Oversight and expertise on ILS globally

The ILS and collateralised reinsurance markets continue to grow apace, and Artex Risk Solutions is ideally placed to service clients globally thanks to two acquisitions, as Justin Wallen, head of ILS–Guernsey at the company, explains to Monte Carlo Today.

As the insurance-linked securities (ILS) and the collateralised reinsurance sectors continue to grow in size and diversify in terms of the breadth of risks covered and structures used, Artex Risk Solutions is better placed than ever to capitalise on these changes thanks to two recent acquisitions, says Justin Wallen, head of ILS–Guernsey, at Artex Risk Solutions.

Artex Risk Solutions, a specialist in insurance management and alternative risk programmes including various forms of ILS, earlier this year acquired Guernsey-domiciled Hexagon Insurance PCC Group, which provides cell company facilities to the ILS industry, and the insurance division of Kane Group, a global insurance management company which specialises in the formation and management of structured insurance solutions.

“Equally important is our emphasis on collateral management and urgently facilitating the release of collateral back to investors at the end of the transaction life cycle.”

The deals have added diversity to the company’s range of services and have helped establish Artex as a leading ILS service provider with a long and deep track record of experience dating back to 1996. It also means the company now offers ILS services in three different domiciles and works with six out of the 10 largest ILS fund managers.

“This is a considerable advantage to our clients, offering different time zones, different insurance vehicles plus a large combined resource—all operating to the same responsive, high-quality service,” Wallen says.

“We are also able to offer access to many other popular insurance domiciles including Malta and Gibraltar with their ILS legislation, plus a range of other insurance management services which may appeal to existing ILS clients.”

This is a good time to be taking a lead in the industry, Wallen says. He foresees growth in most parts of the market as it continues to innovate and spread its reach into new risks and lines of business.

“There is no doubt that there is still plenty of capital ready to be deployed and that year on year our assets under management have increased with the growth of this alternative capital. In order to put these funds to work, there has also been a move to diversify the types of risks being written. Gone are the days when we were only writing property cat business—we now regularly enter into marine, energy, terrorism, crop and other speciality covers such as lottery jackpot,” he says.

“We have also seen strategies where investor capacity is trying to get closer to the primary insurance risk. We have seen strong underwriting discipline and willingness from the ILS investors to walk away from a transaction on the basis of altered terms and conditions within a contract, rather than just rates on line, which is perhaps reflective of the maturity and expertise of the current ILS market.”

Wallen says Artex Risk Solutions sets itself apart on speed of execution and the experience and expertise of its team.

“For Artex the key discipline is responsiveness when it comes to facilitating an ILS transaction, to reduce execution risk. We are focused on making sure that the transaction is turned around as quickly as possible by us as manager of the ILS vehicles,” he says.

“Having facilitated so many collateralised reinsurance and cat bond transactions we are very much experts in this sector and can also add great value when it comes to reviewing and commenting on the transactional documentation, particularly the reinsurance contracts and trust agreements.

“It doesn’t stop with getting the ILS transaction finalised—our clients expect the administration of each vehicle to be top notch, from the provision of regular accounting information and valuations, to taking care of the company secretarial and corporate governance aspects. Equally important is our emphasis on collateral management and urgently facilitating the release of collateral back to investors at the end of the transaction life cycle.”

He adds: “We are also cognisant of the collateralisation costs the ILS markets face. In the short term we will continue to maintain close links with all service providers in the ILS chain and seek cost efficiencies from both structural engineering and economies of scale.”

Wallen stresses that the company has great oversight of the regulatory differences that impact clients and can adjust a strategy accordingly.

“Each of our domiciles—Bermuda, Cayman and Guernsey—has adopted an ILS supportive regime, so although there are differences between those domiciles, each has managed to create an environment where the regulation of ILS vehicles is conducted in an efficient manner,” he explains.

“We operate with a domicile-neutral approach offering our clients objective advice on the domicile that would best suit their needs. We are also aware that Gibraltar and Malta, where we have offices, are keen to attract ILS business to their domiciles and specifically where a direct insurance contract into the EU is required then they have an advantage.”

Justin Wallen is head of ILS–Guernsey at Artex Risk Solutions. He can be contacted at:  justin.wallen@artexrisk.gg