Probitas finally finds new backer as Saudi Re replaces troubled Istmo Re

Probitas 1492, an insurance and reinsurance syndicate at Lloyd's specialising in property, construction and casualty, appears to have found a new backer to replace the capacity provided by the troubled Istmo Re.

The syndicate has signed a memorandum of understanding (MoU) with Saudi Re which will see the reinsurer acquire 49.9 percent of ordinary shares in its holding company Probitas Holding Bermuda (PHBL).

In December 2016, Probitas announced that the syndicate may move to find a buyer for the capacity and shareholding provided by Istmo Compañía de Reaseguros, the Panama reinsurer which backs Syndicate 1492 at Lloyd's.

Istmo Re was downgraded to ‘E’ from ‘B’ by AM Best following the intervention of its regulator in Panama. The intervention at the company by the Superintendent of Insurance and Reinsurance of Panama (SSRP) was taken for several reasons including Istmo Re failing to cover the minimum regulatory requirements for paid capital, presenting an inferior ratio of net premium to net surplus to that required by regulation and relying on insufficient assets to integrally satisfy its liabilities.

Following the latest transaction, PHBL will own 100 percent of Probitas Corporate Capital, Probitas 1492 Services and Probitas Holdings UK. Probitas Syndicate 1492 will maintain underwriting capital (funds at Lloyd’s) of around $135 million to support the 2017 year with no contribution from Istmo Re.

The transaction is subject to approval by both Lloyd’s, the Saudi Arabian Monetary Authority (SAMA) and the completion of the agreement to purchase by PHBL of all Istmo Re Group interests in Probitas, according to the statement.

Both the parties have entered in to an exclusivity agreement up to 20th July 2017 to finalise the definitive transaction.

Ash Bathia, CEO of Probitas, said: "The substantial involvement of Saudi Re in the Probitas syndicate is consistent with our strategy of building our business in growth markets for Lloyd's, including Middle East, Latin America and Asia."

Probitas was advised by GC Securities on this transaction.

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