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Xitus founder upbeat over expansion plans in captive space
Bermuda-based Xitus is set to expand in the legacy re/insurance sector, which has seen growth in the past decade as the business evolves from dealing primarily with distressed assets to being seen as a capital management tool.
Andrew Lewis (pictured), a veteran underwriter who founded the company in 2020 and bought out its minority shareholder in 2023, said in a recent interview that Xitus is steadily expanding in the small- and mid-market space and is especially interested in legacy captive insurance.
Having founded two insurers which primarily operated in Africa, Lewis and his brother Robert turned to legacy after selling a managing general agency to what is now SiriusPoint.
Initially, Xitus was formed in partnership with Bermuda-based financial services company Acumen, which provided some staffing support, but Lewis agreed to buy out that company’s share in 2023. Acumen continues to work with the business.
As a result of the separation, Lewis said Xitus has been increasing its staff in the past 12 months, and has been joined by Gabriel Ware, previously an actuary at legacy giant Enstar, whom he said had “priced probably 300 deals in his career and certainly has a very diverse understanding of how these things work”.
On claims, the company has hired Andy Gregory, former chief executive officer of Stronghold insurance company, whose experience includes managing it through a scheme of arrangement, giving him real-world experience of dealing with a distressed business.
The company has just been joined by former R&Q Holdings co-head of global mergers and acquisitions Huw Battrick, who will be head of M&A.
“He is a recognised industry player in the legacy space,” said Lewis. “He has 25 to 30 years’ legacy experience in some of the larger firms.”
Lewis said the departure of R&Q Holdings from the legacy business also left an opportunity, especially for captive insurers, which he sees as a promising area for Xitus.
“Captives are relatively unique in that their capital is really set up by business people, and sometimes their insurance knowledge is possibly not as good as with a normal insurance company owner,” he said. “As a result, a lot of them don’t realise that there are ways of leaving.
“They don’t realise how long the liabilities are and you can't just give the licence back after a few years; they can go on for a very long time.
“Once they’ve got their heads around that, they look for solutions, and we are the solution. We want to come and really offer that service, and are hoping the bulk of our future business will come from the captive space.
“There's also the type of business that we find in captives, because it's very specific to the industry that they're managing.
“As a result, we find that the legacy is of a higher calibre. It's just that the owners want to cash out and move the money on.”
Lewis is also pleased to be based in Bermuda, praising the Bermuda Monetary Authority as its regulator and the benefits of being close to one of the most concentrated re/insurance capital markets in the world.
“We have an Irish licence, which allows us access to Europe, and the Bermuda licence, which is our main one,” he said. “It's a very attractive regulatory environment in that the BMA are pro-active. We work very closely with them, and they do understand business and people running insurance companies.
“On the regulatory side, with Bermuda, it offers an open, transparent way of doing business, which we really appreciate. As long as we are open and respectful to them, they reciprocate. It's been an absolute pleasure.
“Bermuda is widely recognised and quickly growing into the insurance capital of the world. The amount of capital in Bermuda is quite exceptional as well.”
Despite the additions to the team, Lewis said it remains relatively small and outsources many of its functions, including regulatory management, where Xitus works with Davies.
“Davies will do all our regulatory returns, statutory capital calculations and all other aspects of making sure we meet the threshold conditions with regulators and outsource all claims management to third-party administrators.
“We have an independent board, and it is very strict on oversight and controls. So, although everything is outsourced, various committees check on this outsourcing, and board meetings are robust and intense to ensure these things are properly done, making sure that it is sustainable.
“We can pretty much scale up and down as far as deals go.”
Lewis said the current market has seen larger players showing more interest in smaller deals, perhaps because they are seeking higher rates of return as the cost of capital has risen.
But he said Xitus is fortunate in that its capital is primarily private and not dependent on fund providers or private equity firms, so there is no pressure to return the investment in a fixed period of five to seven years.
“We don't have that stress,” he said. “In fact, the longer the deal is for us, the better.
“Our intention is just to keep adding to our Bermuda licence, building our capital and reserves with a view to investing that money and keeping the wheels turning.
“We've been very lucky. A lot of our deals have been through quite quick recycling, so we have gotten our money back quite quickly, and that's really what's funded our deals as we go along. We certainly see us continuing to do what we have been doing for a long time. We see our relationships expanding across the industry.”