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| CAUTIONARY STATEMENTS FOR FORWARD-LOOKING INFORMATION | ||
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ITEM 2. | PROPERTIES | 28 |
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ITEM 9C. | DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | 40 |
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| ITEM 16. | 41 | |
| INDEX TO EXHIBITS | ||
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Unless the context dictates otherwise, references to “we,” “us,” “our,” “our company,” or “the Company” in this Annual Report on Form 10-K refer to Oxbridge Re Holdings Limited and its wholly-owned subsidiaries, Oxbridge Reinsurance Limited, andSurancePlus Holdings Ltd., Oxbridge Re NS, SurancePlus Inc. and DSN Blockchain Technologies Ltd.
All statements in this Annual Report on Form 10-K, including in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (refer to Part I, Item 7 of this Annual Report on Form 10-K), other than statements of historical fact, including estimates, projections, statements relating to our business plans, objectives and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements generally are identified by the words such as “believe,” “project,” “predict,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from our historical results and the forward-looking statements and you should not place undue reliance on the forward-looking statements. A detailed discussion of risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in the section entitled “Risk Factors” (refer to Part I, Item 1A, of this Annual Report on Form 10-K). We undertake no obligation, other than imposed by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Readers are cautioned not to place undue reliance on the forward-looking statements which speak only to the dates on which they were made.
Overview
We are a Cayman Islands specialty property and casualty reinsurer that provides reinsurance solutions through our subsidiary,reinsurance subsidiaries, Oxbridge Reinsurance Limited.Limited and Oxbridge Re NS. We focus on underwriting fully-collateralizedfully collateralized reinsurance contracts primarily for property and casualty insurance companies in the Gulf Coast region of the United States, with an emphasis on Florida. We specialize in underwriting medium frequency, high severity risks, where we believe sufficient data exists to analyze effectively the risk/return profile of reinsurance contracts. We were organizedOxbridge Re NS functions as a reinsurance sidecar which increases the underwriting capacity of Oxbridge Reinsurance Limited. Oxbridge Re NS issues participating notes to third party investors, the proceeds of which are utilized to collateralize Oxbridge Reinsurance Limited’s reinsurance obligations.
In addition to our historical reinsurance business operations, in April 20132023, our new subsidiary SurancePlus Inc. (“SurancePlus”) began developing, offering, and selling a tokenized reinsurance security representing fractionalized interests in reinsurance contracts, with each token representing an interest in participating notes issued by Oxbridge Re NS. These efforts culminated in the development, launch, and issuance of our first tokenized reinsurance security, the DeltaCat Re Token, which we believe is the first “on-chain” reinsurance security of its kind to be developed by a subsidiary of a public company. Following the issuance of the DeltaCat Re Token, we intend to develop, launch, and issue additional series of tokenized reinsurance securities representing fractional interests in reinsurance contracts, and we are also using our tokenization experience and activities as ana foundation for developing Web3-focused business offerings and products relating to the tokenization of other real-world assets (RWAs), including RWAs held or being acquired by third parties. Our tokenization business will be conducted through SurancePlus and through other subsidiaries of our wholly owned subsidiary, SurancePlus Holdings Ltd. (“SurancePlus Holdings”), a Cayman Islands exempted company under the laws of the Cayman Islands.
In our historical reinsurance business operations, we underwrite reinsurance contracts on a selective and opportunistic basis as opportunities arise based on our goal of achieving favorable long-term returns on equity for our shareholders. Our goal is to achieve long-term growth in book value per share by writing business that generates attractive underwriting profits relative to the risk we bear. Unlike other insurance and reinsurance companies, we do not intend to pursue an aggressive investment strategy and instead will focus our business on underwriting profits rather than investment profits. However,Additionally, we intend to complement our underwriting profits with investment profits on an opportunistic basis. Our primaryunderwriting business focus is on fully collateralized reinsurance contracts for property catastrophes, primarily in the Gulf Coast region of the United States, with an emphasis on Florida.States. Within that market and risk category, we attempt to select the most economically attractive opportunities across a variety of property and casualty insurers. As we attempt to grow our capital base, we expect that we will consider growth opportunities in other geographic areas and risk categories.
Our level of profitability in our reinsurance business operations is primarily determined by how adequately our premiums assumed and investment income cover our costs and expenses, which consist primarily of acquisition costs and other underwriting expenses, claim payments and general and administrative expenses. One factor leading to variation in our operational results is the timing and magnitude of any follow-on offerings we undertake (if any), and issuance of participating notes to investors as we would beare able to deploy new capital to collateralize new reinsurance treaties and consequently, earn additional premium revenue. In addition, our results of operations may be seasonal in that hurricanes and other tropical storms typically occur during the period from June 1 through November 30. Further, our results of operations may be subject to significant variations due to factors affecting the property and casualty insurance industry in general, which include competition, legislation, regulation, general economic conditions, judicial trends, and fluctuations in interest rates and other changes in the investment environment.
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Because we employ an opportunistic underwriting and investment philosophy, period-to-period comparisons of our underwriting results may not be meaningful. In addition, our historical investment results may not necessarily be indicative of future performance. Due to the nature of our reinsurance and investment strategies, our operating results will likely fluctuate from period to period.
Organizational Chart
Other Developments
Formation of SurancePlus
SurancePlus Inc., an indirect wholly-owned subsidiary of Oxbridge Re Holdings Limited, was incorporated as a British Virgin Islands Business Company on December 19, 2022 for the purposes of tokenizing reinsurance contracts underwritten by its affiliated licensed reinsurer, Oxbridge Re NS.
On March 27, 2023, we, through SurancePlus, issued a press release announcing the commencement of an offering by SurancePlus of up to $5.0 million of DeltaCat Re Tokens (“Tokens”) with a purchase price of $10.00 per Token and representing one share of Series DeltaCat Re Preferred Shares per Token (the “Private Placement”).
On June 27, 2023, SurancePlus completed the Private Placement. The aggregate amount raised in the Private Placement was $2,447,760 for the issuance of 244,776 Tokens, of which approximately $1,280,000 was received from third-party investors and approximately $1,167,000 was received from Oxbridge Re Holdings Limited.
On September 11, 2023, the DeltaCat Re tokens were reclassified as tokenized interests carrying rights equivalent to the DeltaCat Re Preferred Shares in accordance with the provisions of the British Virgin Islands law.
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Oxbridge Acquisition Corp.
On February 28, 2023, the Company announced in a press release that Oxbridge Acquisition Corp. (“Oxbridge Acquisition”) filed a Current Report on Form 8-K with the Securities and Exchange Commission in connection with Oxbridge Acquisition’s business combination with Jet Token Inc., a Delaware corporation. Upon the closing of the transaction, the combined company became Jet.AI Inc. (“Jet.AI”). Jet.AI offers fractional aircraft ownership, jet card, aircraft brokerage and charter service through its fleet of private aircraft and those of Jet.AI’s Argus Platinum operating partner. Jet.AI’s charter app enables travelers to look, book and fly. The funding and capital markets access from this transaction is expected to enable Jet.AI to continue its growth strategy of AI software development and fleet expansion. The business combination was completed on August 10, 2023.
The Company’s wholly-owned licensed reinsurance subsidiary, Oxbridge Reinsurance Limited (“Oxbridge Reinsurance”), was the lead investor in Oxbridge Acquisition’s sponsor and currently indirectly holds the equivalent of 1,423,827 of Jet.AI common stock (NASDAQ: JTAI), 3,094,999 of Jet.AI public warrants (NASDAQ: JTAIW) and 285 of Jet.AI Series A-1 Convertible Preferred Stock with purchase price of $285,000.
Bridge Loan with Affiliate
On September 11, 2023, the Company, along with seven (7) other investors, entered into a binding term sheet (“Bridge Agreement”) with Jet.AI to provide Jet.AI with an aggregate sum of $500,000 of short-term bridge financing pending its receipt of funds from its other existing financing arrangements. During the month of September 2023, and prior to the Bridge Agreement, Jet.AI had engaged in discussions with numerous third parties to secure short-term bridge funding but was not offered terms it found acceptable.
The Bridge Agreement provides for the issuance of Notes in an aggregate principal amount of $625,000, reflecting a 20% original issue discount. The Notes bear interest at 5% per annum and mature on March 11, 2024. Jet.AI is required to redeem the Notes with 100% of the proceeds of any equity or debt financing at a redemption premium of 110% of the principal amount of the Notes. Jet.AI anticipates redeeming the Notes in full with proceeds expected to be received over the next several months from existing financing arrangements.
An event of default under the Notes includes failing to redeem the Notes as provided above and other typical bankruptcy events of Jet.AI. In an event of default, the outstanding principal amount of the Notes will increase by 120%, and the company may convert its Note into shares of common stock of Jet.AI at the conversion price set forth in the Bridge Agreement with registration rights associated with those shares.
The Company invested the sum of $100,000 in the Notes and is recorded as “Loan Receivable” on the consolidated balance sheets at cost. On March 11, 2024, the Notes matured and were redeemed by Jet.AI in accordance with the Bridge Agreement. The Company receive an aggregate of $140,000 upon the redemption of the Notes.
