IPO target halved for Kingsway / 1347 backed Insurance Income Strategies

The target for the initial public offering (IPO) and first capital raise for Insurance Income Strategies Ltd., the listed industry-loss warranty (ILW) focused insurance-linked securities (ILS) and collateralized reinsurance fund backed by 1347 Advisors and Kinsgway Financial, has been halved.

Last October we covered the initial filings for the new ILS fund vehicle, which intends to act as a feeder into ILW specialist reinsurance fund manager Cartesian Re to begin.

Later, SEC filings showed that Bermuda-based Insurance Income Strategies Ltd. would seek to issue up to $52 million of shares to investors in an initial public offering, to be followed with a listing of its shares on the NASDAQ Capital Market.

Now the targeted amount for the capital raise has dropped down to almost half, with a public offering price stated of $26 million, although additional shares could be issued to the underwriters of the IPO which could boost the proceeds closer to $29.9 million.

It’s perhaps a reflection of the outcome of recent reinsurance renewals, as pricing for instruments such as ILW’s has not risen as much as had been initially hoped at the start of the year.

The feeder fund strategy could also have made it a little more difficult to raise the desired $52 million, as some investors will see this as paying additional layers of fees for risk linked returns they could access directly through Cartesian Re.

However, for the mutual fund investors that Insurance Income Strategies will target, the feeder fund into an ILW focused strategy makes a lot of sense as a way to approximate a broad catastrophe reinsurance market return in an efficient manner, through a listed mutual fund link vehicle.

As an investment opportunity, Insurance Income Strategies will be easier to access for high-net worth investors and family offices and will offer greater liquidity options than investing direct into a typical dedicated ILS managers fund.

In fact it may even often more liquidity than the interval fund structures which have become so popular, as the Insurance Income Strategies will be tradable on the Nasdaq exchange.

That could make the shares a great option for investors looking to try out the space more easily, although of course liquidity will only be available should someone want to sell their holdings in the shares, so entry through the exchange is not guaranteed.

It will be interesting to see whether Insurance Income Strategies now achieves the $26 million IPO and then whether it can build on that with subsequent share issues as it requires more capital.

We understand that the quota share between IIS’ reinsurance vehicle and Cartesian’s Iris Re is ready to go as soon as the IPO is finalised.

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