Artex Capital Solutions, the insurance-linked securities market service provider and insurance management specialist has partnered with legacy and run-off reinsurance specialist Enstar to introduce structured exit options embedded within Artex’s ILS vehicles.
Trapped capital, where investor’s funds are locked up to sustain insurance and reinsurance investments that are at-risk of attaching or facing potential loss and loss development, has been a drag on investor funds in the ILS space in the past.
Enstar became a first mover in provision of legacy and run-off expertise and solutions tailored to meet the needs of ILS funds and their investors, delivering on a number of arrangements to help free-up ILS trapped capital positions.
In addition, Enstar’s Forward Exit Option (FOE) solution was embedded into the Fractal Re sidecar structure sponsored by Starwind Specialty in 2024.
These exit solutions have gained in popularity and use across ILS, especially in private collateralized reinsurance and retrocession, as well as in insurance-related investments where longer-tailed liabilities are involved and investors seek a more certain and defined point of exit from structures, including casualty ILS and reinsurance sidecar vehicles.
The companies explained that the Artex Capital Solutions partnership with Enstar will provide “structured exit solutions to enhance liquidity, flexibility and execution certainty for investors in Artex controlled ILS transformation vehicles.”
Bringing together Artex’s capabilities in ILS insurance management and facilitation of ILS arrangements with Enstar’s deep legacy and risk management expertise plus strong balance-sheet, creates an offering that will help to unlock ILS capital and reduce capital drag for investors.
Investors will have access to a streamlined and diversified suite of prospective and retrospective exit products (Exit Options) through Enstar’s subsidiary reinsurer Cavello Bay Reinsurance Limited, which is rated “A” by AM Best and S&P.
Enstar’s Chief Strategy Officer, David Ni, commented, “Investors are increasingly seeking greater certainty and flexibility in how they manage their exposures. We are thrilled to work with Artex to respond directly to that need, drawing on our experience in the ILS market and our track record of structuring innovative capital release and risk management solutions.”
Kathleen Faries, CEO, Artex Capital Solutions, further explained, “This collaboration with Enstar is a significant step in our mission to provide innovative and tailored solutions for our clients. By combining our expertise, we are creating a seamless and efficient process that will redefine exit solutions in the ILS market. Together, we are enabling an efficient way for investors to unlock capital, stabilise earnings, and refocus on core priorities.”
The exit solutions are designed to support ILS investors needs throughout the investment cycle, with forward-exit options that offer future liquidity based on pre-defined terms, as well as retrospective solutions to deliver finality on exposures such as novations, loss portfolio transfers, adverse development covers and the purchase of investor interests.
“Together, these Exit Options are designed to accelerate capital release, reduce trapped capital and provide balance sheet finality, mitigating against loss-creep risk,” the companies explained in their announcement.
The utility for investors of having access to exit and finality solutions from Enstar directly via embedded arrangements within Artex Capital Solutions managed and facilitated ILS structures is a significant step forwards in making these innovative features available and making trapped capital less of, or not an issue at all in future ILS investment structures they allocate capital to.