Our Business Strategy
Our goal is to achieve attractive risk-adjusted returns for our shareholders through the prudent management of underwriting and investments risks relative to our capital base. To achieve this objective, the following are the principal elements of our business strategy.
| ● | Maintain a Commitment to Disciplined Underwriting. We employ a disciplined and data-driven underwriting approach to select a diversified portfolio of risks that we believe will generate an attractive return to our shareholders over the long term. Neither our underwriting nor our investment strategies are designed to generate smooth or predictable quarterly earnings, but rather to optimize growth in book value per share over the long term. | |
| ● | Focus on Risk Management. We treat risk management as an integral part of our underwriting and business management processes. All of our reinsurance contracts contain loss limitation provisions that limit our losses to the value of the assets collateralizing our reinsurance contracts. |
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| ● | Deployment of Capital. In order to eliminate the possibility of complete losses, we intend to place only a portion of our total capital at risk in any single year. This means that we expect lower returns than some of our competitors in years where there are lower than average catastrophe losses but that our capital will not be completely eroded in the event of multiple large losses. | |
| ● | Take Advantage of Market Opportunities. Although our business is initially focused on catastrophe coverage for Gulf Coast insurers we intend to continuously evaluate various market opportunities in which our business may be strategically or financially expanded or enhanced in the future. Such opportunities could take the form of investing into related party special purpose acquisition companies, further diversifying our business into other geographic or market areas, which could include quota share reinsurance contracts, joint ventures, renewal rights transactions, corporate acquisitions of other insurers or reinsurers, spinoffs, mergers or the formation of insurance or reinsurance platforms in new markets. | |
| ● | Develop and Pursue Additional Tokenization Business Opportunities. Through SurancePlus Holdings and our Web3-focused subsidiaries, we intend to leverage our experience and knowledge with the tokenization of RWAs (including the initial DeltaCat Re Token) to develop other Web3-focused business offerings and products relating to the tokenization of RWAs, including RWAs held or being acquired by third parties. | |
| We believe the environment in the reinsurance and insurance markets will continue to produce opportunities for us, either through organic expansion, through acquisitions, or a combination of both. |
The Reinsurance Industry
General
Reinsurance is an arrangement in which an insurance company, referred to as the reinsurer, agrees to assume from another insurance company, referred to as the ceding company or cedant, all or a portion of the insurance risks that the ceding company has underwritten under one or more insurance contracts. In return, the reinsurer receives a premium for the insured risks that it assumes from the ceding company, although reinsurance does not discharge the ceding company from its liabilities to policyholders. It is standard industry practice for primary insurers to reinsure portions of their insurance risks with other insurance companies under reinsurance agreements or contracts. This permits primary insurers to underwrite policies in amounts larger than the risks they are willing to retain. Reinsurance is generally designed to:
| ● | Reduce the ceding company’s net liability on individual risks, thereby assisting it in managing its risk profile and increasing its capacity to underwrite business as well as increasing the limit to which it can underwrite on a single risk; | |
| ● | assist the ceding company in meeting applicable regulatory and rating agency capital requirements; | |
| ● | assist the ceding company in reducing the short-term financial impact of sales and other acquisition costs; and | |
| ● | enhance the ceding company’s financial strength and statutory capital. |
When reinsurance companies purchase reinsurance to cover their own risks assumed from ceding companies, this is known as retrocessional reinsurance. Reinsurance or retrocessional reinsurance can benefit a ceding company or reinsuring company, referred to herein as a “retrocedant,” as applicable, in various ways, such as by reducing exposure to individual risks and by providing catastrophe protection from larger or multiple losses. Like ceding companies, retrocedants can use retrocessional reinsurance to manage their overall risk profile or to create additional underwriting capacity, allowing them to accept larger risks or to write more business than would otherwise be possible, absent an increase in their capital or surplus
Reinsurance contracts do not discharge ceding companies from their obligations to policyholders. Ceding companies therefore generally require their reinsurers to have, and to maintain, either a strong financial strength rating or security, in the form of collateral, as assurance that their claims will be paid.
Insurers generally purchase multiple tranches of reinsurance protection above an initial retention elected by the insurer. The amount of reinsurance protection purchased by an insurer is typically determined by the insurer through both quantitative and qualitative methods. In the event of losses, the amount of loss that exceeds the amount of reinsurance protection purchased is retained by the insurer.
As a program is constructed from the ground up, each tranche added generally has a lower probability of loss than the prior tranche and therefore is generally subject to a lower reinsurance premium charged for the reinsurance protection purchased. Insurer catastrophe programs are typically supported by multiple reinsurers per program.
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Reinsurance brokers play an important role in the reinsurance market. Brokers are intermediaries that assist the ceding company in structuring a particular reinsurance program and in negotiating and placing risks with third-party reinsurers. In this capacity, the broker is selected and retained by the ceding company on a contract-by-contract basis, rather than by the reinsurer. Though brokers are not parties to reinsurance contracts, reinsurers generally receive premium payments from brokers rather than ceding companies, and reinsurers that do not provide collateralized reinsurance are frequently required to pay amounts owed on claims under their policies to brokers. These brokers, in turn, pay these amounts to the ceding companies that have reinsured a portion of their liabilities with reinsurers.
Types of Reinsurance Contracts
Property reinsurance products are often written in the form of treaty reinsurance contracts, which are contractual arrangements that provide for the automatic reinsurance of a type or category of risk underwritten. Treaty reinsurance premiums, which are typically due in installments, are a function of the number and type of contracts written, as well as prevailing market prices. The timing of premiums written varies by line of business. The majority of property catastrophe business is written at the January and June annual renewal periods, depending on the type and location of the risks covered. Most hurricane and wind-storm coverage, particularly in the Gulf Coast region of the United States, is written at the June annual renewal periods.
Property catastrophe reinsurance contracts are typically “all risk” in nature, providing protection to the ceding company against losses from hurricanes and other natural and man-made catastrophes such as floods, earthquakes, tornadoes, storms and fires, referred to herein collectively as “perils.” The predominant exposures covered by these contracts are losses stemming from property damage and business interruption resulting from a covered peril. Coverage can also vary from “all natural” perils, which is the most expansive form, to more limited types such as windstorm-only coverage.
Property catastrophe reinsurance contracts are typically written on an “excess-of-loss” basis, which provides coverage to the ceding company when aggregate claims and claim expenses from a single occurrence for a covered peril exceed an amount that is specified in a particular contract. The coverage provided under excess-of-loss reinsurance contracts may be on a worldwide basis or may be limited in scope to specific regions or geographical areas. Under these contracts, protection is provided to an insurer for a portion of the total losses in excess of a specified loss amount, up to a maximum amount per loss specified in the contract.
Excess-of-loss contracts are typically written on a losses-occurring basis, which means that they cover losses that occur during the contract term, regardless of when the underlying policies came into force. Premiums from excess-of-loss contracts are earned ratablyrateably over the contract term, which is ordinarily 12 months. Most excess-of-loss contracts provide for a reinstatement of coverage following a covered loss event in return for an additional premium.
The Florida Property and Casualty Insurance Market
General Overview
Florida’s property and casualty insurance market has undergone significant changes in the past few decades. This market, which was formerly dominated by large, national, multi-line insurance companies, now includes Citizens Property Insurance Corporation (“Citizens”), a state-sponsored insurance company created by the Florida Legislature; Florida-based insurance companies that focus primarily on writing property insurance policies in the state of Florida; and Florida-based subsidiaries of national insurance companies that focus on writing property insurance policies in the state of Florida. While these four types of companies participate in the market at varying levels, Citizens and the Florida-based insurance companies are now the dominant market participants. Within the private market, which excludes Citizens, there is a strong dependence on small insurance companies, which have limited capitalization and a limited ability to diversify.
While the Florida property and casualty insurance market faces various challenges, the primary challenge is the potential for exposure to catastrophic windstorms. According to the Report, the state of Florida has:
| ● | more than $1.8 trillion in insured residential property exposure; | |
| ● | more than $4 billion in expected average annual losses due to windstorms (with respect to residential and commercial residential properties only); and | |
| ● | nearly $60 billion in 1-in-100 probable maximum losses due to windstorms (with respect to residential and commercial residential properties only). |
According to the National Oceanic and Atmosphere Administration (“NOAA”) Technical Memorandum NWS NHC-6, entitled “The Deadliest, Costliest, and Most Intense United States Tropical Cyclones from 1851 to 2010 (and Other Frequently Requested Hurricane Facts) (the “NOAA Memorandum”), “forty percent of all U.S. hurricanes and major hurricanes were in Florida,” and “sixty percent of category 4 or higher hurricane strikes have occurred in either Florida or Texas.” The NOAA Memorandum also indicates that, between 1851 and 2010, there were 114 hurricane strikes and 37 major hurricanes in Florida. (For these purposes, a “major hurricane” is a category 3, 4, or 5 hurricane.)
Our Reinsurance Contracts and Products
We write primarily property catastrophe reinsurance. We currently expect that substantially all of the reinsurance products we write in the foreseeable future will be in the form of treaty reinsurance contracts. When we write treaty reinsurance contracts, we do not evaluate separately each of the individual risks assumed under the contracts and are therefore largely dependent on the individual underwriting decisions made by the cedant. Accordingly, as part of our initial review and renewal process, we carefully review and analyze the cedant’s risk management and underwriting practices in evaluating whether to provide treaty reinsurance and in appropriately pricing the treaty.
Our portfolio of business continues to be characterized by relatively large transactions with a relatively few number of cedants. As of December 31, 2017, we had reinsurance contracts with seven (7) cedants, although income limit losses were experienced on all the contracts with each cedant, and only one of those contracts continue to earn income due to the fact of such contract being a multi-year contract. We do not consider any of those contracts to be singly material to our company, and our largest contract represented approximately 31% of our collateral at risk of all such contracts.
Our contracts are written on an excess-of-loss basis, generally with a per-event cap. We generally receive the premium for the risk assumed and indemnify the cedant against all or a specified portion of losses and expenses in excess of a specified dollar or percentage amount. Our contracts are generally both single-year or multi-year contracts and our policy years generally commence on June 1 of each year and end on May 31 of the following year.
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The bulk of our portfolio of risks is assumed pursuant to traditional reinsurance contracts. However, we may also from time to time we take underwriting risk by purchasing a catastrophe-linked bond, or via a transaction booked as an industry loss warranty (as described below) or an indemnity swap. An indemnity swap is an agreement which provides for the exchange between two parties of different portfolios of catastrophe exposure with similar expected loss characteristics (for example, U.S. earthquake exposure for Asian earthquake exposure).
We believe our most attractive near-term opportunity is in property catastrophe reinsurance coverage for insurance companies. In addition to seeking profitable pricing, we manage our risks with contractual limits on our exposure. Property catastrophe reinsurance contracts are typically “all risk” in nature, meaning that they protect against losses from earthquakes and hurricanes, as well as other natural and man-made catastrophes such as tornados, fires, winter storms, and floods (where the contract specifically provides for such coverage). Losses on these contracts typically stem from direct property damage and business interruption. We generally write property catastrophe reinsurance on an excess-of-loss basis. These contracts typically cover only specific regions or geographical areas.
