Following the closure of its initial public offering last week, Oxbridge Re is listed on NASDAQ. The Cayman Islands-based reinsurer raised $26.4 million from its IPO after deducting placement agent fees and estimated offering expenses.
Oxbridge Re sold 4,884,650 units, each consisting of one ordinary share and one warrant to purchase one ordinary share, at a public offering price of $6 per unit. The units will be listed on the Nasdaq Capital Market, the equity market for companies that have relatively small levels of market capitalization, under the symbol OXBRU.
The offer was slightly oversubscribed, raising total capital at the top end of the reinsurer’s expectations. The firm had previously announced it expected to sell between 1.7 million and 4.25 million units at a price of between $5 and $7.
Oxbridge Re said it intends to use the capital raised for underwriting obligations and general corporate purposes.
Oxbridge Re was formed in April 2013 as a Cayman Islands exempted company to provide reinsurance primarily to property and casualty insurers in the Gulf Coast region of the United States, with an initial emphasis on Florida. Through Oxbridge’s licensed reinsurance subsidiary, Oxbridge Reinsurance Ltd., it writes fully collateralized policies to cover property losses from specified catastrophes, such as hurricanes and tornados.
The reinsurer said it aims to specialize in underwriting medium frequency, high severity risks, where it believes sufficient data exists to analyze effectively the risk-return profile of reinsurance contracts.
Cayman Islands Minister for Financial Services Wayne Panton said the listing indicates the jurisdiction’s positive business and regulatory environment.
“Within one year of establishing the company in Cayman, Oxbridge Re has been able to both set up a physical presence, and also list on the world’s second-largest stock exchange by market capitalization.
“In addition to underscoring our strength and competitiveness in the reinsurance sector, this acknowledges the skilled and talented service providers we have in Cayman.”
Minister Panton said Cayman’s attractiveness as a reinsurance jurisdiction was bolstered with the 2012 amendment to the Insurance Law, which specifically caters for commercial reinsurers.
“Government fully supports growth in this area, as it complements our offerings in securities, insurance and investment funds,” he said.
In June 2013, Oxbridge Re completed a private placement that raised $6.7 million and subsequently entered into its first reinsurance contracts with Claddaugh Casualty Insurance Company, Ltd.
Claddaugh is a captive reinsurance company and a subsidiary of HCI Group, Inc., a Florida-based, publicly traded holding company that is a related party to Oxbridge Re through common directors.
HCI Group includes Homeowners Choice Property & Casualty Insurance Company, Inc., headquartered in Tampa, Florida, which provides property and casualty insurance solely to Florida property owners.
Oxbridge Re has since entered into an additional reinsurance contract with another party in January 2014.
Oxbridge Re said, unlike other insurance and reinsurance companies, it does not intend to pursue an aggressive investment strategy and will focus on generating profits in its underwriting business instead.
Its core business will be focused on the provision of property catastrophe reinsurance coverage to a broad range of select insurance companies and potentially other reinsurers, the firm said in its IPO prospectus.
Steve Evans of Artemis.bm, a news service focusing on the alternative risk transfer market, commented on his website that “given the firm is operating on a fully-collateralized basis and currently has low operational costs due to a small team, it can likely offer insurers competitive pricing” in the property and casualty reinsurance market segment.
He said, “Start-ups like Oxbridge Re offer investors an interesting way to access the returns of the reinsurance market directly, due to its collateralized reinsurance strategy. However, in this competitive market, start-ups may find it difficult to grow, so Oxbridge Re will likely have to rely heavily on its relationships [with HCI Group] to begin with.”
As such, Oxbridge Re is almost acting as a captive reinsurer for HCI, he wrote. “How long it can rely on those relationships alone, without expanding its client base, remains to be seen.”
Oxbridge Re said in its prospectus that as the firm’s capital base grows, it expects to consider growth opportunities in other geographic areas and risk categories.
The reinsurer predicts the majority of its business will be sourced through reinsurance brokers in the future. “We intend to build relationships with global reinsurance brokers and captive insurance companies located in the Cayman Islands,” the reinsurer said.