Howden gets segregated cell & insurance management capabilities in Bermuda & Guernsey

Expansive broking group Howden has acquired ARM Group Holdings, parent of captive specialist insurance manager Alternative Risk Management. But it’s the potential to utilise this new acquisition for establishing segregated cell structures for collateralised reinsurance and ILS transactions where this could get more interesting.

Howden already has a robust reinsurance broking offering under Howden Tiger and a dedicated capital markets and investment banking unit with insurance-linked securities (ILS) capabilities, Howden Tiger Capital Markets & Advisory.

But, the firm did not have its own segregated or protected cell structures available for clients transacting reinsurance on a fully collateralised basis, or for housing ILS and third-party capital backed reinsurance transactions in.

That’s prior to this acquisition announced today, which has now given Howden a segregated cell platform with capabilities in both Bermuda and Guernsey.

Howden has acquired ARM Group Holdings Limited, the parent to Alternative Risk Management which is one of the largest independent insurance managers in Europe, with a specific focus on the formation and management of insurance captives.

Howden’s announcement solely focuses on captives as the opportunity this acquisition brings to the firm.

But that’s perhaps underplaying the opportunity a little, given the potential for segregated cells to provide Howden a new platform through which it can broaden its ILS relevant offerings and activity, with structures that can house reinsurance deals that interface with capital market investors.

ARM is based in Guernsey but also has a management licence in Bermuda and currently manages more than 80 captive structures.

Morwenna Howell, Managing Director and Global Practice Leader, Howden Multinational Clients Practice, commented, “In-house captive capabilities are an essential piece of the puzzle in order for us to provide unparalleled solutions for our large and multinational clients. This is a growing market with strong demand for new entrants, and by harnessing the power of our global network, our market-leading specialty, reinsurance and analytics capabilities, and now, our enhanced captive capabilities, we look forward to continuing our growth.”

Charles Scott, Managing Director, ARM, added, “We have built a robust, successful business in the last 20 years, and joining with Howden represents the logical next step in our journey. It has been an easy decision to make as we already manage a number of Howden clients, allowing us to get to know them and vice-versa. We share Howden’s entrepreneurial spirit and client-centric approach and look forward to providing worldwide captive solutions to Howden and other clients.”

But, as we said, the capabilities this can bring to Howden are much broader than captives alone.

Alternative Risk Management operates two structures that can accommodate segregated cells.

In Guernsey, ARM’s home, the company has Windward Insurance PCC Limited, a protected cell company licensed and regulated in Guernsey and established back in 2001.

While in Bermuda, ARM Insurance Limited is a Class 3 insurer, with the capability to offer clients segregated cells located there.

Of course, there could be some regulatory or licensing changes needed to update the structures to accommodate collateralised reinsurance, but it seems an opportunity that Howden Tiger’s reinsurance brokers and capital markets and advisory teams can take advantage of for clients further down the line.

In addition, all the major insurance and reinsurance brokers have access to dedicated in-house insurance management capabilities that can manage and facilitate ILS structures and transactions, with Aon having Aon Insurance Managers, Marsh and Guy Carpenter having Marsh Management Services, and Gallagher having Artex under the AJG group.

Insurance management capabilities dovetail well with broking teams with reinsurance capital markets and ILS transaction pipelines, offering Howden another way to make the client relationship more sticky, as well as additional value-add products it can offer to both cedent and investors sides of the ILS arrangement.