We are not licensed or admitted as an insurer in any jurisdiction other than the Cayman Islands. In addition, we do not have a financial rating and do not expect to have one in the near future. Many jurisdictions such as the United States do not permit clients to take credit for reinsurance on their statutory financial statements if such reinsurance is obtained from unlicensed or non-admitted insurers without appropriate collateral. As a result, we anticipate that all of our clients will require us to fully collateralize the reinsurance contracts we bind with them. Each of our contracts are fully collateralized and separately structured, with our liability being limited to the value of the assets held in the trust. We are generally not required to top-up the value of the assets held as collateral in respect of a particular reinsurance agreement, unless such collateral is subject to market risk. For each reinsurance agreement, a reinsurance trust is established in favor of the cedant, and the trustee of the reinsurance trust is a large bank that is agreed upon by our company and the cedant.
The premium for the contract is ordinarily deposited into the trust, together with additional capital from our company, up to the coverage limit. Each reinsurance contract contains express limited recourse language to the effect that the liabilities of the relevant reinsurance contract are limited to the realizable value of the collateral held in respect of that contract. Upon the expiration of the reinsurance contract, the assets of the trust net of insured losses and other expenses are transferred to our company.
Underwriting and Retrocessional Coverage
Most of our reinsurance contracts have other reinsurers participating as lead underwriters, and these lead underwriters generally set the premium for the risk. We follow the premium pricing of the lead underwriters in most cases subject to the guidance of the Underwriting Committee of our Board of Directors. Each quarter, our Board of Directors will set parameters for the maximum level of capital to be deployed for the quarter and the expected premium and risk profile that each of our contracts must meet.
Our reinsurance portfolio of business continues to be financially strong, given its AM Best ratingcharacterized by relatively large transactions with a relatively few number of A++cedants and anticipate that our reinsurance entities business will continue to be characterized by a relatively small number of reinsurance contracts for the foreseeable future.
The bulk of our portfolio of risks is assumed pursuant to traditional reinsurance contracts. However, from time to time we take underwriting risk by purchasing a catastrophe-linked bond, or via a transaction booked as an industry loss warranty (as described below) or an indemnity swap. An indemnity swap is an agreement which provides for the exchange between two parties of different portfolios of catastrophe exposure with similar expected loss characteristics (for example, U.S. earthquake exposure for Asian earthquake exposure).
Marketing and Distribution
We expect that, in the future, the majority of our business will be sourced through reinsurance brokers. Brokerage distribution channels provide us with access to an efficient, variable distribution system without the significant time and expense that would be incurred in creating an in-house marketing and distribution network. Reinsurance brokers receive a brokerage commission that is usually a percentage of gross premiums written.
We intend to build relationships with global reinsurance brokers and captive insurance companies located in the Cayman Islands. Our management team has significant relationships with most of the primary and specialty broker intermediaries in the reinsurance marketplace in our target market. We believe that maintaining close relationships with brokers will give us access to a broad range of reinsurance clients and opportunities.
Brokers do not have the authority to bind us to any reinsurance contract. We review and approve all contract submissions in our corporate offices located in the Cayman Islands. From time to time, we may also enter into relationships with managing general agents who could bind us to reinsurance contracts based on narrowly defined underwriting guidelines.
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Investment Strategy
Our company’s business focus is primarily on underwriting profit. However, we remainCompany takes an opportunistic approach with respect to investment income and intend to increase shareholder value through supplemental investment income when favorable opportunities are available. MostThe Company, from time to time, and dependent upon favorable investment conditions and our investment guidelines, may invest in real estate and other ventures that have the potential to increase shareholder value. Through its reinsurance subsidiaries, the Company has made and intend to make future investments that can contribute to the growth of capital and surplus in its licensed reinsurance subsidiaries over time.
Some of our company’s capital is held in trust accounts that collateralize the reinsurance policies that we write. The investment parameters for capital held in such trust accounts isare generally established by the cedant for the relevant policy. Our investments areCurrently, all amounts held in cash, fixed-maturity securities and equity securities.
Our Board of Directors periodically reviews our investment policy and returns.
Claims Management
Claims are managed internally by the company’s management team. Management reviews and responds to initial loss reports, administers claims databases, determines whether further investigation is required and where appropriate, retains outside claims counsel, establishes case reserves and approves claims for payment. In addition, we may conduct audits of any significant client throughout the year, and in the process, evaluate our clients’ claims handling abilities, reserving philosophies, loss notification processes and the overall quality of our clients'clients’ performance.
Upon receipt, claims notices are recorded within our underwriting, financial and claims systems. When we are notified of insured losses or discover potential losses as part of our claimsclaims’ audits, we record a case reserve as appropriate for the estimated amount of the exposure at that time. The estimate reflects the judgment of management based on general reserving practices, the experience and knowledge of the Managermanager regarding the nature of the specific claim and, where appropriate, advice of outside counsel. Reserves are also established to provide for the estimated expense of settling claims, including legal and other fees and the general expenses of administering the claims adjustment process.
Loss Reserves
Loss reserves represent estimates, including actuarial and statistical projections at a given point in time, of the ultimate settlement and administration costs of claims incurred (including claims incurred but not reported (IBNR)(“IBNR”)). Estimates are not precise in that, among other things, they are based on predictions of future developments and estimates of future trends in claims severity and frequency and other variable factors such as inflation. It is likely that the ultimate liability will be greater or less than such estimates and that, at times, this variance will be material.
For our property and other catastrophe policies, we initially establish our loss reserves based on loss payments and case reserves reported by ceding companies. As we are not the only reinsurer on most contracts, the lead reinsurer will set the loss amount estimates for the contract and the cedant will have the ability to pay for case losses consistent with that amount on our pro-rata share of the contract.
We then add to these case reserves our estimates for IBNR. To establish our IBNR estimates, in addition to the loss information and estimates communicated by cedants, we also use the services of an independent actuary. We may also use our computer-based vendor and proprietary modeling systems to measure and estimate loss exposure under the actual event scenario, if available. Although the loss modeling systems assist with the analysis of the underlying loss, and provide us with information and the ability to perform an enhanced analysis, the estimation of claims resulting from catastrophic events is inherently difficult because of the variability and uncertainty of property catastrophe claims and the unique characteristics of each loss.
If IBNR estimates are made, we assess the validity of the assumptions we use in the reserving process on a quarterly basis during an internal review process. During this process actuaries verify that the assumptions we have made continue to form what they consider to be a sound basis for projection of future liabilities.
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Although we believe that we are prudent in our assumptions and methodologies, we cannot be certain that our ultimate payments will not vary, perhaps materially, from the estimates we have made. If we determine that adjustments to an earlier estimate are appropriate, such adjustments are recorded in the quarter in which they are identified. The establishment of new reserves, or the adjustment of reserves for reported claims, could result in significant upward or downward changes to our financial condition or results of operations in any particular period. We regularly review and update these estimates, using the most current information available to us.
Our estimates are reviewed annuallyquarterly by an independent actuary in order to provide additional insight into the reasonableness of our loss reserves.
Competition
The reinsurance industry is highly competitive. We expect to compete with major reinsurers, most of which are well established with significant operating histories, strong financial strength ratings and long-standing client relationships.
Our competitors include Third Point Reinsurance Ltd., Blue Capital Reinsurance Holdings Ltd., ACE Ltd., EverestRenaissance Re, General Re Corporation, Hannover Re Group, Munich Reinsurance Company, Partner Re Ltd., Swiss Reinsurance Company, Transatlantic Reinsurance Company, Berkshire Hathaway, PartnerRe Ltd, Aeolus and Nephila as well as smallerwhich are dominant companies and other niche reinsurers.in the reinsurance industry. Although we seek to provide coverage where capacity and alternatives are limited, we directly compete with these larger companies due to the breadth of their coverage across the property and casualty market in substantially all lines of business. We also compete with smaller companies and other niche reinsurers from time to time.
While we have a limited operating history, we believe that our unique approach to multi-year underwriting will allow us to be successful in underwriting transactions against more established competitors.
Our Tokenization Business
We have decided to develop and pursue business opportunities in the tokenization of RWAs based on the expectation that a successful expansion into this specialization will further increase the underwriting capacity and potential profitability of our reinsurance subsidiaries, Oxbridge Reinsurance Limited and Oxbridge Re NS. We believe this represents a unique opportunity to drive value to our shareholders. The Boston Consulting Group published research projecting the RWA asset tokenization market to reach $16.1 trillion by 2030. A separate publication by Bloomberg reported that, in 2023, reinsurance was one of the top performing hedge fund strategies. It is at the intersection of these two, i.e., RWA tokenization and reinsurance, that we believe there exist substantial growth opportunities for our business.
Accordingly, SurancePlus was incorporated to further innovate upon existing capital raising mechanisms of Oxbridge Re NS for collateralizing reinsurance contracts while simultaneously transforming the corresponding investment product into one that is more accessible to United States accredited investors under Rule 506(c) of Regulation D and to international investors under Regulation S. SurancePlus has since applied insights and technology from the Web3 digital ecosystem to create a multi-year series of real-world asset-backed digital securities, called the Cat Re (short for “catastrophe reinsurance”) token series. Ownership of the tokens confer an indirect fractional interest in reinsurance contracts entered into by Oxbridge Re NS or Oxbridge Reinsurance Limited. The DeltaCat Re token was the first of the token series, and it was issued in 2023 on the Avalanche blockchain network. The subsequent year’s offering of EpsilonCat Re tokens was announced in a Form 8-K filed with the SEC on March 18, 2024. SurancePlus intends to continue to issue the Cat Re token series over several years.
We project that SurancePlus Inc. may develop into a significant revenue generating stream for the Oxbridge Re group that may progressively reduces Oxbridge Re’s annual capital deployed into collateralizing reinsurance contracts.. As opportunities arise, Oxbridge Re intends to pursue, through its Web3-focused subsidiaries, additional expansion of its RWA tokenization business to further increase underwriting profit.
