Listed ILS vehicle launching with Kingsway / 1347 backing & Cartesian input

A new listed insurance-linked securities (ILS) and collateralized reinsurance investment vehicle, Insurance Income Strategies Ltd., is being marketed to investors with backing from 1347 Advisors and Kinsgway Financial, while a relationship with ILW specialist reinsurance fund manager Cartesian Re is set to assist with sourcing investment opportunities.

A prospectus has been published through the SEC for a newly formed Bermuda company named Insurance Income Strategies Ltd., which is seeking to issue shares to investors that will then be listed on the New York Stock Exchange (NYSE American) under a ticker symbol of ILS.

The company expects to invest in a portfolio of short-tail collateralized property catastrophe reinsurance contracts, which will be underwritten through a soon to be registered and set up Bermuda special purpose insurer (SPI) named IIS Re.

To kick off the business, after the initial placement of shares and listing of Insurance Income Strategies on the NYSE American, the company will seek to deploy most of its capital to collateralized a retrocessional quota share arrangement between IIS Re and established ILS fund manager Catesian Re’s reinsurance vehicle, Iris Reinsurance Ltd.

It appears that Cartesian Re, the reinsurance and ILW focused investment management unit sponsored by global private equity investment firm Cartesian Capital Group, LLC, is going to help Insurance Income Strategies to source underwriting business, by enabling the new firm to back some of its portfolio.

The firm will have a mandate that enables it to underwrite and invest in third-party collateralized reinsurance and retrocession, industry-loss warranties (ILW’s) and also catastrophe bonds, should it choose.

Insurance Income Strategies said that following the impacts of the roughly $100 billion of catastrophe losses due to hurricanes Harvey, Irma and Maria, it feels the time is right to launch, saying that the current market condition, “presents a favorable pricing opportunity for us to enter the market and execute our strategy.”

1347 Advisors, a subsidiary of Kingsway Financial Services, Inc., will provide certain structuring services to the new company and the link to the coastal primary insurer 1347 Property Insurance Holdings owners is clear, with directors from across this group of companies.

Artemis is aware that the Kingsway board have been looking at the ILS market for a number of years now, but felt the timing had not been right previously. The potential for dislocation and pricing improvement caused by the recent hurricanes has clearly stimulated them to move quickly to get this novel ILS strategy ready to launch.

Being a listed vehicle with shares sold on the NYSE, Insurance Income Strategies will be able to access investors via a liquid exchange platform, so offering investors a way to access insurance-linked returns with an exit available, while helping them to tap into a potentially much broader investor base.

The new company provides a way for Kingsway / 1347 to tap into ILS returns, leveraging their considerable experience in the insurance and reinsurance space at a time when there are the prospects of higher returns available.

Thomas C. Heise, who co-founded the Bermuda Commodities Exchange and has been a director at ILS specialist Horseshoe Group in the past, is lined up to be the CEO of Insurance Income Strategies, while Hassan Baqar (Vice President of Kingsway Financial Services Inc. and Chief Financial Officer of Itasca Capital Ltd.) is interim CFO.

CEO of Kingsway Financial Larry G. Swets, Jr. is set to be Chairman of Insurance Income Strategies. He is also Chairman of 1347 Property Insurance Holdings at this time.

Given the pedigree of some of the people involved with this venture, the fact it is a stock exchange listed company that will fund collateralized reinsurance and the already established relationship with Cartesian Re, Insurance Income Strategies could be a very interesting company to watch in the ILS space.

Cartesian Re is already working with mutual fund manager City National Rochdale, which will also invest in its Iris Re vehicle. For Cartesian, these partnerships offer a way for it to increase its capacity, writing more business and earning fees from capital raised by other asset managers.

It will be fascinating to see how much capital Insurance Income Strategies can raise from this share offering, particularly as it’s a listed ILS vehicle, and whether it can be ready for business by January 2018 or soon after.