameadirectorofArgoGroupInternationalHoldings,Ltd.,in2011.Ms.Nealon'sinternational career includes significant experiencewith riskmanagement, complianceand regulatoryissueswith global companies.Ms. Nealonwas theGroupHead of Legal and Compliance at StandardChartered PLC in London from 2001 until her retirement in 2004 where she also held additionalinternational legalandcompliancepositions from1992to2001.Prior toStandardCharteredPLC,Ms.NealonpracticedinternationalbankingandregulatorylawinNewYorkfor14years.Ms.Nealonisalsothe Co-chair of the European Advisory Board of Georgetown Law School and serves on the AdvisoryCounciloftheInstituteofBusinessEthics.Ms.NealonalsoservedontheboardsofdirectorsofShirePLCfrom2006to2010,andHalifaxBankofScotlandPLCfrom2004to2009whenitwasmergedintoLloydsBank PLC. In addition, Ms. Nealon served on the board of directors of Cable and WirelessCommunicationsPLCanditspredecessorcompany,CableandWirelessPLC,from2005until2011.

JohnR.Power,Jr.-Director

JohnR.Power,Jr.becameadirectorofArgoGroupInternationalHoldings,Ltd.,in2000.HeiscurrentlyPresidentofthePatricianGroup,aprivateinvestmentfirmlocatedinLisle,Illinois.Mr.PowerhasalsobeenadirectorofcertainfinancialsubsidiariesofCNHGlobal,N.V.sinceJanuary1997.

Al-NoorRamji-Director

Al-NoorRamjijoinedPrudentialinJanuary2016inthenewlycreatedroleofGroupChiefDigitalOfficerandisresponsiblefordevelopingandexecutinganintegrated,long-termdigitalstrategyforthegroup.BeforejoiningPrudential,heworkedatNorthgateCapital,aventurefirminSiliconValley,whereherantechnology-focusedfunds.Priortothis,hewasatMisys,afinancialservicesgroup,andhaspreviously


heldleadingtechnologyandinnovationrolesatBTGroup,QwestCommunications,DresdnerKleinwortBensonandSwissBankCorporation.

JohnH.Tonelli-Director

JohnH.TonellibecameadirectorofArgoGroup InternationalHoldings, Ltd., in2010.Mr.TonellihasbeentheChiefExecutiveOfficerofAdvancedGlobal Investments,Ltd.,aNewYorkbased investment-companywithholdingsinEasternEurope,theMiddleEastandLatinAmerica,since2009.Mr.Tonellihasover20yearsofexperienceinfinance,workingbothasaninvestmentbankerandasanattorney.Mr.Tonelli has advised the governments of Argentina, Chile, Paraguay andUruguay on awide variety ofmatters,includingprivatizations,debtandequityfinancings,andinfrastructureprojects.Hehasbeenadirector of Converse Bank since August 2009. From 2003 to 2009,Mr. Tonelli was SeniorManagingDirectorwith J.P.Morgan&Co., Inc.andBearStearns&Co. Inc.wherehewasHeadof InternationalProjectFinanceandEmergingMarketsStructuredFinance.From1999to2003,hewasthefounderandChief Executive Officer of International Venture Partners, LLC, a NASD member broker-dealerspecializing in emergingmarkets. From 1992 to 1999,Mr. Tonelli was an attorney with Cadwalader,Wickersham&TaftLLPwherehewasheadoftheLatinAmericanpracticegroupandfoundedthefirm'sprojectfinancegroup.

MarkE.WatsonIII-Director

MarkE.WatsonIIIbecameadirectorin1999andhasbeenPresidentandChiefExecutiveOfficerofArgoGroupInternationalHoldings,Ltd.,sinceJanuary2000.HewasaprincipalofAquilaCapitalPartners,aSan Antonio, Texas-based investment firm from 1998 to 1999 and served from 1992 to 1997 as adirector, Executive Vice President, General Counsel and Secretary of Titan Holdings, Inc., a publiclytraded property and casualty insurance holding company. Prior to that,Mr.Watsonwas an attorneywiththeNewYorkbasedlawfirmKroll&Tractfrom1989to1992,whereherepresentedinternationalinsuranceandreinsurancecompanies.

Due to his lengthy tenure, having previously held several executive positions at Titan Holdings, Inc.which was ultimately sold to USF&G Corporation, Mr. Watson brings to the Board a wealth ofexperienceinthespecialtypropertyandcasualtyinsurancesector.Mr.WatsonhasbeenamemberoftheBoardofGovernorsof thePropertyCasualty InsurersAssociationofAmerica since June2005andhasbeenadirectorofHoustonInternationalInsuranceGroup,Ltd.sinceDecember2010.

ArgoGroupInternationalHoldings,Ltd.Officers

MarkE.WatsonIII–ChiefExecutiveOfficer

MarkWatsonjoinedtheBoardofDirectorsofArgoGroup’spredecessorcompany,ArgonautGroup,in1999andhasservedasPresidentandCEOsince2000.PriortojoiningArgonaut,Mr.Watsonwasoneoftwo founding partners of Aquila Capital Partners, a Texas-based venture capital firm focused ontechnologyand life science related companies.Before foundingAquila,Mr.WatsonwasanExecutiveVicePresidentandmemberoftheBoardofDirectorsofTitanHoldingInc.,aNYSE-listedpropertyand


casualty insurancegroup,from1992until itsacquisitionin1997byUSF&GCorporation.From1989to1991hewasanAssociateAttorneywithKroll&Tract, aNewYork law firm focusingon internationalfinancialservicesclientele.

In1989Mr.WatsonwasaLegislativeAidetoTexasStateSenatorDonaldHenderson,wherehehelpeddraft legislation creating the first college savings bond program in the state as well as the firstmandatory alternative fuels bill, both ofwhichwere enacted into law.Mr.Watson graduatedwith aB.B.A.fromSouthernMethodistUniversityandaJ.D.fromtheUniversityofTexas,SchoolofLaw.

Mr.Watsonisanavidclimberandyachtsman,whohasclimbedonseveralcontinentsandwonseveralmajorregattasintheUnitedStates.

