Artex Risk Solutions
Having completed two high-profile acquisitions, David McManus of Artex Risk Solutions explains what its new capabilities mean for clients and the captive industry
How would you describe Artex’s captive capabilities following the Kane acquisition? What can you achieve for current and new clients?
Artex is the fastest growing and most diverse insurance manager in the industry. We manage over 1,000 captives and cells in 27 domiciles through nearly 400 staff in more than 15 global locations. There are very few other managers who can offer this sort of scale, but what really differentiates us from the elite peer group we now find ourselves in is our strong sense of independence. Many of Artex’s leaders built their own successful businesses by bringing creative, independent thought to the development of their risk management solutions. Far from wanting to stifle that in any way, independent thought is the key brand characteristic we want everyone in Artex to embrace. That’s what Kane and all our previous mergers bring to Artex’s existing clients and prospects. In turn, Kane’s clients can take comfort in the additional financial strength and stability that comes from being part of Artex and a subsidiary of a New York Stock Exchange-listed risk management parent with an $8 billion US market cap.
We have a fantastic owner in Arthur J. Gallagher & Co, which really understands this business and have the confidence to allow us to operate as an independent brand. This has enabled us to retain a hugely supportive referral network that, while including some of Gallagher’s top retail brokers, is not in any way dependent on them. Almost 90 percent of our business is generated from outside of our parent group. Externally, when we consider independent thought and what it means for our clients, it is the fact that we’re able to create and provide a full range of alternative risk management solutions, customised for our clients’ individual challenges and opportunities. Powered by independent thought and an innovative approach, we empower our clients and partners to make educated risk management decisions with confidence.
What plans do you have for your captive offerings in the future? Are you planning any expansions?
I think you’ll see us become a lot more active in the healthcare and financial services niche than we have been up until now, as well as in the Cayman Islands and Bermuda in general. We have had a strong presence here for many years, but the scale of the businesses in both domiciles was such that our priority was always strong customer service and retention. With considerably greater scale, our combined teams are resourced to start seeing more new business, and our North American production unit is gearing-up to make sure that happens. This is another key differentiator at Artex. We have a deep pool of sales talent and disciplined production management, which, when fully engaged with Kane’s expanded capabilities, will undoubtedly drive growth from our extensive referral network.
What were your motivations for acquiring the Kane ILS admin business at the same time as Hexagon Insurance PCC?
First and foremost, like every merger we have done or ever will do, it’s all about the people who lead those businesses. In the case of Kane’s insurance-linked securities (ILS) teams and Hexagon, they are among the smartest and most respected voices in this sector. Acquiring great talent whenever it becomes available will always be a priority. That said, our strategic intent to enter the ILS business could not have come together better than through the acquisition of a strong Bermuda and Cayman ILS team in Kane, plus one of the two leading ILS structure administrators in Guernsey.
As always, the first priority will be to take care of our existing customers, but as we move through integration, the teams will come together to make sure we offer sponsors and investors the widest possible range of skills sets, structures and domicile capabilities available.
What opportunities does ILS offer captives? Do you think captive owners should look more closely before entering the ILS market, and do you think they need more education before entering?
The ILS market’s potentially greater interaction with corporates and/or their captives is a subject very much in vogue at the moment, but of course it is nothing new, with Tokyo Disney Land having utilised alternative capital to support its earthquake protection since as far back as far as 1999. Amtrack and New York Metropolitan Transport Authority cat bonds are more recent examples, but I doubt that anyone could seriously argue that we have anything yet that amounts to a trend.
What we can be sure of is that risk and capital will always seek out the most efficient methods to come together. That means that every player in the risk value chain will be challenged including the broker, the insurance manager and the captive. There is some debate as to exactly how big the global ‘protection gap’ is, but there is little doubt that it is huge, with insurance estimated to respond to no more than 30 percent of global economic losses from natural disasters. Add to this public and private exposure to man-made losses from cyber, terrorism, pollution and other impacts to the environment and it’s not hard to conclude that there is no shortage of risk looking for capital.
Risk managers and chief financial officers of every large corporation, public and private, are already on to this and are eager to understand how the ILS-sponsored capacity could be structured within their programmes. Minimally, we can expect that service providers in every segment of our industry will need more education on the subject if they hope to remain pertinent in any large corporates’ future risk management discussions.
