Multi-Peril, Multi-Territory

Securing alternative financial solutions.

Our acquisitions of both Hexagon and Kane’s ILS and structured transaction administration services put Artex at the forefront of this sector. Hexagon is widely recognized for its European ILS expertise, while Kane has focused primarily on US-based risks. Now this combination firmly establishes Artex as a leading global ILS services provider with scale, depth and diversity that few, if any, can match.

Insurance-linked securities (ILS) are financial instruments whose values are driven by insurance loss events. They encompass catastrophe (CAT) bonds and other forms of risk-linked securitization. Today they represent an industry with tens of billions of assets from capital investors at risk from catastrophic losses.

The Artex team focuses on facilitating two main types of insurance-linked securities transactions: CAT bond special purpose vehicles (SPVs) and collateralized reinsurance.

CAT bonds provide reinsurance for high-severity/low-probability and other uncontrollable events. They are grouped by their level of risk and sold in tranches, offering different classes of bond to investors with different risk appetites.

Another popular ILS solution is the facilitation of collateralized reinsurance transactions. Collateralized reinsurance has experienced significant growth in the last decade, with Artex being a major market participant facilitating billions of USD transactions through our SAC/PCC companies.

Investors in ILS funds, pension funds and others, often seek to achieve higher returns and/or market diversification than is currently available in the CAT bond market.

 

Catastrophe Bonds

There are few ILS administrators that can claim to have participated in one of the first catastrophe bond issuances. For more than 15 years, our ILS Administration team has played an integral part in facilitating the evolution of the market through its proactive management approach and a commitment to execution certainty. We pride ourselves on having more cat bond experience than any other administrator, with one of the largest in house teams servicing the sector. Our unrivaled experience and expertise in managing cat bond structures through some of the most significant market events to have impacted the insurance industry. For example, our Cayman team has administered some 90% of all cat bonds set up in the domicile.

Our expertise covers a broad spectrum of private and listed transactions, working with both new entrants to the cat bond market as well as seasoned participants. These transactions, which have ranged from cat bond ‘lite’ deals of approximately US$10M to structures of over US$300M, have included a multitude of perils, including medical benefits, hurricane, storm surge, wildfire and winter storms, across numerous territories and incorporating multiple trigger types.

Our ILS Administration team has also worked on many transactions which have helped extend the boundaries of the ILS market. These have included multi-perils cat bonds, multi-cedant cat bonds, and multi-territory cat bonds, as well as transactions which involved risks outside of the catastrophe arena, such as medical benefits. The team has also administered transactions operating at some of the riskiest layers seen to date.

Each member is able to simultaneously manage and perform any task required under the deal documents. In addition, Artex is able to proactively schedule tasks, using a customized central database and diary system that prompts the team to complete key requirements in a timely manner, and which provides exception reports to the Artex management team on a regular basis.

Cat Bond Lite

The emergence of cat bond ‘lite’ structures has served to significantly reduce the barriers to entry for many organizations seeking to transfer risk into the capital markets. Facilitating deals starting from US$10m or less, such transactions are helping to markedly expand the scope of the ILS arena – attracting new entrants into the space and promoting innovation by enabling companies to test the ILS water with various types of transaction structure.

The SAC Limited Note Program is an independent private catastrophe bond platform which enables the flow of smaller, private transactions into the collateralized reinsurance sector. Established in August 2013, the platform provides a standardized, efficient and cost-effective mechanism for smaller investors to access the multiple benefits of the ILS arena.

The SAC program is designed to facilitate issuances in the range of US$10M – US$50M. It is based on an enhanced version of Artex’s transformer transactions, which are linked to either a contractual, preferred share or note instrument. It reduces both time to market and structuring costs compared to traditional Cat Bond structures by providing a standardized process which delivers execution efficiencies to investors.

The platform also meets other key criteria for investors – the demand for liquidity. The platform is the first of its type to list the issuance notes on the BSX. This ground-breaking development greatly enhances the liquidity of the notes and makes them a fully tradable commodity. All transactions to date have been listed on the BSX.

Special Purpose Insurer

The Special Purpose Insurer (SPI) has become an increasingly prominent structure in the Bermuda insurance arena since its introduction in 2009 under the Insurance Amendment Act 2008. Its popularity reflects a number of key advantages of the legislation. Designed specifically for highly sophisticated insurance and reinsurance companies and fully-funded, the regulatory requirements for SPIs are lighter, capital and solvency requirements are lower, and the flexibility of the structure means few restrictions on the types of risk placed into the vehicle.

Our ILS Administration team has built a leading position in the SPI market since its inception, helping clients capitalize on the many advantages of the vehicle to form cat bonds, side cars and collateralized reinsurance structures. Since the introduction of the legislation, the team has managed numerous SPIs and in 2013 worked on almost one third of all SPI transactions in Bermuda involving an insurance manager, accounting for 20% of the overall SPI market.

Our ability to lead the SPI administration sector is based on our extensive experience and expertise, coupled with our close working relationships with both regulators and other leading service providers in the SPI arena. It is also based on the encompassing range of services we offer, which cover all aspects of the process, from the initial incorporation and licensing procedures, to the day-to-day management services, as well as corporate governance requirements.

Segregated Cells and Transformers

The concept of segregated accounts, whether in the form of a Segregated Accounts Company, a Segregated Cell Company, a Protected Cell Company or an Incorporated Cell Company, has become an integral part of today’s risk transfer environment. Not only do such structures provide a key point of entry to the benefits of self-insurance for smaller organizations, but they also play a prominent role in facilitating access to the capital markets through forms such as transformer vehicles or collateralized reinsurance transactions.

Over recent years, our market-leading practitioners have acted on behalf of both investors and re/insurance firms alike, establishing numerous collateralized reinsurance segregated accounts and transformer segregated accounts through our international cell company platform.

We provide our clients with access to the largest independent network of cell companies.

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