JayS.Bullock–ExecutiveVicePresidentandChiefFinancialOfficer

JayBullock joinedArgoGroup in 2008 fromBear, Stearns&Co. Inc.,wherehewas SeniorManagingDirectorandHeadofBearStearns’InsuranceInvestmentBankingGroup.Focusingonthepropertyandcasualty and life insurance sector for more than 20 years, he advised companies on acquisitions,mergersandsales,aswellasallformsofpublicandprivatefinancingsandrestructurings.WhileatBearStearns, Mr. Bullock was an advisor to Argonaut Group, Argo Group’s predecessor, on a number oftransactions.Priorto joiningBearStearns in2000,Mr.BullockwasaManagingDirectoratFirstUnionSecurities.He isanhonorsgraduateofSouthernMethodistUniversityandreceivedhisMBAfromtheMcColl School of Business atQueens College in Charlotte, North Carolina.Mr. Bullock also holds thedesignationofCertifiedPublicAccountant.

OscarGuerrero–SeniorVicePresidentandDeputyChiefFinancialOfficer

OscarGuerrerojoinedArgoGroupin2016fromAIGInc.,wherehewastheGlobalHeadofFinanceforAIGFinancialLines.Previoustothisrole,hewasChiefOperatingOfficerfortheAIGGlobalSpeciality–Small andMid-sized Enterprises and Program business, Global Head of FP&A – Property & Casualty,Chief AccountingOfficer –USOperations Controller and Controller – Personal Lines. Prior to AIG, heheld a number of senior financial roles for XL Capital, Admiral Insurance Company, Scottish Re andFrontierInsuranceGroup.HeisaSummaCumLaudegraduateofMountSt.MaryCollegeofNewburgh,NewYork,withaBachelorsofSciencedegreeinAccounting.Mr.GuerreroalsoholdsthedesignationofCertifiedPublicAccountantaswellasCharteredGlobalManagementAccountant.

RobertKatzman–SeniorVicePresidentandChiefActuary

Robert “Bob” Katzman joined Argo Group in 2016 from AIG Inc., where he was the Head of GlobalCasualtyPricingandAnalytics.Therehewasacatalystfortransformingthecasualtypricingoperationbyblendingpredictiveanalyticsandtraditionalactuarialtechniquestorefineandenhancepricingmodels.Throughouthisnearly30yearsof industryexperience,Mr.KatzmanhasheldseniorrolesatTravelers,Crum & Forster and Reliance National, where he led reserving, pricing, M&A, reinsurance and ERMfunctions.Mr.Katzman is a Fellowof theCasualtyActuarial Societyandholdsabachelor’sof sciencedegreeinMathandPsychologyfromUnionCollege.


JoseA.Hernandez–HeadofInternationalBusiness

JoseA.Hernandez joinedArgoGroup in2016asHeadof InternationalBusiness.Prior to joiningArgoGroup,Mr.HernandezmostrecentlyservedaspresidentandchiefexecutiveofficerofAIG’sAsiaPacificregion.Mr.Hernandezspentmorethan20yearswithAIGinanumberofseniorleadershiprolesinboththeconsumerandcommercialsegments.Hehasexpertiseinfieldoperations,distribution,underwriting,claims, strategic planning and management. Mr. Hernandez has a Bachelor of Science degree inmarketingandmanagementfromBentleyUniversityandamasterinbusinessadministrationfromtheCollegeofInsuranceinNewYork.

AlexHindson–ChiefRiskOfficer

AlexHindsonjoinedArgoGroupastheChiefRiskOfficerin2015.PreviouslyhewastheChiefRiskOfficerof Amlin AG, the Swiss reinsurance operation of Amlin PLC, where he was responsible for the risk,compliance and legal functions across the Bermuda branch and Zurich operation. He had previouslybeen the Head of Group Risk of Amlin PLC, responsible for the implementation of an enterprise riskmanagementframeworkacrossthecompanyinpreparationforSolvencyII.

Beforethis,Mr.HindsonwasHeadofEnterpriseRiskManagementatAonGlobalRiskConsulting,wherehe was responsible for the consulting activities for ERM across EMEA. He was originally a chemicalengineerandworkedinavarietyofrolesatAstraZeneca,includingengineering,manufacturingandriskmanagement.Mr.Hindson is a Fellow andpast Chairmanof the Institute of RiskManagement.He isinterestedinhistory,genealogyandarchery.

NigelMortimer–ExecutiveVicePresident,Strategy&BusinessDevelopment

NigelMortimerisresponsibleforArgoGroup’sinternationalinsuranceoperations(withtheexceptionofLloyd’sSyndicate1200),havingsuccessfullybuilt theGroup’s insuranceoperations inBermuda,Brazil,ContinentalEuropeandDubai.Inaddition,heisDirectorofGroupProductDevelopmentandischargedwith leading innovative thinking across the Group as well as identifying profitable product lineopportunitiestogrowourbusinessesintheU.S.andinternationally.

PriortojoiningArgo,Mr.MortimerspentanumberofyearsatXL’sBermudaoperationsasUnderwritingManager of their Casualty operations and SVP Director of Product Development focused on drivingprofitablegrowththroughoutXL’sglobalnetwork.CurrentlybasedinBermuda,Mr.Mortimerhaslivedand worked in New York, London and Australia for companies such as Chubb Corporation, ZurichInternationalandZurichRe.Mr.MortimerearnedanhonorsdegreeineconomicsfromtheUniversityofHertfordshire in England and has successfully completed several advanced management courses atHarvard,WhartonandtheUniversityofNorthCarolinaatChapelHill.

MarkH.Rose–SeniorVicePresidentandChiefInvestmentOfficer

AsSeniorVicePresidentandChief InvestmentOfficer,MarkRoseoverseesthecompany’s investmentstrategy. Prior to joining Argo Group in 2013, Mr. Rose was a Senior Credit Analyst at RBC CapitalMarketsandhasheldsimilarrolesatDeephavenCapitalManagement,GoldmanSachs&Co.andCredit


SuisseFirstBoston.Hehasabachelor’sdegreeinmathematicsfromtheU.S.MilitaryAcademyatWestPointandisaCFA®charterholder.

