Financials Acquisition Corp has established London Innovation Underwriters Limited (LIU) in order to implement its strategy of becoming “a listed operating company deploying funds into the Lloyd’s of London insurance market.”
According to Financials Acquisition Corp, the Lloyd’s of London insurance market has a strong track record of innovation and underwriting expertise which the newly established LIU intends to access via London Bridge 2, a third-party protected cell risk transformation vehicle.
The firm believes that through its combination with LIU, it can create an “efficient vehicle for investors to access attractive returns in the Lloyd’s insurance market without paying significant goodwill or adding further fee structures.”
Financials Acquisition Corp continued, “It is intended that LIU will provide investors with capital efficient access to some of the best underwriting in the Lloyd’s market and that the Core Syndicate book will comprise of established syndicates which have been chosen for their underwriting expertise and diversification benefit.”
The firm noted it will also look to substantively replicate the performance of Lloyd’s through a similar sized Broad Market Exposure book, as well as establishing an Innovation and Seed book to gain exposure to growth syndicates focused on fast-growing risk classes, new approaches to data in underwriting, and new models of risk transformation.
Based upon current market conditions, Financials Acquisition Corp said it will be targeting an average return on equity of more than 20% over the next five years.
The firm went on, “The company believes that its management team and board of directors have the skills and relationships with some of the best underwriters in the Lloyd’s market to execute this strategy.
“Working with AON as a core reinsurance broker, LIU has secured significant conditional capacity commitments from syndicates which it intends to support by deploying proceeds raised in the Capital Raising as Funds At Lloyd’s (FAL) through LB2.
“LIU has set up LIU Corporate Member Ltd as its wholly owned subsidiary and as a corporate member to provide the FAL. LIU is working with Argenta as a members agent, who will manage the research, reporting and analysis allowing LIU to fine tune the portfolio of syndicates.
“The book of reinsurance is currently anticipated to have a capital requirement below 50%, which would give LIU sufficient capital to support up to £1 billion of capacity.”
Financials Acquisition Corp has engaged UBS AG London Branch and HSBC Bank plc as Joint Global Co-ordinators and Joint Bookrunners, and The Growth Stage Limited, Panmure Gordon (UK) Limited and Stifel Nicolaus Europe Limited (trading as Keefe, Bruyette & Woods) as Co-Bookrunners to the proposed capital raise.
Will Allen, Chief Executive Officer of Financials Acquisition Corp said, “We believe LIU will offer a unique opportunity for investors to gain efficient access and diversified exposure to the Lloyd’s market with liquidity.
“We are pleased with the initial reaction we have received from both investors and underwriters and look forward to the next stage of the transaction.”
Financial Acquisition Corp is sponsored by FINSAC LLP, a limited liability partnership founded by Allen, previously of investment bank KBW and Andy Rear, a former executive at Munich Re.
Allen and Rear first revealed plans for the “significant new Lloyd’s re/insurance start-up” in June.
