Cayman Islands based reinsurer, Oxbridge Re Holdings Limited, has launched a special purpose acquisition company (SPAC) called Oxbridge Acquisition Corp., which itself has filed an initial public offering (IPO) of its securities with the U.S. Securities and Exchange Commission (IPO).
Oxbridge Acquisition Corp. has been established as a blank cheque company incorporated in the Cayman Islands as an exempted firm whose “business purpose is to effect a merger, share exchange, asset acquisition, share purchase, reorganisation or similar business combination with one or more businesses.”
Currently, Oxbridge Acquisition Corp. has not identified any specific business combination for its initial transaction, but says that it intends to focus its efforts “in identifying a target in the disruptive technology market where our experience, network and access to public markets can be a catalyst for accelerating growth.”
In the insurance and reinsurance world, SPAC ventures have grown in popularity in recent times.
With rates rising or in favourable territory in the majority of business lines, and with the opportunity to disrupt the risk transfer market remaining significant, backing a re/insurance and insurtech focused SPAC is seen as attractive by many.
In its SEC filing, the new company says that it believes insurtechs and those with a focus on blockchain and artificial intelligence are potential attractive targets.
“Disruptive innovation in these sectors significantly alters the way that consumers, industries, or businesses operate. While innovators create new markets with their products and services, investors of disruptive technology companies can also achieve unparalleled returns during the mass adoption phase. We believe that there are many potential attractive targets within the sectors for our initial business combination,” says the company.
Oxbridge Acquisition Corp. highlights a host of reasons for its focus on the insurtech space, including the impacts of the COVID-19 pandemic, which it says “creates unique opportunities” for its firm in the insurtech space, but also in the insurance services arena and among primary insurers and traditional reinsurers.
The company also notes the development of the insurance-linked securities (ILS) market and the improved access to traditional reinsurers via fronting arrangements as key to the creation of a more consistent supply of risk capital at a lower cost.
This, explains the firm, flattens the market cycle and provides an opportunity to cut long-term operating costs of those re/insurers who utilise 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,” says the company.
For its IPO, Oxbridge Acquisition Corp. is looking to sell 10,000,000 units at an offering price of $10.00 per unit, with each unit comprised of one of its Class A ordinary shares and one redeemable warrant.
Once underwriting discounts and commissions have been accounted for, Oxbridge Acquisition Corp. expects this IPO to result in proceeds, before expenses, of $94.5 million.
Additionally, the company expects to raise funds from the sale of private placement warrants that will close simultaneously with the closing of its main offering.
Together with these funds, Oxbridge Acquisition Corp. expects gross proceeds from units offered of $102.2 million without an over-allotment option. With an over-allotment option fully exercised, the company expects gross proceeds from these offerings of $117.43 million.
Commenting on its business strategy, the new SPAC says: “We believe that the insurance, blockchain and artificial intelligence sectors are highly fragmented and evolving quickly. Our business strategy is to identify and consummate an initial business combination with a disruptive and differentiated technology company that focuses on InsurTech, blockchain and/or artificial intelligence technologies.
“We will seek to acquire established businesses that we believe are fundamentally sound but potentially in need of financial, operational, strategic or managerial redirection to maximize value. We may also look at earlier stage companies that exhibit the potential to change the industries in which they participate and which will offer the potential of sustained high levels of revenue growth and path to profitability.”