Hudson Structured Capital Management Ltd. has entered the Special Purpose Acquisition Company, or SPAC marketplace, with a new insurance, reinsurance and insurtech focused company named Kairos Acquisition Corp. that will target raising $200 million or more in its initial public offering (IPO).
It’s no surprise to see Hudson Structured Capital Management, the Michael Millette founded transportation, reinsurance and insurance-linked securities (ILS) focused investment manage that undertakes its reinsurance work as HSCM Bermuda, entering the Special Purpose Acquisition Company (SPAC) market.
Hudson Structured has a broad remit to source returns from insurance and reinsurance related investments, with allocations to transactions in areas such as ILS and collateralized reinsurance, catastrophe bonds, insurtech investments, equity and private debt.
Given the managers broad expertise in managing third-party assets allocated to insurance and reinsurance market transactions and companies, it makes perfect sense that Hudson Structured would look to the growing SPAC wave as another way to employ its expertise to attract more third-party investor capital.
Kairos Acquisition Corp., a so-called blank check company incorporated in the Cayman Islands, is aiming to raise up to $230 million through an initial public offering of its shares, if over-allotment options are exercised in full.
As with all SPAC’s, the capital is being raised and the company listed to then support its goal of finding an acquisition or combination transaction that will put the capital to work and bring an established entity to listing through its structure.
The target sectors for Kairos will be insurance, reinsurance and insurtech sectors, with a broad remit to enter into acquisition or combination transactions, with carriers, MGA’s, run-off managers, fronting companies, brokers, other service providers and insurance technology start-ups all potential target entities.
The thesis is that there is significant value locked up in the insurance and reinsurance sector and Kairos, with the support of Hudson Structured and a very impressive board can unlock that, providing a platform into which it can bring an existing entity, take it to listing given its IPO and then build out the company, or sell it to profit.
Part of the thesis and the reason SPAC’s in the insurance and reinsurance sector are so attractive right now, is the fact the market has been disrupted by efficient forms of capital.
The Kairos Acquisition Corp. S1 registration document explains:
The development of the insurance linked securities market, and improved access to traditional reinsurance companies through fronting relationships, has created a more consistent supply of risk capital at lower cost, flattening the peaks of traditional market pricing cycles and thereby providing an opportunity to cut long-term operating costs of those insurance and reinsurance companies who utilize reinsurance as a significant form of contingent capital. These forms of contingent capital has also allowed innovative InsurTech start-ups to develop innovative and disruptive risk transfer products, sharing in the economics of the underwriting results enabled by advanced risk management using newly available massive data sets and computing power.
These trends, alongside the efficient way a SPAC or blank check company enables capital to be raised from perhaps slightly different sources, means there is a significant opportunity to capitalise on the interest in re/insurance business right now, while putting intellectual capital to work in finding the acquisition or combination and propelling it onto its next phase of growth, or a profitable exit opportunity.
Kairos Acquisition Corp. is sponsored by Kairos Alpha Acquisition LLC and HS Chronos LLC, both Delaware limited liability companies.
HS Chronos LLC is a Hudson Structured (HSCM) related entity, being owned by the HSCM Bermuda Fund Ltd. and HS Santanoni LP fund.
Reading through the S1 document, it’s clear HS Chronos will be a significant owner of the listed SPAC, having purchased founder shares in the structure back in September and being lined up to potentially purchase up to $19.8m of the IPO offering for Kairos.
Michael Millette, Hudson Structured founder, will be a board observer for Kairos, while Hudson Structured Partner and Chief Investment Officer for the HSCM Insurtech Strategy Vikas Singhal will be a board director.
The SPAC has Peter Bang as its CEO, an executive with years of investment banking and insurance sector focus who was most recently MD of ERG Capital Partners, and Jerry Michael de St. Paer as its CFO, an executive with a long history in reinsurance having served on the board of SCOR Re US, as CFO of XL Capital, and numerous other senior roles.
Chairman of the Kairos Board will be Robert Glanville, a founding partner of Pine Brook and someone who as an Arch executive in the early to mid 2000’s worked on collateralised reinsurance sidecars and other structures for the firm.
Other directors include Garrett Koehn of CRC fame, John Lummis of AQR Re and RenRe fame, Thomas Motamed of AIG and previously CNA, Michael J. Stone of RLI Corp., and Susan Sutherland of Ascot, Montpelier Re and who was previously a Partner at law firm Skadden, Arps.
It’s an impressive line up, which is really one of the main selling features of SPAC investment vehicles.
That the intellectual capital and domain expertise locked up in its management team and board, as well as their resources and network, can deliver on a combination or acquisition target that will have significant potential as a listed company and to make a profit.
With the Hudson Structured backing and the expert board, Kairos Acquisition Corp. looks like it could be another very interesting SPAC opportunity for insurance and reinsurance focused investors.
The shares eventually issued by Kairos are expected to be listed on the Nasdaq Capital Market under the symbol “KAIR”.
These special purpose acquisition companies, or blank check investment vehicles, provide an attractive proposition for investors right now, giving them a way to back investors with specific insurance and reinsurance sector expertise on unknown acquisitions and combinations, but that can return significant multiples.
The listing makes the investment opportunity even more compelling for some, given the potential liquidity options it provides as well.