Mark Watson has been CEO of Argo Group International Holdings Ltd. since 2007. The Hamilton, Bermuda-based specialty insurer and reinsurer just relocated its New York offices to the city’s downtown tech hub. Mr. Watson recently spoke with Business Insurance Reporter Matthew Lerner about technology in insurance, recruiting, market changes and other topics. Edited excerpts follow.

Q: How is technology affecting the insurance space?

A: For almost two decades, I’ve been talking about how I thought technology would fundamentally change our industry. And I think what we’re seeing today — and I’ll define today as the last two years — is that it’s finally happened.

I use the words fundamentally change for a reason. I think it’s unlikely that any one company comes in and disrupts our industry in the way that other industries have been disrupted. I think that things will fundamentally change through people’s use of technology.

We’ve been investing in technology for the better part of a decade now, quite a bit in the last six to eight years, and those investments are just now paying off. We’ve invested in data analytics. We’ve built a pretty large data warehouse. We’ve begun using machine learning and other robotic processes to help us select risk by having access to more data.

We’ve also invested in technology to make it easier and faster for us to adjudicate claims, keeping in mind that most of our claims are large, complex corporate risks. It is prevalent in every part of our company. We’ll do more in the next three to five years than we did in the last 15.

Q: How does Argo attract new talent and approach recruiting?

A: It’s not accidental that we’ve moved offices from SoHo to the Meatpacking District (of New York City), and it’s not coincidental that we’ve got 40 software engineers sitting here in the building, across the street from Google, and there are a lot of other tech companies here as well. That’s the fastest growing part of our workforce in New York City.

Moving our office from one part of New York City to another was a conscious decision to help facilitate the recruitment of our digital team, which has now been going for three or four years, but really got launched to a new level a year and a half ago when Andy Breen joined our company from American Express (where he was vice president of product in American Express’ Enterprise Digital business unit).

So a lot of times, the reason why we have an office in a place is because that’s where really good people are. And I appreciate that a lot of people are retiring, but there are a lot of people entering our industry workforce, and a lot of them are coming from other industries.

No one in our digital team worked in the insurance industry before joining our company. Most of the corporate finance team came from investment banking. Most of the legal team came from private practice. We have a number of underwriters that came out of whatever industry they’re now underwriting risk in. Equally important, maybe even a little more important in the long run, we’ve had a graduate recruitment program here in the U.S. and in London for almost a decade.

Q: Will technology supplant jobs?

A: If you look at our workforce today, we have more employees today than we did before. Our workforce has a different complexion today. We have replaced processing roles with data analytic roles or actuarial roles. We have five times as many actuaries today as we did 10 years ago. We’ve replaced some underwriting processing roles with software engineers to do the data analytics. It’s much more of a professional organization today than it was even five years ago, and that evolution is going to continue to change as we become more and more of a data-driven company.

When we think about how we use technology for underwriting, it’s applicable to every part of the market. It’s most useful in the short run for the small-account business where we can automate more things. But there’s another end of the market, too, and that’s the large-account business, and that will — at least, as long as I’m still in the industry — still be very relationship-driven. And as long as you’re trying to cobble together hundreds of millions of dollars of capacity — or in some cases a billion — that’s still going to be very manually intensive. So it really just depends on which part of the risk spectrum you’re talking about as to what technology will do.

Q: Did extensive losses from 2017 catastrophes change or turn the market?

A: It comes back to supply and demand. There isn’t much more demand for reinsurance or retro today than there was a year ago, and there’s more supply today than there was a year ago, mainly coming in from the capital markets. I’m a little surprised we didn’t keep some rate increase over the course of the year — or, I should say, a little more than we did achieve — but I’m not terribly surprised knowing how much more capacity is there.

Q: Is “alternative capital” really alternative anymore or has it become mainstream?

A: That’s an excellent question, and I’ll answer it by saying that we think of reinsurance in all shapes, forms and sizes, including (insurance-linked securities) as a form of capital, not an alternative form of capital. And it is a substantial feature in our capital structure particularly for property cat reinsurance, but also other risks.

If you look at how people support risk, how companies support risk on their balance sheets today, I think it is so prevalent as to be a form of capital, not an alternative form of capital.