After recording some impressive growth in 2022, and with current market dynamics calling for speed and efficiency, Artex Capital Solutions is optimistic about the years ahead for the insurance-linked securities (ILS) space, according to its Chief Executive Officer (CEO), Kathleen Faries.
Horseshoe was rebranded as Artex Capital Solutions back in May, bringing all of the ILS and Fund Services offering under the Artex master brand, which came after the acquisition of Horseshoe by Artex Risk Solutions in 2019.
The takeover of Horseshoe enabled Artex to expand its ILS offerings and, importantly, since the deal closed, the company’s mission to be the best-in-class ILS and Fund Services provider has remained.
Against this backdrop, Artemis spoke with Faries about the performance of Artex through 2022, another challenging year for the re/insurance industry, and also what current market dynamics mean for the firm.
“In 2022, we definitely saw growth in the fund space,” said Faries. “Across the 60+ ILS funds that we manage, we saw an overall increase in assets under management of 25%.”
Faries explained that 18% of that increase was related to new fund launches, with 7% being more organic growth across the funds Artex already had in place.
“Our clients launched 14 new ILS funds, and then on the insurance management side, launched 16 new regulated entities,” continued Faries.
Growth of this magnitude is pretty impressive and significant, especially when you consider the conversations around investors being concerned around prices and terms leading up to the January 1st, 2023, reinsurance renewals.
In terms of demand for Artex’s offerings, it’s important to think about this holistically as the firm facilitates transactions when they’re happening, meaning Artex needs to have both the cedents that want to transfer the risk and investors that want to assume the risk.
When the two sides of a transaction come together, explained Faries, Artex sees growth as it is at the centre of the transaction, providing services for both sides of the trade.
“The message we want to give right now is, because we are that engine in the middle, facilitating, we’re ready to – especially in times like these when everyone’s waiting to see what the dynamic is going to be – bring speed and are able to efficiently get that capital in play, which is going to be critical for the industry,” said Faries.
“That’s where we come into play because we have all the pieces of the necessary infastructure. If an investor needs the infrastructure to provide reinsurance, either through a rentable vehicle or setting up their own vehicle, there’s corporate secretarial that’s potentially needed, there’s potentially a fund that needs to be set up, we can shepherd everybody through that whole process in a very efficient way, to get that capital deployed efficiently.
“So, it’s about being nimble, having all the pieces and expertise, frankly. How to deal with the regulator, how to deal with getting business plans in place quickly, that’s kind of what we’re known for. This is a fun time for us because we can really help a lot of people deploy quickly.”
In recent times, ILS investors have had to navigate elevated loss activity from storms, but also from so-called secondary perils, which have led to trapped collateral issues and somewhat of a shift in investor sentiment.
According to Faries, currently, investors are “cautious, and for good reason they want to see some significant change. But I think that’s good for the whole entire industry in terms of becoming a more sustainable market.”
The cautious stance from investors suggests it’s going to be a prolonged and protracted renewal, noted Faries.
“I’m still, again, cautiously optimistic about the future because if we can get that right, or move it in a better direction, that is going to bring renewed interest for property cat. It could also be more of a catalyst for investors to become more educated and interested in some of the other lines of business that are becoming more available to investors. So, we’re still pretty optimistic about the next few years for our space.
“There are some really interesting things bubbling and coming together in 2022 that could make for an interesting 2023 and beyond,” said Faries.
Kathleen Faries will be speaking at our next ILS market conference, ILS NYC 2023 on February 10th in New York. Register to attend the conference here.