Whether you're looking to manage legacy programs such as pension longevity or close a captive, we've created a number of structures that can manage the changes your business requires.
There are many reasons your organization may choose to close its captive: the desire to eliminate the variability and volatility of long-tail liabilities, a change in company direction or market focus, rationalization in the aftermath of a merger, or the result of regulatory developments. Artex is seasoned in all possible scenarios. We have solutions and insight that aid you in developing the most efficient and cost-effective solutions, for better risk management.
Longevity risk – essentially the risk that retirees will live longer than expected and require additional, unaccounted-for pension payments – is a serious risk that cannot be managed through investment strategy alone, particularly in times of economic fluctuation. Artex as the market leader, offers risk transfer solutions to help mitigate this risk and secure certainty for a pension scheme's future liabilities and member benefits.
There are several options available, depending on the structure of the entity and the requirements of the domicile in which it is located. These options include a novation or loss portfolio transfer of all or a portion of the captive's business, commutation, restructuring of liabilities and bringing finality to a book of claims – usually with fronting insurance or a reinsurer. Artex has expertise in creating better options that provide confidence and peace of mind.
Our approach to Legacy risk reduces exposure on many fronts, including release from collateral requirements, full finality of claim obligations, balance sheet clean up and potential accounting benefits on acquisition of companies with contingent liabilities.
Our experience in assisting entities with a captive in run-off by novating contracts into a protected cell to reduce vehicle run-off expenses provides you better risk management in the short and long term. We can manage the captive through the liquidation process and reduce the amount of parent company management time by transferring the insurance risks into a protected cell. Our process uses a blend of market insight and expertise to serve firms seeking relief from the ongoing management and expense of a continuous claims process. We also aid companies:
We provide asset management with access to investment management firms in Guernsey and the UK. This advantage, aids in maximizing the use of assets to meet claim obligations while boosting returns. We can also manage your liabilities to wind down the captive in an orderly way until the end and to settle all interests of the insured. This is an excellent option for shareholders with an average risk appetite and return on capital and who can set fairly realistic claim resolutions.
Longevity risk management is a central focus for sponsors and trustees of defined benefit pension schemes. Beginning in 2014, the use of captive insurance has enabled pension schemes to use incorporated cells to transfer longevity risk to the reinsurance market.
As reinsurers cannot underwrite contracts of insurance directly to the pension scheme, an efficient and cost-effective solution is for the pension scheme to establish a captive insurance company that assumes the longevity risk of the scheme. The captive then passes on the risk to the reinsurance market on a back-to-back basis; i.e., with no retained risk. The transaction is negotiated directly with the reinsurance market via the captive so that optimum pricing for the longevity risk being transferred can be obtained.
The use of captives reduces the number of negotiating parties and offers more control to the trustees over future plans. Captives also enable a phased approach to an overall buy-in, or ultimately, a full buy-out strategy. Artex has considerable experience in working with pension longevity risks, having worked with BT Pension Scheme (BTPS) during 2014 to form its ICC, which subsequently completed the first-ever pension longevity captive transaction.
Loss portfolio transfers (LPTs) are structured transactions that package and transfer a portfolio of known and unknown losses to a commercial insurance company in exchange for a fixed amount of consideration or premium. With an LPT, the company is relieved of its balance sheet liability (as well as any required related collateral) and, as a result, can clean up its balance sheet and achieve certainty of expense for what previously was uncertain and potentially volatile expense recognition.
Learn more about these solutions in our case study.
Through the combination of our Artex-sponsored and client-sponsored cell companies, Artex is now the world’s largest manager of cell captives to serve your business goals.
Artex is a pioneer in the space of feasibility studies. We help find solutions others may overlook to achieve better, & more sustainable, risk financing solutions.
Artex manages in excess of 500 single-parent captives with premium sizes ranging from $300,000 to over $100 million.
