Kingsway / 1347 backed Insurance Income Strategies targets $52m

Insurance Income Strategies Ltd., a new listed insurance-linked securities (ILS) and collateralized reinsurance investment vehicle backed by 1347 Advisors and Kinsgway Financial, is targeting an initial $52 million capital raise, SEC filings show.

Back in October we covered the initial filings for this new vehicle, which intends at launch to act as a feeder into ILW specialist reinsurance fund manager Cartesian Re, at least for its launch.

A newly updated prospectus filed with the SEC contains details of the fund-raising target, as well as some changes to the initial documents filed, reflecting refinements to the strategy by the management team at Insurance Income Strategies.

The Bermuda-based company named Insurance Income Strategies Ltd. will issue up to $52 million of its shares to investors in an initial public offering and will then aim to list its shares on the NASDAQ Capital Market.

That’s one change in this new prospectus that the company has filed. Originally it had said it was aiming for a listing on the New York Stock Exchange (NYSE American), under a ticker symbol of ILS, but now the NASQAQ looks like the potential new home for this listed ILS vehicle strategy. The reason for seeking a listing for the ILS fund vehicle is to open up the capital raise to a broader range of investors, it’s assumed.

Insurance Income Strategies will aim to create a portfolio of short-tail collateralized property catastrophe reinsurance contracts, predominantly industry-loss warranties (ILW’s), which will be underwritten through a Bermuda segregated cell company.

For this initial public offering of Insurance Income Strategies, Ltd. shares, the company will seek to sell 5.2 milion share units at an offering price of  $10 each, so the company is hoping to raise $52 million.

The company still expects to deploy most of the capital it raises as collateral for a retrocessional quota share arrangement with established ILS fund manager Cartesian Re’s reinsurance vehicle, Iris Reinsurance Ltd.

Originally, the first prospectus had explained that this would be achieved through a special purpose insurer (SPI) named IIS Re Ltd. But now it appears that the company will leverage the Artex SAC platform to achieve this risk transfer, through a cell named IIS SAC, with the SPI slated for use at a later date. Using Artex to intermediate the transaction in this way may be more efficient for a first portfolio.

So Cartesian Re, the reinsurance and ILW focused investment management unit sponsored by global private equity investment firm Cartesian Capital Group, LLC, will assist Insurance Income Strategies to source its initial underwriting business through this quota share arrangement.

Looking further ahead, Insurance Income Strategies does want to underwrite its own business, but partnering with Cartesian Re is an efficient way to generate its first risk pool for investors.

1347 Advisors, a subsidiary of Kingsway Financial Services, Inc., will provide brokerage and structuring services to the new company, providing a clear link to the owners of coastal primary insurer 1347 Property Insurance Holdings.

It’s a vehicle that will allow for Kingsway / 1347 to tap into ILS market returns, leveraging their considerable experience in the insurance, reinsurance and investments space at a time when there are prospects of higher returns available.

Cartesian Re is already working alongside mutual fund manager City National Rochdale, which also invests its capital cells of the Iris Re vehicle. For Cartesian, these partnerships offer a way for it to augment its underwriting capacity, writing more business and earning fees from third-party capital raised by other asset managers.