Employees
As of March 12, 2018,26, 2024, we had three full-timefour employees, and we are not in the processall of hiring additional resources at this time.which were full-time. We believe that our relations with our employees are good. None of our employees are subject to collective bargaining agreements, and we are not aware of any current efforts to implement such agreements. We believe that we will continue to have relatively few employees and intend to outsource some functions to specialist firms in the Cayman Islands if and when we determine that such functions are necessary. We intend to use the expertise of our Board of Directors and where necessary, external consultants to provide any other service we may require from time to time.
Legal Proceedings
We are not currently involved in any litigation or arbitration. We anticipate that, similar to the rest of the insurance and reinsurance industry, we will be subject to litigation and arbitration in the ordinary course of business.
Regulation and Capital Requirements
Our wholly-owned subsidiary,reinsurance subsidiaries, Oxbridge Reinsurance Limited and Oxbridge Re NS, each holds a Class C Insurer’s License issued in accordance with the terms of the Insurance Law (as revised) of the Cayman Islands (the “Law”), and is subject to regulation by the Cayman Islands Monetary Authority (“CIMA”), in terms of the Law. As the holder of a Class C Insurer’s License, Oxbridge Reinsurance Limited isand Oxbridge Re NS are permitted to undertake insurance business approved by CIMA.
Oxbridge Reinsurance Limited isand Oxbridge Re NS are subject to minimum capital and surplus requirements, and our failure to meet these requirements could subject us to regulatory action. Pursuant to The Insurance (Capital and Solvency) (Classes B, C and D Insurers) Regulations, 2012 (the “Capital and Solvency Regulations”) published under the Law, Oxbridge Reinsurance Limited isand Oxbridge Re NS are required to maintain the statutory minimum capital requirement (as defined under the Capital and Solvency Regulations) of $500 and prescribed capital requirement (as defined under the Capital and Solvency Regulations) of $500, and a minimum margin of solvency equal to or in excess of the total prescribed capital requirement. Any failure to meet the applicable requirements or minimum statutory capital requirements could subject us to further examination or corrective action by CIMA, including restrictions on dividend payments, limitations on our writing of additional business or engaging in finance activities, supervision or liquidation.
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CIMA may at any time direct Oxbridge Reinsurance Limited and Oxbridge Re NS, in relation to a policy, a line of business or the entire business, to cease or refrain from committing an act or pursing a course of conduct and to perform such acts as in the opinion of CIMA are necessary to remedy or ameliorate the situation. See the discussion in “Risk Factors” under the heading “Any suspension or revocation of our reinsurance license would materially impact our ability to do business and implement our business strategy”for more information.
In addition, as a Cayman Islands exempted company, we may not carry on business or trade locally in the Cayman Islands except in furtherance of our business outside the Cayman Islands, and we are prohibited from soliciting the public of the Cayman Islands to subscribe for any of our securities or debt. We are further required to file a return with the Registrar of Companies in January of each year and to pay an annual registration fee at that time.
The Cayman Islands has no exchange controls restricting dealings in currencies or securities.
Available Information
Our website is located at www.oxbridgere.com. Copies of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available, free of change, on our website as soon as reasonably practicable after we file such material electronically with or furnish it to the Securities and Exchange Commission (the “SEC”). The SEC also maintains a website that contains our SEC filings. The address of the SEC’s website is www.sec.gov.
Summary of Risk Factors
Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors,” that represent challenges that we face in connection with the successful implementation of our strategy. The occurrence of one or more of the events or circumstances described in the section titled “Risk Factors,” alone or in combination with other events or circumstances may have an adverse effect on our business, cash flows, financial condition and results of operations. In that case, the market price of our securities could decline, and you may lose some or all of your investment. Such risks include, but are not limited to:
| ● | We will need additional capital in the future in order to grow and operate our business. Such capital may not be available to us or may not be available to us on favorable terms. Furthermore, our raising additional capital could dilute your ownership interest in our company. |
| ● | Our results of operations will fluctuate from period to period and may not be indicative of our long-term prospects. | |
| ● | Our tokenization business operations are at an early stage of development and have a limited operating history, and our strategy of developing a Web3-focused tokenization business may not be successful. | |
| ● | Developing a Web3.0-focused business around the tokenization of RWAs involves significant risks. |
| ● | Failure to become rated by A.M. Best, or receipt of a negative rating, could significantly and negatively affect our ability to grow. |
| ● | Established competitors with greater resources may make it difficult for us to effectively market our products or offer our products at a profit. |
| ● | If actual renewals of our existing contracts do not meet expectations, our premiums assumed in future years and our future results of operations could be materially adversely affected. |
| ● | Reputation is an important factor in the reinsurance industry, and our lack of an established reputation may make it difficult for us to attract or retain business. |
| ● | If our losses and loss adjustment expenses greatly exceed our loss reserves, our financial condition may be significantly and negatively affected. |
| ● | The property and casualty reinsurance market may be affected by cyclical trends and over-supply. |
| ● | Our property and property catastrophe reinsurance operations will make us vulnerable to losses from catastrophes and may cause our results of operations to vary significantly from period to period. |
| ● | We could face unanticipated losses from war, terrorism, and political unrest, and these or other unanticipated losses could have a material adverse effect on our financial condition and results of operations. |
| ● | We depend on our clients’ evaluations of the risks associated with their insurance underwriting, which may subject us to reinsurance losses. |
| ● | Changing climate conditions may adversely affect our financial condition, profitability or cash flows. |
| ● | Operational risks, including human or systems failures, are inherent in our business. |
| ● | The effect of emerging claim and coverage issues on our business is uncertain |
| ● | We are required to maintain sufficient collateral accounts, which could significantly and negatively affect our ability to implement our business strategy. |
| ● | The inability to obtain business provided from brokers could adversely affect our business strategy and results of operations. |
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| ● | The involvement of reinsurance brokers may subject us to their credit risk. |
| ● | Our use of fair value accounting of our significant investment in Jet.AI Inc. could result in income statement volatility, which in turn, could cause significant market price and trading volume fluctuations for our securities |
| ● | U.S. and global economic downturns could harm our business, our liquidity and financial condition and the price of our securities. |
| ● | Our ability to implement our business strategy could be delayed or adversely affected by Cayman Islands employment restrictions. |
| ● | Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer. |
| ● | If we lose or are unable to retain our senior management and other key personnel and are unable to attract qualified personnel, our ability to implement our business strategy could be delayed or hindered, which, in turn, could significantly and negatively affect our business. |
| ● | There are differences under Cayman Islands corporate law and Delaware corporate law with respect to interested party transactions which may benefit certain of our shareholders at the expense of other shareholders. |
| ● | Any suspension or revocation of our reinsurance license would materially impact our ability to do business and implement our business strategy. |
| ● | Our reinsurance subsidiaries are subject to minimum capital and surplus requirements, and our failure to meet these requirements could subject us to regulatory action. |
| ● | As a holding company, we will depend on the ability of our subsidiaries to pay dividends. |
| ● | We may be subject to the risk of possibly becoming an investment company under U.S. federal securities law. |
| ● | Insurance regulations to which we are, or may become, subject, and potential changes thereto, could have a significant and negative effect on our business. |
| ● | We will likely be exposed to credit risk due to the possibility that counterparties may default on their obligations to us. |
| ● | Provisions of our Third Amended and Restated Memorandum and Articles of Association (“Articles”) could adversely affect the value of our securities. |
| ● | Provisions of the Companies Law of the Cayman Islands could prevent a merger or takeover of our company. |
| ● | Holders of our securities may have difficulty obtaining or enforcing a judgment against us, and they may face difficulties in protecting their interests because we are incorporated under Cayman Islands law. |
| ● | Provisions of our Articles may reallocate the voting power of our ordinary shares. |
| ● | We do not currently have an effective registration statement registering the issuance of the shares underlying our publicly traded warrants, and therefore you may not be able to exercise the warrants in a cash exercise. |
| ● | We may become subject to taxation in the Cayman Islands which would negatively affect our results. |
| ● | We may be subject to United States federal income taxation. |
| ● | We may be treated as a PFIC, in which case a U.S. holder of our ordinary shares should be subject to disadvantageous rules under U.S. federal income tax laws. We may be treated as a CFC and may be subject to the rules for related person insurance income, and in either case this may subject a U.S. holder of our ordinary shares to disadvantageous rules under U.S. federal income tax laws. |
| ● | United States tax-exempt organizations who own ordinary shares may recognize unrelated business taxable income. |
| ● | Changes in United States tax laws may be retroactive and could subject us, and/or United States persons who own ordinary shares to United States income taxation on our undistributed earnings. |
| ● | We do not intend to resume paying cash dividends in the foreseeable future. |
| ● | Outages, computer viruses and similar events could disrupt our operations. |
| ● | Increased Information Technology (“IT”) security threats and more sophisticated computer crime could pose a risk to our systems, networks, and services. |
| ● | Increased scrutiny by and changing expectations from investors, employees, and other stakeholders regarding our environmental, social, and governance (“ESG”) practices and reporting could cause us to incur additional costs and adversely impact our reputation, tenant and employee acquisition and retention, and access to capital. |
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Risks Relating to Our Business
We will need additional capital in the future in order to grow and operate our business. Such capital may not be available to us or may not be available to us on favorable terms. Furthermore, our raising additional capital could dilute your ownership interest in our company.
We expect that we will need to raise additional capital in the future through public or private equity or debt offerings or otherwise in order to:
| ● | further capitalize our reinsurance subsidiaries and implement our growth strategy; | |
| ● | fund liquidity needs caused by underwriting or investment losses; | |
| ● | replace capital lost in the event of significant reinsurance losses or adverse reserve developments; | |
| ● | meet applicable statutory jurisdiction requirements; | |
| ● | fund our business activities relating to our new tokenization business operations; and/or | |
| ● | respond to competitive pressures. |
Additional capital may not be available on terms favorable to us, or at all. Further, any additional capital raised through the sale of equity could dilute your ownership interest in our company and may cause the market price of our ordinary shares and warrants to decline. Additional capital raised through the issuance of debt may result in creditors having rights, preferences and privileges senior or otherwise superior to those of our ordinary shares and warrants.
Our results of operations will fluctuate from period to period and may not be indicative of our long-term prospects.
