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Favorable market turn prompted Nasdaq-bound insurer IGI's hunt for capital: COO

Improving trading conditions in the global insurance market led to Dubai-based International General Insurance Holdings Ltd.'s tie-up with Tiberius Acquisition Corp., according to the insurer's group chief operating officer, Hatem Jabsheh.

Seventeen-year-old International General Insurance, or IGI, announced Oct. 10 that it would merge with Tiberius, a Nasdaq Capital Market-listed special-purpose acquisition company. The deal will give IGI a listing on the Nasdaq Capital Market and an extra $121 million of capital to grow.

A special purpose acquisition company, or SPAC, is a shell company that raises money through an initial public offering to buy companies.

Favorable conditions

Several global insurance groups, including Lloyd's of London and American International Group Inc., are overhauling their business portfolios to improve profitability, resulting in cutbacks in challenging lines of business. And although market observers stop short of saying the global insurance and reinsurance markets are hard, prices are rising. These are good conditions for expansion.

Jabsheh said in an interview that the company observed capacity shrinking in many of its business lines, and that it started seeing "rate movements in double digits across the board" — even 100% or 200% increases in some business lines and classes.

"We thought it would be opportune to go out and try and raise money," he said, explaining that the Tiberius opportunity came at the beginning of 2019, "while we were going through an exercise of looking at various ways to raise money and finding the right time."

IGI went with the Tiberius merger in part because it was a less risky route to the stock market, and so potential access to further capital, than launching a traditional IPO from scratch. It also seemed like a good time to be seeking investment from the capital markets, he noted.

"Public insurers and reinsurers are trading at all-time highs," Jabsheh said, adding that at a July investor roadshow, IGI was able to attract $100 million in committed capital "fairly quickly." He added: "There is market appetite for companies with our track record."

A further attraction, Jabsheh said, was that unlike many SPACs, Tiberius is insurance-specific, and its board members have an insurance background. For example, Tiberius's CEO, Michael Gray, is president and CEO of Louisiana-based casualty insurer Gray Insurance Co.

International expansion

When it announced the Tiberius merger, IGI outlined a series of growth initiatives, including a planned debut in the U.S. excess and surplus lines market. Jabsheh said IGI has "had the U.S. market in sight for several years" but that inadequate pricing had kept the company on the sideline until now.

As elsewhere, the U.S. market "is hardening pretty nicely," he said. "Right now is a very opportune time to enter the U.S. market."

Jabsheh noted that "you can't dabble in the U.S, market" but stressed that IGI was going to be selective about what it writes. He added that the company sees energy, property and political violence in particular as attractive.

"We're not going to play in all of the U.S.," he said. "We are a specialist niche insurer and reinsurer. We are going to stick to our underwriting guns and our risk appetite and write the business that we see as profitable."

The company is also in the process of applying for a license to set up a European subsidiary in Belgium, which it expects to generate more business than its current European business that operates in the U.K.

A longer-term aim is for IGI to reactivate its North Star underwriting agency to underwrite using third-party capital. But Jabsheh said the main focus was seeking profitable business; continuing its European expansion plans; expanding in Asia through its operation in the Malaysian offshore hub of Labuan; and continuing to grow in the Middle East and Africa.

He declined to comment on whether the company would consider using its new capital for acquisitions.

Facing the public

The transition from private to public can be challenging for insurers in particular, because their long-term view can clash with investors' need for quarterly updates. Stephen Catlin, CEO of recently formed specialty insurer Convex, bemoaned short-term decision-making driven by quarterly reporting at a recent insurance technology conference in London, calling it "frankly insane."

But although IGI has spent the first 17 years of its life as a private company, Jabsheh said it is well-prepared for publicly traded life. He said the company had examined whether it could handle the volume of financial reports and investor calls "before we decided to pull the trigger."

He added: "We spent months analyzing our internal systems and the staff that we have, and we feel very comfortable having to fulfill all the requirements that we need to."