AxelSchmidt–GroupChiefUnderwritingOfficer

Axel Schmidt joinedArgoGroup in 2014 asGroup ChiefUnderwritingOfficer. He came toArgo fromAviva, where he served as Chief Underwriting Officer for the company’s UK/Ireland business acrosspersonal,commercialandcorporate/specialtylines.PriortojoiningAviva,Mr.Schmidtspent20yearsininternationalbusinessatZurich InsuranceGroup,whereheheldanumberofseniorunderwritingandmanagement positions including Deputy Chief Executive Officer/CUO for corporate business inEurope/UK and Underwriting Director for global corporate business. He also served as amember ofZurich’s Group Underwriting and Group Reinsurance Board. Mr. Schmidt has lived and worked inGermany, Brazil, Switzerland and the UK. He has also been amember of the German national trackcyclingteam.

Mr.Schmidtgraduated fromWestphalianWilhelmsUniversity inMunster,Germany,withadegree inLaw Studies. He also earned a Juris Doctor degree from the State Supreme Court in Dusseldorf,Germany.

SusanSpivakBernstein–SeniorVicePresident,InvestorRelations

SusanSpivakBernsteinjoinedArgoGroupin2013asSeniorVicePresidentofInvestorRelations.PriortojoiningArgoGroup,Ms. SpivakBernstein led investor relations atAlterraCapital and its predecessor,MaxCapital,from2009untiljoiningArgoGroup.ShewaspreviouslyanEquitiesAnalystfocusedonthepropertyandcasualty insuranceindustryatWachoviaSecurities,ABNAMRO,andDonaldson,Lufkin&Jenrette.Ms.SpivakBernsteinreceivedabachelor’sdegreefromtheUniversityofMichigan.

CraigComeaux–VicePresident,CorporateSecretary

Mr.ComeauxjoinedArgoGroupinJuly2003.Inadditiontohissecretarialresponsibilities,Mr.Comeauxoverseesthe legal,regulatoryandtaxaspectsoftheCompany’s internationalgrowthinitiatives. He isalsoresponsibleforthelegalaspectsoftheCompany’scapitalmanagementandcapitalraisingactivities,corporate governance matters, SEC reporting and compliance, intellectual property matters and theCompany’s executive retention and compensation programs. Additionally, Mr. Comeaux providessupport for theCompany’sM&Aactivitiesandassistswith litigationandrealestatematters. Prior tojoiningArgoGroup,Mr.ComeauxwasSeniorVicePresident, SecretaryandGeneralCounselof Seitel,Inc., a publicly traded, Houston, Texas based oil and gas services company. He graduated from theUniversityofTexasatAustinwithdegreesininternationalbusinessandmarketing,andearnedhis lawdegree from St.Mary's University. In 1991,Mr. Comeaux also served as an intern to Judge NathanHechtoftheTexasSupremeCourt.Followinglawschool,hewasinprivatepracticefornineyearswithAkin,Gump,Strauss,Hauer&Feld inAustin,Texaswherehehandledcomplexbusiness litigationandcorporatetransactionalmattersforavarietyofpublicandprivateconcerns.

ArgoGroupUS

KevinJ.Rehnberg–PresidentU.S.Operations


As President of U.S. operations, Kevin Rehnberg oversees all activities of Argo Group’s U.S.-basedbusiness segments. Before joining the company in 2013, he served as Executive Vice President forspecialty lines at OneBeacon Insurance, where he oversaw specialty underwriting operations andacquiredandbuiltnewlinesofspecialtybusiness.Mr.Rehnbergheldsimilarseniorexecutivepositionsat The St. Paul Travelers Companies, Liberty International and Chubb Corporation.More recently, heservedasCEOofConsultantsinLaboratoryMedicineofGreaterToledoInc.Hehasabachelor’sdegreeinhistoryfromPrincetonUniversity.

FrankMike-Mayer–ChiefUnderwritingOfficer-US

Mr. Mike-Mayer is responsible for guiding the development and execution of Argo Group USunderwriting strategies and policies supporting retention, growth and profitability of the company’stotalportfolioofbusinesses.He joinsArgoGroup fromAIGCommercial,wherehe servedasHeadofTechnicalUnderwriting,responsiblefordrivingkeyglobalunderwritingexcellencestrategies,developingand implementing global underwriting standards, and establishing amore consistent and robust riskselectionframeworkforunderwriters.

BeforejoiningAIGCommercialin2012,Mr.Mike-MayerservedinseveralseniorroleswithZurichNorthAmerica, ACE and RelianceNational. He received anMBA in statistics and actuarial science from theSternSchoolofBusinessatNewYorkUniversity.

MarkWade–ChiefClaimsOfficer

Mr. Wade joins Argo Group following his appointment as Executive Director of the New York StateWorkers’CompensationBoard.Prior tohisappointment,Mr.WadeservedasDeputySuperintendentfor property and casualty insurance at New York State’s Department of Financial Services. Beforeentering public service in 2014,Mr.Wade served in several senior roles with Arch Insurance Group,ZurichNorthAmericaandMarshUSA.HebeganhisindustrycareerwithChubbCorporation,wherehehandled directors’ and officers’ claims. Mr. Wade is a graduate of Georgetown University and theUniversityofPittsburghSchoolofLawandisadmittedtotheNewYorkandPennsylvaniastatebars.

JoshuaC.Betz–President,ArgoSurety

JoshBetzjoinedArgoGroupin2008tolaunchthesuretyoperationandhasoverseenitsdevelopmentasaleadingcommercialsuretyplayerinthemarketplace.HewaspromotedtoPresidentofArgoSuretyin 2012. Prior to joining Argo Group, he was a Managing Director for Travelers commercial suretyoperations,wherehemanagedthesecondlargestportfolioforthecommercialsuretydivisionwithover$5billion inaggregateexposure.BeforeTravelers,Mr.Betzheldvarioussuretyunderwritingpositionswith Citigroup, CNA and Reliance. Mr. Betz graduated from Midwestern State University with abachelor’sdegreeinbusinessadministrationwithanemphasisinfinance.

