The capacity crisis of the mid-1980s was the force that fueled the exponential growth of the alternative market, the broad category to which Artex belongs. As the market started to soften, industry observers wondered whether the business that had left the traditional market in search of solutions would return to it when rates and terms eased up. The whole point of our programs is to redistribute profits. In the traditional market, the insurer keeps all the profits. In a soft market, there's less profit to capture.
Many carriers are willing to enter the 'risk-free' fronting market.
As the pendulum swings, fronting becomes a more specialized service. Our programs are market neutral because when prices are artificially low, reinsurance is cheap. When prices rise, there's more profit to capture. Whether single entities or groups, clients are seeing that this is a long-term trend and a solution that makes sense. We asked Mullen and McManus to comment on the trends they see shaping the future of Artex and its agency profit-sharing programs.