We anticipate that the performance of our reinsurance operations and our investment portfolio will fluctuate from period to period. Fluctuations will result from a variety of factors, including:
| ● | reinsurance contract pricing; | |
| ● | our assessment of the quality of available reinsurance opportunities; | |
| ● | the volume and mix of reinsurance products we underwrite; | |
| ● | loss experienced on our reinsurance liabilities; | |
| ● | our ability to assess and integrate our risk management strategy properly; and | |
| ● | the performance of our investment portfolio. |
In particular, we plan to underwrite products and make investments to achieve favorable return on equity over the long term. In addition, our opportunistic nature and focus on long-term growth in book value will result in fluctuations in total premiums written from period to period as we concentrate on underwriting contracts that we believe will generate better long-term, rather than short-term, results. Accordingly, our short-term results of operations may not be indicative of our long-term prospects.
Our tokenization business relationships between usoperations are at an early stage of development and HCI Grouphave a limited operating history, and our strategy of developing a Web3-focused RWA tokenization business may present difficult conflictsnot be successful.
Our Web3-focused RWA tokenization business is still in the development stage, and our operating history in such business has been limited to the development and issuance of interesta token for participation in reinsurance contracts underwritten by our Oxbridge Re NS subsidiary. We have not yet announced any revenue-producing activities for tokenization of RWAs that are held by or being acquired by third parties, and we may not be able to successfully complete the development of any products or services relating to tokenization of third-party RWAs. Accordingly, we have only a very limited operating history and limited experience in this business opportunity issues.
Developing a Web3.0-focused business around the tokenization of interest could arise with respect toRWAs involves significant risks.
Our planned tokenization business opportunities that could be advantageous to HCI Group or its subsidiaries,activities are based on a new area of technology and carries significant risks, including the one hand, and us or any of our subsidiaries, on the other hand. Moreover, because of this relationship, HCI Group may have the ability to otherwise significantly influence certain business decisions by us, including our writing of future policies. This relationship and potential conflict of interest could also result in contracts between us and HCI Group and/or its subsidiaries that are less favorable to us than contracts that could be negotiated with other third parties.following:
| ● | an active trading market for tokenized RWAs may not develop or be sustained; | |
| ● | there is no guarantee that tokenized RWAs will hold their value or increase in value; | |
| ● | tokenized RWAs of SurancePlus may not be listed on any securities exchange and may not be available to trade on any alternative trading system (“ATS”), which would result in limited liquidity for holders; | |
| ● | if the tokenized RWAs become available for trading on an ATS, the number of securities traded on such ATS may be very small, making the market price more easily manipulated; | |
| ● | technology on which an ATS relies for its operations may not function properly; | |
| ● | blockchain networks are relatively new technologies; | |
| ● | asset tokenization via blockchain technologies is a relatively new digital innovation; | |
| ● | blockchain network transaction fees may significantly increase over the duration of the investment; | |
| ● | smart contracts may have implementation errors that vitiate them; | |
| ● | blockchain transactions may be taken advantage of for financial crimes; and | |
| ● | the Avalanche blockchain the tokenized RWAs rely upon and the tokenized RWAs themselves may be the target of malicious cyberattacks. |
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Failure to become rated by A.M. Best, or receipt of a negative rating, could significantly and negatively affect our ability to grow.
Companies, insurers and reinsurance brokers use ratings from independent ratings agencies as an important means of assessing the financial strength and quality of reinsurers. This rating reflects the rating agency’s opinion of our financial strength, operating performance and ability to meet obligations. It is not an evaluation directed toward the protection of investors or a recommendation to buy, sell or hold our securities. A.M. Best assigns ratings based on its analysis of balance sheet strength, operating performance and business profile.
Currently, A.M Best has not assigned us a financial strength rating, and we do not intend to seek a rating in the forseesableforeseeable future. Without a rating, or if we received a negative rating, our growth potential and business strategy will be limited because of the need to collateralize the insurance policies that we write.
Established competitors with greater resources may make it difficult for us to effectively market our products or offer our products at a profit.
The reinsurance industry is highly competitive. We compete with major reinsurers, all of which have substantially greater financial, marketing and management resources than we do. Competition in the types of business that we seek to underwrite is based on many factors, including:
| ● | premium charges; | |
| ● | the general reputation and perceived financial strength of the reinsurer; | |
| ● | relationships with reinsurance brokers; | |
| ● | terms and conditions of products offered; | |
| ● | ratings assigned by independent rating agencies; | |
| ● | speed of claims payment and reputation; and | |
| ● | the experience and reputation of the members of our underwriting team in the particular lines of reinsurance we seek to underwrite. |
Additionally, although the members of our underwriting team have general experience across many property and casualty lines, they may not have the requisite experience or expertise to compete for all transactions that fall within our strategy of offering customized frequency and severity contracts at times and in markets where capacity and alternatives may be limited.
Our competitors include Third Point Reinsurance Ltd., Blue Capital Reinsurance Holdings Ltd., ACE Ltd., EverestRenaissance Re, General Re Corporation, Hannover Re Group, Munich Reinsurance Company, Partner Re Ltd., Swiss Reinsurance Company, Transatlantic Reinsurance Company, Berkshire Hathaway, PartnerRe Ltd, Aeolus Re, and Nephila which are dominant companies in the reinsurance industry, as well as smaller companies and other niche reinsurers. Although we seek to provide coverage where capacity and alternatives are limited, we will directly compete with these larger companies due to the breadth of their coverage across the property and casualty market in substantially all lines of business.
We cannot assure you that we will be able to compete successfully in the reinsurance market. Our failure to compete effectively could significantly and negatively affect our financial condition and results of operations and may increase the likelihood that we may be deemed to be a passive foreign investment company or an investment company.
If actual renewals of our existing contracts do not meet expectations, our premiums assumed in future years and our future results of operations could be materially adversely affected.
Many of our contracts are generally written for a one-year term. In our financial forecasting process, we make assumptions about the renewal of our prior year’s contracts. The insurance and reinsurance industries have historically been cyclical businesses with periods of intense competition, often based on price. If actual renewals do not meet expectations or if we choose not to write on a renewal basis because of pricing conditions, our premiums assumed in future years and our future operations would be materially adversely affected.
Reputation is an important factor in the reinsurance industry, and our lack of an established reputation may make it difficult for us to attract or retain business.
Reputation is a very important factor in the reinsurance industry, and competition for business is, in part, based on reputation. Although our reinsurance policies will be fully collateralized, we are a relatively newly formed reinsurance company and do not yet have a well-established reputation in the reinsurance industry. Our lack of an established reputation may make it difficult for us to attract or retain business. In addition, we do not have or currently intend to obtain financial strength ratings, which may discourage certain counterparties from entering into reinsurance contracts with us.
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If our losses and loss adjustment expenses greatly exceed our loss reserves, our financial condition may be significantly and negatively affected.
Our results of operations and financial condition will depend upon our ability to accurately assess the potential losses and loss adjustment expenses associated with the risks we reinsure. Reserves are estimates at a given time of claims an insurer ultimately expects to pay, based upon facts and circumstances then known, predictions of future events, estimates of future trends in claim severity and other variable factors. The inherent uncertainties of estimating loss reserves are generally greater for reinsurance companies as compared to primary insurers, primarily due to:
| ● | the lapse of time from the occurrence of an event to the reporting of the claim and the ultimate resolution or settlement of the claim; | |
| ● | the diversity of development patterns among different types of reinsurance treaties; and | |
| ● | the necessary reliance on the client for information regarding claims. |
Our estimation of reserves may be less reliable than the reserve estimations of a reinsurer with a greater volume of business and an established loss history. Our actual losses and loss adjustment expenses paid may deviate substantially from the estimates of our loss reserves and could negatively affect our results of operations. If our loss reserves are later found to be inadequate, we would increase our loss reserves with a corresponding reduction in our net income and capital in the period in which we identify the deficiency, and such a reduction would also negatively affect our results of operations. If our losses and loss adjustment expenses greatly exceed our loss reserves, our financial condition may be significantly and negatively affected.
The property and casualty reinsurance market may be affected by cyclical trends.
We write reinsurance in the property and casualty markets, which tend to be cyclical in nature. Ceding company underwriting results, prevailing general economic and market conditions, liability retention decisions of companies and ceding companies and reinsurance premium rates each influence the demand for property and casualty reinsurance. Prevailing prices and available surplus to support assumed business then influence reinsurance supply. Supply may fluctuate in response to changes in return on capital realized in the reinsurance industry, the frequency and severity of losses and prevailing general economic and market conditions.
Continued increases in the supply of reinsurance may have consequences for the reinsurance industry generally and for us, including lower premium rates, increased expenses for customer acquisition and retention, less favorable policy terms and conditions and/or lower premium volume. Furthermore, unpredictable developments, including courts granting increasingly larger awards for certain damages, increases in the frequency of natural disasters (such as hurricanes, windstorms, tornados, earthquakes, wildfires and floods), fluctuations in interest rates, changes in the investment environment that affect market prices of investments and inflationary pressures, affect the industry’s profitability. The effects of cyclicality could significantly and negatively affect our financial condition and results of operations.
Our property and property catastrophe reinsurance operations will make us vulnerable to losses from catastrophes and may cause our results of operations to vary significantly from period to period.
Our reinsurance operations expose us to claims arising out of unpredictable catastrophic events, such as hurricanes, hailstorms, tornados, windstorms, earthquakes, floods, fires, explosions, and other natural or man-made disasters. Because of our emphasis on Florida, we are particularly vulnerable to hurricanes and with windstorm losses occurring in Florida. The incidence and severity of catastrophes are inherently unpredictable but the loss experience of property catastrophe reinsurers has been generally characterized as low frequency and high severity. Claims from catastrophic events could reduce our earnings and cause substantial volatility in our results of operations for any fiscal quarter or year and adversely affect our financial condition. Corresponding reductions in our surplus levels could impact our ability to write new reinsurance policies.
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Catastrophic losses are a function of the insured exposure in the affected area and the severity of the event. Because accounting standards do not permit reinsurers to reserve for catastrophic events until they occur, claims from catastrophic events could cause substantial volatility in our financial results for any fiscal quarter or year and could significantly and negatively affect our financial condition and results of operations.
We could face unanticipated losses from war, terrorism, and political unrest, and these or other unanticipated losses could have a material adverse effect on our financial condition and results of operations.