AndrewBorst–President,U.S.SpecialtyPrograms

Andrew“Andy”BorstwaspromotedtoPresident,U.S.SpecialtyPrograms,inFebruary2016tooverseetheU.S.CommercialPrograms,AlternativeRiskSolutionsandAlterisbusinessunitsforArgoGroupUS.


Mr.Borst joinedArgoGroupUS inMarch2014, fromOneBeacon InsuranceGroup.AtOneBeacon,heserved in several roles, including President of Crop Insurance and CFO for specialty lines, where hehelpedacquireandbuildoutnewlinesofspecialtybusiness.HestartedhiscareeratTravelersInsuranceandgraduatedfromtheFinancialManagementProgramin1999.Mr.Borstearnedabachelor’sdegreein business administration with honors from the Boston University School of Management,concentratingonfinanceandmanagementinformationsystems.

RooneyGleason–President,ArgoInsurance–U.S.Retail

RooneyGleasonwas namedPresident ofArgo Insurance in September of 2015 as part of a renewedefforttotransformArgoInsurancetobetheleadingproviderofRiskManagement,ClaimsManagementandLossPreventionsolutionstomiddlemarketretailers,andprovidecutting-edgetechnologysolutionsto reduce the total cost of risk for retail clients. Prior to joining Argo Insurance, hewas one of thefounders of Gleason Technology, a Johnstown, Pennsylvania-based international software solutionsproviderforallthingsinspectedwithmorethan1,000clientlocationsin16countriesthatlaunchedin2010. PriortoGleasonTechnology,Rooneywasacommercial insurancebrokerforGleasonGroupfor22yearsspecializinginlargeriskmanagedaccounts.

Prior toGleasonGroup,Rooneywasan insurancebrokeratLloyd’sof London for twoyears. RooneygraduatedfromBabsonCollege,withabachelor’sdegreeinEconomics.

KurtTipton–President,Rockwood

KurtTiptonjoinedRockwoodasamanagementtraineein1986andtookoverasPresidentofRockwoodin2015.InMay2011,Mr.TiptonwaspromotedtoChiefOperatingOfficerandmaintainshispositionsofSenior Vice President and Chief Underwriting Officer. Before that, he had been Vice President ofUnderwritingsince2000.

He is responsible for maximizing long-term underwriting profits. He oversees all aspects of theunderwriting,marketing,losscontrolandclaimsdepartments.

Mr.Tiptonreceivedhisbachelor’sdegree inbusinessadministration fromtheUniversityofPittsburghand hisMBA from Frostburg State University. He was previously a partner in an outdoor adventureschoolandremainsactiveincommunityservice.

RonaldVindivich–President,Excess&Surplus(E&S)

RonVindivichwaspromotedin2013toPresidentofTridentInsurance,thebusinessunitofArgoGroupthathandlescommercialinsuranceforsmallandmidsizepublicentitiesintheU.S.Mr.VindivichjoinedArgo Group in 2006 to lead the industrial casualty division of Colony Specialty and also oversaw therestructuringofitsgarageandtransportationportfolio.HemostrecentlyservedasSeniorVicePresidentof thebrokeragecasualtydivisionandheadofE&S.Mr.Vindivich is agraduateofPennsylvaniaStateUniversityandholdsaCPCU®designation.


PhilVedell–HeadofGlobalOperations

PhilVedellwaspromotedtoGlobalHeadofOperations forArgoGroup InternationalHoldingsLtd., inSeptember2016.HejoinedArgoGroupUSinOctober2015asChiefOperatingOfficer.PriortojoiningArgoGroupUS,heservedasChiefOperatingOfficerforCatlinUS.HehasalsoheldpositionsatAlterraCapital Holdings, Vaccaro Insurance Holdings, American Wholesale Insurance Company and AonCorporation.Mr.VedellholdsadegreeinbusinessadministrationfromNorthCarolinaStateUniversity.

SueCoates–SeniorVicePresident,TridentPublicRiskSolutions

SueCoatesjoinedTridentin2008andbecameitsseniorvicepresidentin2017afterservinginseveralotherroleswithintheunderwritingteam.Shehasmorethan25yearsofindustryexperience,includingalmost15years inthepublicentitysector.BeforeArgoGroup,shewasaseniorunderwriterofpublicentities with Massamont Insurance, managing large municipal and school risks. She is a CertifiedInsuranceServiceRepresentativeandmaintainstheCertifiedSchoolRiskManagers(CSRM)designation.

InternationalSpecialty(includingArgoRe)

NigelMortimer–PresidentArgoInsuranceBermuda

NigelMortimerisresponsibleforArgoGroup’sinternationalinsuranceoperations(withtheexceptionofLloyd’sSyndicate1200),havingsuccessfullybuilt theGroup’s insuranceoperations inBermuda,Brazil,ContinentalEuropeandDubai.

In addition, he is Director of Group Product Development and is charged with leading innovativethinking across the Group as well as identifying profitable product line opportunities to grow ourbusinessesintheU.S.andinternationally.PriortojoiningArgo,Mr.MortimerspentanumberofyearsatXL’sBermudaoperationsasUnderwritingManagerofitsCasualtyoperationsaswellasSVPDirectorofProductDevelopmentfocusedondrivingprofitablegrowththroughoutXL’sglobalnetwork.CurrentlybasedinBermuda,Mr.MortimerhaslivedandworkedinNewYork,LondonandAustraliaforcompaniessuchasChubbCorporation,ZurichInternationalandZurichRe.Mr.Mortimerearnedanhonorsdegreein economics from theUniversity of Hertfordshire in England and has successfully completed severaladvancedmanagementcoursesatHarvard,WhartonandtheUniversityofNorthCarolinaatChapelHill.

