Global Indemnity plans US redomestication

After only four years of being based in the Cayman Islands, Global Indemnity Limited has announced it plans to redomesticate the company and its Bermuda subsidiary, Global Indemnity Reinsurance, to the US.

Global Indemnity’s board has approved the redomestication plan and has also approved the filing of a preliminary proxy statement with the US SEC in connection with a special meeting of shareholders to consider and approve the plan.

If shareholders approve, Delaware limited liability company Global Indemnity Group will replace Global Indemnity Limited as the publicly listed parent of the company’s affiliated group. The business of the Bermuda subsidiary will be assumed by existing US insurance company subsidiaries.

Under the plan, the company’s class A ordinary shares will be converted on a one-for-one basis to the class A common shares of the new parent company. They will trade on Nasdaq under the company’s existing ticker symbol “GBLI”.

If approved by its shareholders, the company anticipates that the redomestication will close in the third quarter of 2020.

Global Indemnity did not provide a rationale for the move.

The company had only completed a redomestication to the Cayman Islands from Ireland in November 2016.

At that time, it said: “The company believes that the Cayman Islands offers a business friendly regulatory environment and a predictable legal framework that simultaneously provides both corporate certainty and shareholder protections, presents a flexible and stable legal and corporate governance framework, which allows a company’s board of directors latitude to exercise its judgment in what it deems to be in the best interests of the company and offers a beneficial tax regime.”

The Cayman Islands in February this year was added to the EU’s list of noncooperative jurisdictions in tax matters, known as the EU’s tax haven “blacklist”.

Global Indemnity’s announcement follows Maiden Holdings completing the redomestication of its principal operating subsidiary, Maiden Reinsurance, to Vermont in March this year. The parent holding company remains in Bermuda.

Maiden commented at the time that the redomestication would allow it to “continue to appreciably strengthen our solvency ratios and enable us to continue to evaluate our operating strategy during 2020 while leveraging the significant assets and capital we retain”.

GWP growth

Global Indemnity’s operating companies are a US domestic insurer and a Bermuda-based international reinsurer specialising in excess and surplus (E&S) lines, as well as specialty admitted business.

The company’s gross written premiums increased 16.2 percent to $637mn in 2019, while its combined ratio improved 20.1 points to 92.2 percent.

Global Indemnity’s commercial specialty division is an independent provider of small ticket E&S, with its $297mn of GWP accounting for 46.6 percent of Global Indemnity’s overall GWP in 2019.

The specialty property division wrote $164mn GWP in 2019 (25.8 percent of overall), farm, ranch and stable business accounted for $88mn and reinsurance also accounted for $88mn (both 13.8 percent of overall GWP).

The acquisition of American Reliable in 2015 nearly doubled its writings, but at the same time also significantly increased its US property exposures.

Overall, property business accounted for 66 percent of GWP in 2019, while casualty made up 34 percent.

Global Indemnity has been rated A by AM Best since it was organised by Fox Paine in 2003. The Woodside, California-based private equity firm holds a 36 percent stake in the (re)insurer.

Global Indemnity has around 570 producer relationships with wholesale general agents, program administrators, wholesale brokerage agents and retail agents. It has around 400,000 US property casualty insurance policies in force.

Like other insurers, its share price has suffered this year as a result of Covid-19. It closed today (23 June) at $23.03, down 21 percent from the turn of the year.

Global Indemnity’s adjusted operating income for the first quarter declined by 13.2 percent to $10mn compared with the first quarter of 2019. This year’s Q1 only included $0.6mn of reserve releases compared with $7.9mn in the prior period.

Q1 GWP increased 9.5 percent to $156mn, while the combined ratio for the period was 92.7 percent.

In light of the Covid-19 pandemic, the company said in its first quarter results that all of its in-force business interruption insurance coverages contain a specific exclusion in respect of virus and bacteria.