Like other reinsurers, we face potential exposure to large, unexpected losses resulting from man-made catastrophic events, such as acts of war, acts of terrorism and political instability. These risks are inherently unpredictable and recent events may indicate that the frequency and severity of these types of losses may increase. It is difficult to predict the timing of these events or to estimate the amount of loss that any given occurrence will generate. To the extent that losses from these risks occur, our financial condition and results of operations could be significantly and negatively affected.
We depend on our clients’ evaluations of the risks associated with their insurance underwriting, which may subject us to reinsurance losses.
In the proportional reinsurance business, in which we assume an agreed percentage of each underlying insurance contract being reinsured, or quota share contracts, we do not separately evaluate each of the original individual risks assumed under these reinsurance contracts. Therefore, we are largely dependent on the original underwriting decisions made by ceding companies. We are subject to the risk that the clients may not have adequately evaluated the insured risks and that the premiums ceded may not adequately compensate us for the risks we assume. We also do not separately evaluate each of the individual claims made on the underlying insurance contracts under quota share arrangements. Therefore, we are dependent on the original claims decisions made by our clients.
Changing climate conditions may adversely affect our financial condition, profitability or cash flows.
Climate change, to the extent it produces extreme changes in temperatures and changes in weather patterns, could impact the frequency or severity of weather events and wildfires. Further, it could impact the affordability and availability of homeowners insurance, which could have an impact on pricing. Changes in weather patterns could also affect the frequency and severity of other natural catastrophe events to which we may be exposed. The occurrence of these events would significantly and negatively affect our financial condition and results of operations.
Operational risks, including human or systems failures, are inherent in our business.
Operational risks and losses can result from, among other things, fraud, errors, failure to document transactions properly or to obtain proper internal authorization, failure to comply with regulatory requirements, information technology failures or external events.
We believe that our modeling, underwriting and information technology and application systems are critical to our business and our growth prospects. Moreover, we rely on our information technology and application systems to further our underwriting process and to enhance our ability to compete successfully. A major defect or failure in our internal controls or information technology and application systems could result in management distraction, harm to our reputation or increased expenses.
The effect of emerging claim and coverage issues on our business is uncertain.
As industry practices and legal, judicial and regulatory conditions change, unexpected issues related to claims and coverage may emerge. It is possible that certain provisions of our future reinsurance contracts, such as limitations or exclusions from coverage or choice of forum, may be difficult to enforce in the manner we intend, due to, among other things, disputes relating to coverage and choice of legal forum. These issues may adversely affect our business by either extending coverage beyond the period that we intended or by increasing the number or size of claims. In some instances, these changes may not manifest themselves until many years after we have issued insurance or reinsurance contracts that are affected by these changes. As a result, we may not be able to ascertain the full extent of our liabilities under our insurance or reinsurance contracts for many years following the issuance of our contracts. The effects of unforeseen development or substantial government intervention could adversely impact our ability to adhere to our goals.
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We are required to maintain sufficient collateral accounts, which could significantly and negatively affect our ability to implement our business strategy.
We are not licensed or admitted as a reinsurer in any jurisdiction other than the Cayman Islands. Certain jurisdictions, including the United States, do not permit insurance companies to take credit for reinsurance obtained from unlicensed or non-admitted insurers on their statutory financial statements unless appropriate security measures are implemented. Consequently, we must continue to maintain sufficient funds in escrow accounts to serve as collateral for our reinsurance contracts. Because we intend to continue to utilize our funds (rather than utilizing the credit markets) to serve as collateral for our reinsurance obligations, we may not be able to fully utilize our capital to expand our reinsurance coverage as rapidly as other reinsurers.
The inability to obtain business provided from brokers could adversely affect our business strategy and results of operations.
We anticipate that a substantial portion of our business will be placed primarily through brokered transactions, which involve a limited number of reinsurance brokers. If we are unable to identify and grow the brokered business provided through one or more of these reinsurance brokers, many of whom may not be familiar with our Cayman Islands jurisdiction, this failure could significantly and negatively affect our business and results of operations.
The involvement of reinsurance brokers may subject us to their credit risk.
As a standard practice of the reinsurance industry, reinsurers frequently pay amounts owed on claims under their policies to reinsurance brokers, and these brokers, in turn, remit these amounts to the ceding companies that have reinsured a portion of their liabilities with the reinsurer. In some jurisdictions, if a broker fails to make such a payment, the reinsurer might remain liable to the client for the deficiency notwithstanding the broker’s obligation to make such payment. Conversely, in certain jurisdictions, when the client pays premiums for policies to reinsurance brokers for payment to the reinsurer, these premiums are considered to have been paid and the client will no longer be liable to the reinsurer for these premiums, whether or not the reinsurer has actually received them. Consequently, we assume a degree of credit risk associated with the brokers that we do business with.
Our use of fair value accounting of our significant investment in Jet.AI Inc. could result in income statement volatility, which in turn, could cause significant market price and if we successfully purchase such reinsurance, we may be unable to collect, which could adversely affect our business, financial condition and results of operations.
Our significant beneficial interests in orderJet.AI Inc.’s common stock and public warrants are recorded at fair value with changes in fair value being recorded in the consolidated statements of operations during the period of change. Additionally, the fair value of the investment must be remeasured quarterly. Because of this, and due to mitigate the effectsignificance of a potential concentration of losses upon our financial condition. The insolvency or inability or refusal of a reinsurer of reinsurance to make payments under the terms of its agreement with us could have an adverse effect on us because we remain liableinvestment in Jet.AI relative to our client. From time to time, market conditions have limited, andtotal assets, our earnings may experience greater volatility in some cases have prevented, reinsurers from obtaining the types and amounts of retrocession that they consider adequate for their business needs. Accordingly, we may not be able to obtain our desired amounts of retrocessional coverage or negotiate terms that we deem appropriate or acceptable or obtain retrocession from entities with satisfactory creditworthiness. Our failure to establish adequate retrocessional arrangements orfuture as a decline in the failurefair value of our retrocessional arrangements to protect us from overly concentrated risk exposureinvestment in Jet.AI Inc. could significantly reduce both our earnings and negatively affectshareholders’ equity, which in turn, could cause significant market price and trading volume fluctuations for our business, financial condition and results of operations.
U.S. and global economic downturns could harm our business, our liquidity and financial condition and the price of our securities.
Weak economic conditions may adversely affect (among other aspects of our business) the demand for and claims made under our products, the ability of customers, counterparties and others to establish or maintain their relationships with us, our ability to access and efficiently use internal and external capital resources and our investment performance. Volatility in the U.S. and other securities markets may adversely affect our investment portfolio and our resulting results of operations.
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Our ability to implement our business strategy could be delayed or adversely affected by Cayman Islands employment restrictions.
Under Cayman Islands law, persons who are not Caymanian, do not possess Caymanian status, or are not otherwise entitled to reside and work in the Cayman Islands pursuant to provisions of the Immigration Law (2015 Revision) of the Cayman Islands, which we refer to as the Immigration Law, may not engage in any gainful occupation in the Cayman Islands without an appropriate governmental work permit. TheAlthough Jay Madhu and Wrendon Timothy have obtained Permanent Residency in the Cayman Islands, the failure to obtain work permits, or extensions thereof, for our employeesother employee(s) could prevent us from continuing to implement our business strategy.
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
In the ordinary course of our business, we may collect and store sensitive data, including proprietary business, in our data centers and on our networks. The secure processing,maintenance and transmission of this information is critical to our operations and business strategy. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, disrupt our operations, and damage our reputation, which could adversely affect our business, revenues and competitive position.
If we lose or are unable to retain our senior management and other key personnel and are unable to attract qualified personnel, our ability to implement our business strategy could be delayed or hindered, which, in turn, could significantly and negatively affect our business.
Although we only employ threefour individuals, two of whom are members of senior management, our future success dependsmay depend to a significant extent on the efforts of our senior management and other key personnel (who have not yet been hired) to implement our business strategy. We believe there are only a limited number of available, qualified executives with substantial experience in our industry. In addition, we will need to add personnel, including underwriters, to implement our business strategy. We could face challenges attracting personnel to the Cayman Islands. Accordingly, the loss of the services of one or more of the members of our senior management or other key personnel (when hired), or our inability to hire and retain other key personnel, could delay or prevent us from fully implementing our business strategy and, consequently, significantly and negatively affect our business.
We do not currently maintain key man life insurance with respect to any of our senior management. If any member of senior management dies or becomes incapacitated, or leaves the Company to pursue employment opportunities elsewhere, we would be solely responsible for locating an adequate replacement for such senior management and for bearing any related cost. To the extent that we are unable to locate an adequate replacement or are unable to do so within a reasonable period of time, our business may be significantly and negatively affected.
There are differences under Cayman Islands corporate law and Delaware corporate law with respect to interested party transactions which may benefit certain of our shareholders at the expense of other shareholders.
Under Cayman Islands corporate law, a director may vote on a contract or transaction where the director has an interest as a shareholder, director, officer or employee provided such interest is disclosed. None of our contracts will be deemed to be void because any director is an interested party in such transaction and interested parties will not be held liable for monies owed to the company. In contracts, under Delaware law, interested party transactions are potentially voidable.
Risks Relating to Insurance and Other Regulations
Any suspension or revocation of our reinsurance licenselicenses would materially impact our ability to do business and implement our business strategy.
Oxbridge Reinsurance Limited isand Oxbridge Re NS are each licensed as an insurer only in the Cayman Islands by the CIMA, and we do not intend to obtain a license in any other jurisdiction. The suspension or revocation of each of our licenselicenses to do business as a reinsurance company in the Cayman Islands for any reason would mean that we would not be able to enter into any new reinsurance contracts until the suspension ended or we became licensed in another jurisdiction. Any such suspension or revocation of our licenselicenses would negatively impact our reputation in the reinsurance marketplace and could have a material adverse effect on our results of operations.
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As a regulated insurance company, each of Oxbridge Reinsurance Limited and Oxbridge Re NS is subject to the supervision of CIMA and CIMA may at any time direct Oxbridge Reinsurance Limited and/or Oxbridge Re NS, in relation to a policy, a line of business or the entire business, to cease or refrain from committing an act or pursing a course of conduct and to perform such acts as in the opinion of CIMA are necessary to remedy or ameliorate the situation.