RyanMather–GlobalHeadofReinsurance,ArgoGroupandChiefExecutive-Reinsurance,ArgoRe

RyanMatherjoinedArgoGroupinFebruary2017aspartoftheArielReacquisitionwherehewasChiefExecutiveOfficer.HeisnowtheGlobalHeadofReinsuranceforArgoGroup.PriortojoiningArgoGroup,Mr.Mather joinedArielRe in2002asSVP InternationalPropertyandwaspromoted in2008 toChiefUnderwriter, Property Reinsurance, and subsequently to Global Head of Reinsurance in 2015, beforeassumingtheCEOrole.


PriortoArielRe,Mr.MatherheldanumberofrolesintheLondonandLloyd’smarket.Mr.Matherhasadegree in genetics from Queen Mary College, University of London. He is also an Associate of theCharteredInsuranceInstitute.

DarrenArgyle–ChiefFinancialOfficer–ArgoRe

Darren joinedArgoGroup in2009asFinancialController forSyndicate1200.HewaspromotedtotheroleofFinanceDirector forSyndicate inFebruary2012and in Januaryof2016wastheappointedtheChiefFinancialOfficerforallInternationalBusinessesofArgoGroup.HejoinedArgoGroupinJuly2009fromAegisLondonwherehewasFinancialControlleroftheSyndicateoperationofAegis-aNewJersey-based energy mutual insurer. Darren has worked within the Lloyd’s market in a number of roles,includingeightyearsasaFinancialController.PriortoworkingintheLloyd’smarket,Darrenspenteightyears in audit practice, five of those in insurance audit andwas a senior auditor at Ernst and Young.Darrenholdsanhonoursdegree inFinanceandAccountingfromSalfordUniversityandalsoholdsthedesignationofCharteredAccountant(ACA).

RonaldSwanstrom–ChiefActuaryandLossReserveSpecialist–ArgoRe

Ronald joinedArgoGroup in 2009 and is currently SeniorVicePresident andChiefReservingActuarywith the Argo Group in Chicago. He is responsible for evaluating Argo Group’s property/casualtyreserves,communicatingresultstooperationalandfinancialmanagement,signingactuarialopinionsforArgo’sUSproperty/casualtycompaniesandArgoGroupinBermuda,andpreparingandreviewinglossreserve related GAAP and statutory documentation. Prior to the Argo Group, Ron was a SeniorConsultantwithEMBAmericaLLCinChicago.From1997throughFebruary,2009,RonwasSeniorVicePresidentandSeniorActuarialOfficerwithCNAinChicago.HewastheleaderofthegroupresponsibleforevaluatingCNA’sproperty/casualtyreservelevels.PriortoCNA,RonwasaprincipalwithCoopers&LybrandLLC inChicago.Ronhasparticipated inavarietyofprofessionalactivities includingservingasthePresidentoftheMidwesternActuarialForumandtheChairoftheJointCommitteefortheCasualtyLoss Reserve Seminar. He has spoken to several actuarial and non-actuarial audiences. He is a pastmemberoftheAmericanAcademyofActuariesCommitteeonProperty/LiabilityFinancialReporting.HeisaFellowoftheCasualtyActuarialSocietyandaMemberoftheAmericanAcademyofActuaries.HeisagraduateofBenedictineUniversityinLisle,Illinois,withaB.S.inMathematics.

PedroPurmJr.–President,ArgoSeguros

Pedro Purm Jr. joined ArgoGroup in 2011 to oversee the creation and operation of Argo Seguros inBrazil.HejoinedArgoGroupfromZurichFinancialServicesGroupwherehehadbeenCEOofBrazilianoperations since 1994. Prior to joining Zurich, he held senior positions at Safra Financial Group andCiticorp Insurance Brokers. Mr. Purm has a bachelor’s degree in metallurgical engineering fromUniversidadedeSaoPauloandanMBAfromFundacaoGetulioVargas.


MatthewWilken–President,ArgoRe

MatthewWilkenjoinedArgoGroupin2008asChiefUnderwritingOfficer,PropertyRisksatArgoRe.In2013, he was promoted to President of Argo Re. Prior to joining Argo Group, Mr. Wilken heldprogressively responsible roles in reinsuranceunderwriting at Kiln&Co. in London.Mr.Wilkenhas adegree inphysicswithbusiness studies fromQueenMaryCollege,Universityof London,andanMBAfromHenleyManagementCollege.HeisalsoanAssociateoftheCharteredInsuranceInstitute.

SteveEccles–ChiefUnderwritingOfficer-International

SteveEcclesjoinedArgoGroupasInternationalChiefUnderwritingOfficerinJanuary2018.Inthisrole,Stevewillcontinuetoexpandourinternationalplatformsandfurtherestablishourpositionasaleadingspecialty lines insurer, working alongside Axel Schmidt, Group Chief Underwriting officer and FrankMike-Mayer,U.S.CUO,todrivetheArgoGroupunderwritingstrategy,optimizeprofitablegrowthandunderwritingmargin.

Withmorethan30yearsofindustryexperience,StevejoinedArgofromTravelersInsurancewhereheserved as the active underwriter of syndicate 5000 and a director on both the Insurance CompanyLimitedandSyndicateManagementLimitedboards.Hecurrently servesasanelecteddirectoron theboardoftheLloyd’sMarketAssociation.


APPENDIXD–RiskAppetiteFramework

RiskType RiskSourceRiskPreference

RiskAppetiteStatement

InsuranceRisk

UnderwritingCatastropheRisk

Attitude –Positive

Capacity for catastrophe risk is limited by the expectedlevelofprofitonuncorrelatedrisks,balancesheetstrengthand the cost and availability of reinsurance. All majorcatastrophe zones should have a maximum deterministicmodeledrisktolerance.

Underwritingnon-CatastropheRisk


We have a significant appetite for underwriting risk inthose market segments where it believe there isdemonstrable in-house expertise, and where sufficientbusiness opportunities exist which meet our strategicobjectivesandourreturnoncapitaltargets.

