Artex North America
Barry White, EVP for Artex North America, sits down with John Savage to discuss the benefits of Artex’s new protected cell company (PCC) domiciled in Vermont
Artex has established cell facilities in multiple domiciles. How does the regulatory and business environment in Vermont complement your global PCC strategy, particularly in comparison to offshore jurisdictions?
As a true global manager, at Artex we have a very diverse and international client base that we want to provide equivalent captive solutions to across our major captive domiciles. We are always monitoring trends, and as we considered our approach to onshore PCC utilisation, we could look no further than Vermont.
Vermont has an industry-leading regulator and support framework in place locally, so we have no hesitation in recommending that clients consider establishing captive operations there.
We want to provide clients with greater flexibility when considering where to form their cells, and having Artex Axcell in Vermont really complements our offshore facilities in Bermuda and Cayman.
Given that Vermont is currently the largest captive domicile in the world, how do you see the competitive landscape for PCCs in this jurisdiction changing, and what special value proposition does Artex Axcell PCC in Vermont offer?
Competition between domiciles has never been stronger, making it a very healthy place to be. Our industry continues to grow year-over-year, and the respective domiciles appreciate this as they look to invest in their infrastructure, staff, and IT systems.
We anticipate continued competition as other leading locations such as North and South Carolina, Hawaii, and Arizona present compelling arguments for locating in their respective territories.
As a full-service captive manager offering solutions for single parents, groups, benefits, and protected cells, we believe we have a number of advantages at Artex over our peers.
Having this onshore PCC facility complements our offering to our distribution partners and client base. It provides both incorporated and unincorporated cells tailored to broader needs, giving clients greater flexibility as they explore alternative risk transfer solutions. We have established partnerships with leading local service providers to expedite our time to market and offer valuable advice to captive owners.
Can you elaborate on the strategic decision to offer both incorporated and unincorporated cell structures within Artex Axcell PCC? How do you anticipate that this flexibility will benefit different types of clients?
We have learned from our other PCC facilities around the world that offering multiple options can be a unique selling point for clients. We aim to empower our clients to make unrestricted decisions about the cell type they choose. As we manage hundreds of cells globally within our organisation, we believe we are privy to client needs and requirements, and this dual approach very much fits with our experience.
The concept of the protected cell, which needs to have its own board of directors, also aligns with clients who have a strong interest in captive benefits but might not be ready just yet to form their own standalone vehicle. However, the incorporated cell approach allows them to ‘dip their toe in the water’ and affords them a little time to make a decision if a wholly owned captive would work for them. We see other clients who simply need a platform to access reinsurance market capacity, so an unincorporated cell can make more economic and operational sense to them.
Given the efficiency of cell facilities in terms of setup, operating costs, and exit costs, how do you envision Artex Axcell PCC serving as a catalyst for smaller organisations to enter the captive insurance space?
We certainly see the PCC model as broadening the universe of clients that can experience the benefits of a captive model and taking carefully considered decisions to retain risk in a more formal fashion. With capitalisation for single parents in onshore locations commencing typically at US$250,000, this can be a challenge for some smaller organisations, so a cell option may be more capital efficient.
Similarly, by distributing some operating costs among cell owners, smaller organisations can benefit from adopting the cell model. Our Vermont PCC will have a stable of pre-selected key service providers, and having this structure in place can be a less daunting task for a client as opposed to having to go out and vet or select these vendors on a standalone basis.
So, speed to market, capital, and cost efficiencies are key attributes of a PCC offering, making it more attractive for smaller organisations.
How does Artex plan to leverage its experience as one of the world's largest cell facility managers to enhance the offerings of Artex Axcell PCC for multinational organisations with complex risk transfer needs?
Our global executive team, with representation from all our key divisions, drives the overall PCC strategy at Artex.
They discuss cell usage, innovation, and opportunities on this platform, enabling us to take tried and tested concepts from one geography and explore the advantages of launching them elsewhere within our group.
For many years, our colleagues at Artex International and Artex Capital Solutions have successfully managed cell facilities, catering to diverse client profiles across divisions.
For instance, our insurance-linked security (ILS) strategy in Bermuda has shaped our PCC approach, which leverages cells to streamline capital markets transactions. We are able to monitor trends from other locations within our group, and this will help us further develop our offerings for Vermont.
With the ability to access reinsurance and capital market capacity through the PCC, how do you foresee this impacting the risk management strategies of cell participants, particularly in hard market conditions?
We have seen some very challenging market conditions in the past couple of years, and when clients find themselves in these cycles, not only do they face pricing pressures, but as we saw for property in 2023, clients can find it very difficult to source capacity for their programmes.
By having a cell in place, clients have a platform from which to seek capacity that they may very well not have access to when just working in the traditional insurance placement process.
While it depends on the risk and nature of the market cycle, cell owners do provide themselves with the potential for greater flexibility in building out their risk management strategies.
We could see some corporate clients with particular individual peak risks using a cell to both access traditional reinsurance and also capital market capacity. By structuring this through a cell, it also helps to segregate a particular risk from other captive risks.
As PCCs continue to evolve in the captive insurance marketplace, what future innovations or developments do you anticipate in this space, and how is Artex positioning itself to lead these advancements?
Interesting areas going forward include clients wishing to segregate first and third party risks through the use of cells. A client may have great data and understand the risk really well, but from a corporate perspective, they may want to segregate first and third party risks from one another, and a cell is an innovative way to do this.
We envisage opportunities in the private equity (PE) space where investors may have a level of risk appetite but, for strategic purposes, need to keep separate individual insurance programmes in place. The PE firm can harness their risk appetite by establishing a cell to participate in a specific programme while continuing to separate the programs of individual businesses.
We also continue to see MGAs looking at cells as a way to potentially share in underwriting profits but also start to create their own programme capacity. This is an area we are closely monitoring and could be a valuable strategic tool as markets develop over the next few years.
Looking back over time, we see how captive products have evolved, which encourages us that there is a lot of innovation in the marketplace. Cells will play a significant role in providing ongoing solutions to the risk management challenges faced by organisations of all sizes.