Furthermore, in certain circumstances, including when CIMA is of the opinion that:
| ● | a licensee either is or appears to be likely to become unable to meet its obligations as they fall due; | |
| ● | a licensee is carrying on its business in a manner which is seen as detrimental to the general public interest or to the interests of its creditors or policy holders; | |
| ● | the activities of any member of the licensee’s insurance group are detrimental to those interests of the licensee’s creditors, as well as its policy holders; | |
| ● | a licensee has contravened the Law or the Money Laundering Regulations (2023 Revision) of the Cayman Islands; | |
| ● | the licensee has failed to comply with a condition of its license such as maintaining a margin of solvency as prescribed by CIMA; | |
| ● | the direction and/or management of the licensee’s business has not been conducted in a fit and proper manner; | |
| ● | a director, manager or officer of the licensee’s business is not someone who would qualify or be seen as a person suitable to hold the respective position; | |
| ● | any person who is either holding or acquiring control or ownership of the licensee is not a fit and proper person to have such control or ownership; | |
| ● | the licensee has ceased to carry on business; or | |
| ● | the licensee is placed in liquidation or is dissolved; |
CIMA may take one of a number of steps, including:
| ● | requiring the licensee to take steps to rectify the matter; | |
| ● | suspending the license of the licensee pending a full inquiry into the licensee’s affairs; | |
| ● | revoking the license; | |
| ● | imposing conditions upon the licensee in terms of decisions made by it, including the suspension of voting rights or nullification of votes cast by it, and amending or revoking any such condition; | |
| ● | requiring the substitution or removal of any director, manager or officer of the licensee, at the expense of the licensee; | |
| ● | appointing a person to advise the licensee on the proper conduct of its affairs, at the expense of the licensee; | |
| ● | appointing a person to assume control of the licensee’s affairs; or | |
| ● | otherwise requiring such action to be taken by the licensee as CIMA considers necessary. |
Failures to comply with a direction given by CIMA may be punishable by a fine of up to five hundred thousand Cayman Islands dollars (US$609,756.10 based on the Cayman Islands’ pegged exchange rate of CI$0.82 per US$1.00 as of March 12, 20181.00) or imprisonment for a term of five years or both, and a fine of an additional ten thousand Cayman Islands dollars (US$12,195.12) for every day after conviction on which the offense so continues.
Our reinsurance subsidiary issubsidiaries are subject to minimum capital and surplus requirements, and our failure to meet these requirements could subject us to regulatory action.
Pursuant to the Capital and Solvency Regulations, Oxbridge Reinsurance Limited and Oxbridge Re NS, our reinsurance subsidiary, issubsidiaries, are each required to maintain the statutory minimum capital requirement (as defined under the Capital and Solvency Regulations) of $500 and prescribed capital requirement (as defined under the Capital and Solvency Regulations) of $500, and a minimum margin of solvency equal to or in excess of the total prescribed capital requirement. Any failure to meet the applicable requirements or minimum statutory capital requirements could subject us to further examination or corrective action by CIMA, including restrictions on dividend payments, limitations on our writing of additional business or engaging in finance activities, supervision or liquidation.
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As a holding company, we will depend on the ability of our subsidiaries to pay dividends.
We are a holding company and do not have any significant operations or assets other than our ownership of the shares of our subsidiarysubsidiaries Oxbridge Reinsurance Limited.Limited and Oxbridge Re NS. Dividends and other permitted distributions from our subsidiaries will be our primary source of funds to meet ongoing cash requirements, including future debt service payments, if any, and other expenses, and to pay dividends to our shareholders if we choose to do so. Our subsidiaries will be subject to applicable law as well as significant regulatory restrictions limiting their ability to declare and pay dividends. The inability of our subsidiaries to pay dividends in an amount sufficient to enable us to meet our cash requirements at the holding company level could have an adverse effect on our operations and our ability to pay dividends to our shareholders if we choose to do so and/or meet our debt service obligations, if any.
We are subject to the risk of possibly becoming an investment company under U.S. federal securities law.
In the United States, the Investment Company Act of 1940, as amended (the “Investment Company Act”), regulates certain companies that invest in or trade securities. We run the risk of inadvertently being deemed to be an investment company that is required to register under the Investment Company because a significant portion of our assets may be deemed to consist of, or may be deemed to have consisted of, investment securities, including potentially Oxbridge Reinsurance Limited’s interest in Oxbridge Acquisition Corp. However, we rely on an exemption under the Investment Company Act for an entity organized and regulated as a foreign insurance company which is engaged primarily and predominantly in the reinsurance of risks on insurance agreements. The law in this area is subjective and there is a lack of guidance as to the meaning of ‘‘primarily and predominantly’’ under the relevant exemption to the Investment Company Act. For example, there is no standard for the amount of premiums that need to be written relative to the level of an entity’s capital in order to qualify for the exemption. If this exception were deemed inapplicable, we would have to seek to register under the Investment Company Act as an investment company, which, under the Investment Company Act, would require an order from the SEC. Our inability to obtain such an order could have a significant adverse impact on our business, as we might have to cease certain operations or risk substantial penalties for violating the Investment Company Act.
Registered investment companies are subject to extensive, restrictive and potentially adverse regulation relating to, among other things, capital structure, leverage, management, dividends and transactions with affiliates. Registered investment companies are not permitted to operate their business in the manner in which we operate (and intend to operate) our business. Specifically, if we were required to register under the Investment Company Act, provisions of the Investment Company Act would limit (and in some cases even prohibit) our ability to raise additional debt and equity securities or issue options or warrants (which could impact our ability to compensate key employees), limit our ability to use financial leverage, limit our ability to incur indebtedness, and require changes to the composition of our Board of Directors. Provisions of the Investment Company Act would also prohibit (subject to certain exceptions) transactions with affiliates.
Accordingly, if we were required to register as an investment company, we would not be permitted to have many of the relationships that we have or expect that we may have with affiliated companies.
If at any time it were established that we had been operating as an investment company in violation of the registration requirements of the Investment Company Act, there would be a risk, among other material adverse consequences, that we could become subject to monetary penalties or injunctive relief, or both, or that we would be unable to enforce contracts with third parties or that third parties could seek to obtain rescission of transactions with us undertaken during the period in which it was established that we were an unregistered investment company.
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Insurance regulations to which we are, or may become, subject, and potential changes thereto, could have a significant and negative effect on our business.
Although we do not presently expect that we will conduct business in any jurisdiction other than the Cayman Islands, we cannot assure you that insurance regulators in the United States or elsewhere will not review our activities and claim that we are subject to such jurisdiction’s insurance licensing requirements. In addition, we are subject to indirect regulatory requirements imposed by jurisdictions that may limit our ability to provide reinsurance. For example, our ability to write reinsurance may be subject, in certain cases, to arrangements satisfactory to applicable regulatory bodies, and proposed legislation and regulations may have the effect of imposing additional requirements upon, or restricting the market for, non-U.S. reinsurers such as Oxbridge Reinsurance Limited and Oxbridge Re NS, with whom domestic companies may place business. We do not know of any such proposed legislation pending at this time.
Furthermore, we may not be able to comply fully with, or obtain desired exemptions from, revised statutes, regulations and policies that currently, or may in the future, govern the conduct of our business. Failure to comply with, or to obtain desired authorizations and/or exemptions under, any applicable laws could result in restrictions on our ability to do business or undertake activities that are regulated in the jurisdictionjurisdictions in which we operate and could subject us to fines and other sanctions. In addition, changes in the laws or regulations to which our reinsurance subsidiary is subject or may become subject, or in the interpretations thereof by enforcement or regulatory agencies, could have a material adverse effect on our business, our business plans, and our growth strategy.
We will likely be exposed to credit risk due to the possibility that counterparties may default on their obligations to us.
Due to our investments in our portfolio, we are exposed to credit risk due to the possibility that counterparties may default on their obligations to us. Issuers or borrowers whose securities or debt we hold, customers, reinsurers, clearing agents, exchanges, clearing houses and other financial intermediaries and guarantors may default on their obligations to us due to bankruptcy, insolvency, lack of liquidity, adverse economic conditions, operational failure, fraud or other reasons. Such defaults could have a significant and negative effect on our results of operations, financial condition and cash flows.
Risks Relating to our Securities
Provisions of our Third Amended and Restated Memorandum and Articles of Association (“Articles”) could adversely affect the value of our securities.
Our Articles permit our Board of Directors to allot, issue, grant options over or otherwise dispose of further shares (including fractions of such share) with or without preferred, deferred or other rights or restrictions, whether in regard to dividend or other distribution, voting, return of capital or otherwise and to such persons, at such times and on such other terms as they consider appropriate. Accordingly, our Board of Directors may authorize the issuance of preferred shares with terms and conditions and under circumstances that could have an effect of discouraging a takeover or other transaction, deny shareholders the receipt of a premium on their ordinary shares in the event of a tender or other offer for ordinary shares and have a depressive effect on the value of our ordinary shares.
Provisions of the Companies Law of the Cayman Islands could prevent a merger or takeover of our company.
As compared to mergers under corporate law in the United States, it may be more difficult to consummate a merger of two or more companies in the Cayman Islands or the merger of one or more Cayman Islands companies with one or more overseas companies, even if such transaction would be beneficial to our shareholders. The Companies Law of the Cayman Islands, as amended (the “Companies Law”), permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a) “merger” means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company and (b) a “consolidation” means the combination of two or more constituent companies into a combined company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by (a) a special resolution of the shareholders of each constituent company, and (b) such other authorization, if any, as may be specified in such constituent company’s articles of association. The written plan of merger or consolidation must be filed with the Registrar of Companies together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the shareholders and creditors of each constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Dissenting shareholders have the right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.
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In addition, there are statutory provisions that facilitate the reconstruction and amalgamation of companies, provided that the arrangement is approved by a majority in number of each class of shareholders or creditors (representing 75% by value) with whom the arrangement is to be made and who must, in addition, represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:
| ● | the statutory provisions as to the required majority vote have been met; | |
| ● | the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class; | |
| ● | the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and | |
| ● | the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law. |
When a takeover offer is made and accepted by holders of 90% of the shares within four months, the offeror may, within a two-month period commencing on the expiration of such four monthfour-month period, require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands, but such objection is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.