ReserveRiskAttitude -Balanced

We take a balanced view of reserving risk, which weconsider tobe inherent inwritingaportfolioof insurancebusinesswhereclaimsmaydevelopafterthepolicyperiodhasexpired.Wemaintainapracticeofcarryingreservesator above the actuarial point estimate. In other words amargin in excess of actuarial point estimate reservesshouldbeavailable inorder to reduce the riskofadversedevelopments.

Cyber Risk –Explicit

Attitude -Balanced

Wewrite explicit cyber risk and take a balanced view toaccepting these risks as a small part of a diversifiedportfolio.

Cyber Risk –Implicit

Attitude -Balanced

Wetakeabalancedviewofcyberriskrecognizingthatitisa peril, which will legitimately form part of the coverprovidedbymanyclassesofbusiness.

FinancialRisk

Market Risk– InvestmentPortfolioRisk


We actively seek attractive risk adjusted returns whilerecognizing:

(1)Potentialdownsideimpactsoncapitalandtheneedforliquidity;

(2)Regulatoryandratingagencyexpectations;and

(3) Avoiding shareholder impact from a major market




downturn.

Market Risk–FXrisk

Attitude -Balanced

We seek to manage foreign exchange exposures tomitigate the economic impact of currency movementsimpactingthebalancesheetandearnings.

ConcentrationRisk

Attitude -Negative

Weseektomanageconcentrationriskbysettinglimitsonexposure type, credit rating, asset classes and singlecounterparties.

Credit Risk –Reinsurancebaddebt

Attitude -Balanced

WerecognizethevaluethatreinsuranceprotectionbringsbyincreasingArgoGroup'sriskcapacityandprotectingthecompany against severe catastrophes. Exposures toindividualcounterpartiesarelimitedbytheirgeneralcreditworthinessandabilityandwillingnesstosettleclaims.

Credit Risk –Investment

Attitude -Balanced

We recognize that credit risk exposures are an inevitableconsequenceofprovidinginsuranceproductstoclientsviabrokers and other distribution channels. We seek tomitigate the extent to which such assets could becomeuncollectiblefromanygivencounter-party intheeventofitsinsolvencyorfinancialimpairment.

Credit Risk –Receivable

Attitude -Balanced

Credit Risk –Countryrisk

Attitude -Balanced

Weseektolimitforeignmarketexposureinourinvestableassets to avoid liquidity, political and currency risk. Wehoweverrecognizeasaglobal insurer thatweunderwriterisks that will result in explicit country exposures. Ourpractice is therefore to match assets and liabilitiesexposures.

LiquidityRiskAttitude -Negative

Wedonotwish to be exposed to situationswhere fundsarenotavailable tomeetclaimswhen thesebecomeduebecause this would have significant reputational andregulatoryimpact.

Asset-LiabilityMatching

Attitude -Balanced

Argo Group seeks generally to match the duration andcurrency of its insurance liabilitieswith suitable assets. Ithowever recognizes that in periods of uncertainty itmay




be advisable to accept a level ofmismatch tomanage itsoverallmarketriskexposure.

Opera-tionalRisk

InternalEvents

Attitude -Negative(Fraud)

Attitude -Balanced(Other)

We have limited appetite for failures associated withcontrols related to internal processes, systemsor people.Werecognizehoweverthatallsystemsandprocesseshavelimitations and humans are susceptible to error. Weacknowledgethatthereisatrade-offtobemadebetweenthe cost of implementing further incrementalimprovementsandthebenefitsrealizedthroughimprovedinternalcontrols.

ArgoGroup has no appetite for fraudwhether related tointernal staff or third parties and has established andenforcesaCodeofConductandBusinessEthicsPolicyandsecurity measures in order to prevent fraud and clearlycommunicate to all parties the expected level of ethicalbehavior.

ModelRiskAttitude -Balanced

We accept that mathematical models are inherentlysubject to limitations through their design andimplementation.We arewilling to acceptmodel error totheextent that suchmodelsarevaluabledecision-makingtools.

ExternalEvents

Attitude -Negative

Argorecognizesthatitsoperationsareexposedtoexternalthreats such as terrorism, natural catastrophe, pandemicor computer virus attack. It is essential that criticalbusiness operations are sustained through effectivebusiness continuity management and crisis response.Severe interruptions that could severely damage ourreputation/ability to bind business are consideredunacceptableandresponseplansarerequiredtominimizetheriskoccurring.




Compliance/Legal /Regulatory

Attitude -Negative

ArgoGrouphaslimitedappetiteforfailurestocomplywithlegal, regulatory and internal policy requirements orunethicalorillegalactivitiescommittedbytheorganizationand/or its employees. A system of managementmonitoring and self-monitoring exists for compliancepurposes, with guidance provided by the corporate legalandregulatorycompliancefunctionalareas.

Cyber Risk -Operational

Attitude -Negative

Argorecognizesthatitsoperationsareexposedtoexternalthreats such as cyber-attack. It is essential that criticalbusiness operations are sustained through effectivepreventative cyber security measures and businesscontinuity management. Severe interruptions that couldseverely damage our reputation are consideredunacceptableandresponseplansarerequiredtominimizetheriskoccurring.

StrategicRisk

GroupRiskAttitude -Negative

Argo Group seeks to avoid Group Risk and organizes itsintra-groupfinancialandgovernancearrangementsinsuchamannerastoavoidthepotentialforlossorcontagion.

ReputationalRisk

Attitude -Negative

ArgoGroup considers it to be critical that it preserves itshighreputation.ArgoGroupthereforehaslowappetiteforrisk in the conduct of any of its activities that puts itsreputation in jeopardy, could lead to undue adversepublicity,orcould lead to lossofconfidenceamongstkeyexternal stakeholders. ArgoGroup has a low appetite foraberrantlossesincomparisontoitspeerorganizations.

StrategicExecutionRisk

Attitude -Negative

ArgoGrouphaslimitedappetiteforfailuretoaddressanyof the fundamentals required to execute the corporatebusiness strategy, as evidenced by material deviationsfromagreedbusinessorprojectplans.

IncentivesAttitude -Negative

ArgoGroupseekstoalignmanagementincentiveswiththedelivery of Argo Group's strategic objectives. It thereforehas no appetite for the consequences of creatingmisalignment of interests between the organization'sleaders and its shareholders.We however recognize thatany incentive process requires tradeoffs to be madebetween many factors including the balance between




discretionaryandobjectivemetrics.

EmergingRisks

Attitude -Balanced

ArgoGroupremainscautiouslyopentonewandemergingrisks. It recognizes thatwith a changing risk environmentcomesuncertainty.Businessopportunitiesmayexist fromemerging risks and the careful development of newinsuranceproductsolutions.

APPENDIXE–RiskAssessmentCriteria


Definitions)Likelihood) Impact) Threat)Impact)

Measure) Score) Financial) Score) Reputational) Score)

VH)–)Very)High)

An)event)you)can)expect)to)happen)(Once&per&year&

or&more))VH) $300m) VH)

Massive)and)sustained)impact)on)corporate)reputation)(e.g.)intense)media)attention))leading)to)severe)loss)of)confidence)in)brand,)serious)stakeholder)concern)and)significant)impact)on)the)organization’)strategy)and)/)operational)activities.))Crisis)Management)Plan)evoked.)

VH)

H)–)High)

An)event)that)can)be)anticipated)to)happen)

and)this)area)or)a)similar)organization)have)

experienced)such)an)event)(1&in&3&year&event))

H) $100m) H)

Significant)and)fairly)sustained)impact)on)corporate)reputation)in)terms)of)media)attention)causing)confidence)in)brand)to)be)impacted,)some)concern)to)stakeholders)and)considerable)impact)on)the)organization’s)strategy)and)/)operational)activities.))Crisis)Management)Plan)may)be)evoked.)

H)

MQ)Medium)

A)rare)event)that)can)be)envisaged)but)has)not)

occurred)in)this)area)or)in)this)organization)(1&in&10&

year&event))

M) $30m) M)

Localized)impact)on)corporate)reputation)in)terms)of)media)attention)leading)to)a)few)stakeholders)getting)concerned)(e.g.)a)business)partner)or)supplier).)Counter)action,)which)must)be)supervised)by)Marketing,)is)designed)to)address)the)situation.)

M)

L)–)Low)

An)event)that)can)be)envisaged)but)hasn’t)

occurred)in)the)company)history)(e.g.)requires)a)combination)of)two)or)more)events)to)occur)(1&

in&30&year&event))

L) $10m) L)

Mild)and)short)lived)impact)on)corporate)reputation)(e.g.)negligible)media)attention))which)can)be)contained.)

L)

VL)–)Very)Low)

An)event)that)can)be)conceived)but)is)

VL) $3m) VL)Negligible)impact)on)corporate)reputation,)which)can)be)dealt)with)at)business)unit)level)if)

VL)

APPENDIXF-NAICCorporateGovernanceRequirementsandDisclosure


The following synopsis is intended to incorporate the applicable requirements based on the NAICCorporateGovernanceRequirementsandDisclosureModelAct:

Ref NAICREQUIREMENTS WhereinformationprovidedwithinFinancialConditionReport

Commentary

1 Description of the board and variouscommittees thereof ultimately responsibleforoverseeingtheinsurerorinsurancegroupand the level(s) at which that oversightoccurs, such as ultimate control level,intermediate holding company, legal entity,etc.

Page16Committeestructures

Fullydescribed.

2 Descriptionanddiscussionoftheinsurer’sorinsurance group’s the rationale for thecurrentboardsizeandstructure.

Pages13-18SectionIIGovernancestructure

Boardmembers,structuresandrationaledescribed.

3 Description of the duties of the board andeach of its significant committees and howtheyaregoverned,suchasbylaws,charters,informalmandates, etc., aswell as how theboard's leadership is structured, including adiscussion of the roles of chief executiveofficerandchairmanoftheboardwithintheorganization.

Pages13-18GovernancestructuresandBoard/committees.Pages20-21ExecutiveleadershipAPPENDIXC-ExecutiveLeadership

Boardmembers,structuresandrationaledescribedExecutiveleadershipdescribed.

4 Descriptionoftheinsurerorinsurancegroupidentifies,nominatesandelectsmemberstotheboardanditscommittees.

Page18NominatingCommitteedescribed.

NominatingCommittee.

5 (ii)Confirmationastowhethertermlimitsareplacedondirectors;

Page15Boardinformationprovided

Argo Group policydisclosed.

6 (iii) Description of the election and re-electionprocessesfunction;and





Commentary

7 (iv)Confirmationastowhetheraboarddiversitypolicyisinplaceandifso,howitfunctions.



8 Descriptionof theprocesses inplace for theboard to evaluate its performance and theperformance of its committees, as well asany recent measures taken to improveperformance, including any board orcommitteetrainingprogramsthathavebeenputinplace.


9 Descriptionoftheinsurer’sorinsurancegroup’spoliciesandpracticesfordirectingseniormanagement,includingadescriptionofthefollowingfactors:(Anyprocessorpractices,suchassuitabilitystandards,todeterminewhetherofficersandkeypersonsincontrolfunctionshavetheappropriatebackground,experienceandintegritytofulfilltheirprospectiveroles,including:

Pages23-24FitandProperprocesses

Full disclosure of FitandProperprocesses.

10 Identificationofthespecificpositionsforwhichsuitabilitystandardshavebeendevelopedandadescriptionofthestandardsapplied.


ThedisclosurereferstoBoardmembers,controllersandofficersofentitiesspecifically.

11 Descriptionofanychangesinanofficer'sorkeyperson'ssuitabilityasoutlinedbytheinsurer'sorinsurancegroup'sstandardsandprocedures.


FulldisclosureofFitandProperprocesses.



Commentary

12 Descriptionoftheinsurer'sorinsurancegroup'scodeofbusinessconduct.

Page16ReferencetoBoardsettingcodeofconductPage24ReferencetocodeofconductandriskmanagementpolicyPages25-26Internalcontrolsandcompliance

Code of Conduct isreferenced.

13 Descriptionofbasisforcompliancewithlaws,rules,andregulations;and


Code of Conduct isreferenced.

14 Confirmation of existence of proactivereportingofanyillegalorunethicalbehavior.


CodeofConductisreferenced.

15 Description of the insurer's or insurancegroup's plans for CEO and seniormanagementsuccession.

Page16 SpecificBoardresponsibilityoutlined.



Commentary

16 Description of the insurer’s or insurancegroup’s processes by which the board, itscommittees and seniormanagement ensurean appropriate amount of oversight to thecritical risk areas impacting the insurer'sbusiness activities including a discussion of:Description of delegation of oversight andmanagementresponsibilitiesasbetweentheboard, its committees, and seniormanagement;

Pages13-18Board,committeesandexecutivemanagement

Describedinfull.

17 Descriptionofprocessforkeepingtheboardinformedoftheinsurer'sstrategicplans,theassociated risks, and steps that seniormanagement is taking to monitor andmanagethoserisks;

Pages13-18Board,committeesandexecutivemanagement

Describedinfull.

18 Description of reporting responsibilitiesorganizational structure that isapplicable toeachcriticalriskarea.Thedescriptionshouldprovidethebasisforanunderstandingofthefrequency at which information on eachcriticalriskareaisreportedtoandreviewedbyseniormanagementandtheboard.

Pages24-33Coverskeyriskareasandtheirreporting

Describedinfull.

19 Descriptionofriskmanagementprocesses. Pages26-29RiskmanagementprocessesincludingOwnRisk&SolvencyAssessment

RiskManagementprocessesdescribed.

20 Descriptionofactuarialfunction. Pages32-33(ii)Actuarialfunction;SectionII,II(f)

Actuarialfunctiondescribed.



Commentary

21 Descriptionofinvestmentdecision-makingprocesses.

Page38Prudentpersonprinciple

Informationprovidedonbasisofinvestmentdecisionmaking.

22 Descriptionofreinsurancedecision-makingprocesses.

Page37Riskmitigation

Reinsurancerecoverablesandcreditriskonlydescribed.

23 Descriptionofbusinessstrategy/financedecision-makingprocesses.

Notspecificallycovered

24 Descriptionofcompliancefunction. Page30(vi)Compliancefunction;

Compliancefunctionfullydescribed.

25 Descriptionoffinancialreporting/internalauditingfunctions

Pages29-32(vii)Financialreporting/internalauditing;and

Internalcontrolsandinternalauditdescribed.

26 Descriptionofmarketconductdecision-makingprocesses.

Page30(vi)Compliancefunction;

Compliancefunctiondescribed.

27 TheCGADmustincludeasignatureoftheinsurer'sorinsurancegroup'schiefexecutiveofficerorcorporatesecretaryattestingtothebestofthatindividual'sbeliefandknowledgethattheinsurerorinsurancegrouphasimplementedthecorporategovernancepracticesandthatacopyoftheCGADhasbeenprovidedtotheinsurer'sorinsurancegroup’sboardortheappropriatecommitteethereof.

Page2 FCRissignedbyGroupCEO(ChairmanofArgoGroupUS)andGroupCROagainstasimilarattestation.



Commentary

28 Theinsurerorinsurancegroupshallhavethediscretion regarding the appropriate formatfor providing the information required bythe CGAD regulations and is permitted tocustomize the CGAD to provide the mostrelevant information necessary to providethe basis for an understanding of thecorporategovernancestructure,policiesandpractices utilized by the insurer or theinsurancegroup.

WholeFCRdocument This allows Bermudaformat of FCR to beadopted for acombined document,provided the CGADdocument is clearlyidentified.

29 The insurer or insurance groupmay chooseto provide information on governanceactivities that occur at the ultimatecontrolling parent level, an intermediateholdingcompanylevel,and/ortheindividuallegal entity level, depending upon how theinsureror insurancegrouphasstructureditssystem of corporate governance. Theinsurer or insurance group is encouraged tomake the CGAD disclosures at the level atwhich the insurer'sor insurancegroup's riskappetite is determined, or at which theearnings, capital, liquidity, operations, andreputation of the insurer are overseencollectively and at which the supervision ofthosefactorsarecoordinatedandexercised,orthelevelatwhichlegalliabilityforfailureof general corporate governance dutieswouldbeplaced. If the insureror insurancegroup determines the level of reportingbased on these criteria, it shall indicatewhich of the three criteria was used todeterminethelevelofreportingandexplainanysubsequentchangesinlevelofreporting.

WholeFCRdocument Thisdocumentallowsa reporting at Grouplevel but it needs tobe made clear thatthis option has beenselected.



Commentary

30 If the CGAD is completed at the insurancegroup level, then it must be filed with theleadstateofthegroupasdeterminedbytheprocedures outlined in the most recentfinancial analysis handbook adopted by theNAIC.Intheseinstances,acopyoftheCGADmustalsobeprovided,uponrequest, tothechiefregulatoryofficialofanystateinwhichtheinsurancegrouphasadomesticinsurer.

WholeFCRdocument Document wouldneed to be filedwithVirginia DepartmentofInsurance.

31 An insurer or insurance group may complywith this section by referencing otherexistingdocuments,suchasanownriskandsolvency assessment (ORSA) summaryreport, holding company form B or form Ffilings, securities and exchange commissionproxy statements, foreign regulatoryreporting requirements, etc. The insurer orinsurance group shall clearly reference thelocationoftherelevantinformationwiththeCGADandattachthereferenceddocumentifitisnotalreadyfiledwiththedepartment.

Pages26-29 ArgoGroupfilesaSummaryORSAwithIllinoisregulatorwhichisidenticaltotheNAICSummaryORSAreport.ReferencesaremadetoORSA/GSSAwithinORSA.FormFisfilledwith2states.

32 Each year following the initial filing of theCGAD, the insurer or insurance group shallfile an amended version of the previouslyfiled CGAD, indicating 3901-3-19 2 revisionsmade,oracopyoftheprioryearfilingwithadated statement indicating that no changeshave been made in the information oractivities reported in the previous yearCGAD.

N/A N/A

financial condition report...8 financial condition report (f) insurance business written by business...

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