If an arrangement and reconstruction is thus approved, the dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of certain corporations incorporated in the United States, including Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.
Holders of our securities may have difficulty obtaining or enforcing a judgment against us, and they may face difficulties in protecting their interests because we are incorporated under Cayman Islands law.
Because we are a Cayman Islands company, there is uncertainty as to whether the Grand Court of the Cayman Islands would recognize or enforce judgments of United States courts obtained against us predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in the Cayman Islands against us predicated upon the securities laws of the United States or any state thereof.
We are incorporated as an exempted company limited by shares under the Companies Law. A significant amount of our assets are located outside of the United States. As a result, it may be difficult for persons purchasing our securities to effect service of process within the United States upon us or to enforce judgments against us or judgments obtained in U.S. courts predicated upon the civil liability provisions of the federal securities laws of the United States or any state of the United States.
Although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will, based on the principle that a judgment by a competent foreign court will impose upon the judgment debtor an obligation to pay the sum for which judgment has been given, recognize and enforce a foreign judgment of a court of competent jurisdiction if such judgment is final, for a liquidated sum, not in respect of taxes or a fine or penalty if not inconsistent with a Cayman Islands judgment in respect of the same matters, and was not obtained in a manner, and is not of a kind, the enforcement of which is contrary to the public policy of the Cayman Islands. There is doubt, however, as to whether the courts of the Cayman Islands will, in an original action in the Cayman Islands, recognize or enforce judgments of U.S. courts predicated upon the civil liability provisions of the securities laws of the United States or any state of the United States on the grounds that such provisions are penal in nature. Furthermore, a Cayman Islands court may stay proceedings if concurrent proceedings are being brought elsewhere.
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Unlike many jurisdictions in the United States, Cayman Islands law does not specifically provide for shareholder appraisal rights on a merger or consolidation of an entity. This may make it more difficult for shareholders to assess the value of any consideration they may receive in a merger or consolidation or to require that the offeror give a shareholder additional consideration if he believes the consideration offered is insufficient. In addition, shareholders of Cayman Islands exempted companies such as ours have no general rights under Cayman Islands law to inspect corporate records and accounts. Our directors have discretion under our Articles to determine whether or not, and under what conditions, the corporate records may be inspected by shareholders, but are not obligated to make them available to shareholders. This fact may make it more difficult for shareholders to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest. Finally, subject to limited exceptions, under Cayman Islands law, a minority shareholder may not bring a derivative action against our Board of Directors.
Provisions of our Articles may reallocate the voting power of our ordinary shares.
In certain circumstances, the total voting power of our ordinary shares held by any one person will be reduced to less than 9.9% of the total voting power of the total issued and outstanding ordinary shares. In the event a holder of our ordinary shares acquires shares representing 9.9% or more of the total voting power of our total ordinary shares, there will be an effective reallocation of the voting power of the ordinary shares as described in the Articles.
We aredo not currently have an “emerging growth company”effective registration statement registering the issuance of the shares underlying our publicly traded warrants, and therefore you may not be able to exercise the warrants in a cash exercise.
For you to be able to effect a cash exercise of our publicly traded warrants, the sale of the ordinary shares to be issued to you upon exercise of the warrants must be covered by an effective and current registration statement. We have not maintained a current registration statement relating to the sale of the shares of common stock underlying the warrants. As a result, you would be unable to exercise the warrants in a cash exercise and will be required to engage in a cashless exercise in which a number of warrant shares equal to the fair market value of the exercised shares will be withheld. In those circumstances, we cannot be certain whether the reduced disclosure requirements and relief from certain other significant obligations that are applicable to emerging growth companies will make our securities less attractive to investors.
Risks Relating to Taxation
We may become subject to taxation in the Cayman Islands which would negatively affect our results.
Under current Cayman Islands law, we are not obligated to pay any taxes in the Cayman Islands on either income or capital gains. The Governor-in-Cabinet of Cayman Islands has granted us an exemption from the imposition of any such tax on us for twenty years from April 23, 2013. We cannot be assured that after such date we would not be subject to any such tax. If we were to become subject to taxation in the Cayman Islands, our financial condition and results of operations could be significantly and negatively affected.
We may be subject to United States federal income taxation.
We are incorporated under the laws of the Cayman Islands and intend to operate in a manner that will not cause us to be treated as engaging in a United States trade or business and will not cause us to be subject to current United States federal income taxation on our income. However, because there are no definitive standards provided by the Internal Revenue Code of 1986, as amended (the “Code”), regulations or court decisions as to the specific activities that constitute being engaged in the conduct of a trade or business within the United States, and as any such determination is essentially factual in nature, we cannot assure you that the United States Internal Revenue Service, or the IRS, will not successfully assert that we are engaged in a trade or business in the United States and thus are subject to current United States federal income taxation.
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We may be treated as a PFIC, in which case a U.S. holder of our ordinary shares should be subject to disadvantageous rules under U.S. federal income tax laws.
Significant potential adverse United States federal income tax consequences generally apply to any United States person who owns shares in a “passive foreign investment company”, or PFIC. In general, a non-U.S. corporation is classified as a PFIC for a taxable year in which, after taking into account the income and assets of the corporation and certain subsidiaries pursuant to certain look-through rules, either (i) 75% or more of its gross income is passive income, or (ii) 50% or more of the average quarterly value of its gross assets is attributable to assets that produce passive income or are held for the production of passive income. In general, either of Oxbridge Re Holdings Limited or Oxbridge Reinsurance Limited would be deemed to be a PFIC for a taxable year if 75% or more of its income constitutes ‘‘passive income’’ or 50% or more of its assets produce ‘‘passive income.’’
Passive income generally includes interest, dividends and other investment income but does not includeincome. However, the income derived in the active conduct of an insurance business is excluded from the term “passive income” if (i) for years before 2021, the income is earned by a corporation that is predominantly engaged in an insurance business, and (ii) for years after 2021, the income is earned by a “qualifying insurance corporation”. In order for a non-U.S. property and casualty insurance company to be treated as a “qualifying insurance corporation” for a taxable year, the company’s “applicable insurance liabilities” generally must be greater than 25% of the company’s assets for the taxable year. In the case of a non-U.S. property and casualty insurance company, the term “applicable insurance liabilities” means the amount of loss and loss adjustment expenses, but shall not exceed the amount reported to the applicable regulator in an applicable financial statement. It is not clear whether the term “applicable insurance liabilities” includes not only the unpaid loss and loss adjustment expenses, but also includes the paid loss and loss adjustment expenses during the taxable year. If each of Oxbridge Reinsurance Limited and Oxbridge Re NS is a “qualified insurance corporation” for a taxable year, then neither Oxbridge Re Holdings Limited, nor Oxbridge Reinsurance Limited, nor Oxbridge Re NS should be deemed to be a PFIC for the taxable year.
Regardless of whether the term “applicable insurance liabilities” includes not only the unpaid loss and loss adjustment expenses but also the paid loss and loss adjustment expenses, we believe that each of Oxbridge Reinsurance Limited and Oxbridge Re NS met the requirements for being a “qualified insurance corporation” for the 2023 and 2022 years. For years prior to 2022, we also believe that each of those corporations met the requirement of being predominantly engaged in an insurance business. This exception for insurance companies is intended to ensure that a bona fide insurance company’s income is not treated as passive income, except to the extent such income is attributable to financial reserves in excess of the reasonable needs of the insurance business. WeAccordingly, we believe that we are currently operating and intend to continue operating our business with financial reserves athave not been a level that should not cause us to be deemed PFICs, although we cannot assure you the IRS will not successfully challenge this conclusion. In addition, sufficient risk must be transferred under an insurance company’s contracts with its insureds in order to qualify for the insurance exception. Whether our insurance contracts possess adequate risk transfer for purposes of determining whether income under our contracts is insurance income, and whether we are predominantly engaged in the insurance business, are subjective in nature and there is very little authority on these issues.PFIC during 2023 or prior years. We cannot assure you that the IRS will not successfully challenge the level of risk transfer under our reinsurance contracts for purposes of the insurance company exception, nor can we cannot assure you that the IRS will not successfully challenge our interpretation of the scope of the active insurance company exception and our qualification for the exception. Further, the IRS may issue regulatory or other guidance that causes us to fail to qualify for the active insurance company exception on a prospective or retroactive basis. Therefore, we cannot assure you that we will satisfy the exception for insurance companies and will not be treated as PFICs currently or in the future. Although we do not expect thathave an expectation, however, as to whether or not we were a PFIC in 2017, nor do we expect tomay be a PFIC in 2017 or thereafter, no assurance can be provided in that regard or as to our status in future years.years after 2023. If you are a United States person, we adviseurge you to consult your own tax advisor concerning the potential tax consequences to you under the PFIC rules.
We may be treated as a CFC and may be subject to the rules for related person insurance income, and in either case this may subject a U.S. holder of our ordinary shares to disadvantageous rules under U.S. federal income tax laws.
Controlled Foreign Corporation
. United States persons who, directly orRelated Person Insurance Income
. A different definition of CFC is applicable in the case of a foreign corporation which earns “related person insurance income” (“RPII”). RPII is a Code Subpart F insurance income attributable to insurance policies or reinsurance contracts where the person that is directly or indirectly insured or reinsured is a RPII shareholder or a related person to the RPII shareholder. A “RPII shareholder” is a United States person who owns, directly or indirectly through foreign entities, any amount of our ordinary shares. Generally, for purposes of the RPII rules, a related person is someone who controls or is controlled by the RPII shareholder or someone who is controlled by the same person or persons which control the RPII shareholder. Control is measured by either more than 50% in value or more than 50% in voting power of shares after applying certain constructive ownership rules. For purposes of taking into account RPII, and subject to the exceptions described below, Oxbridge Reinsurance Limited or Oxbridge Re NS will be treated as a CFC if our RPII shareholders collectively own, indirectly, 25% or more of the total combined voting power or value of their respective shares on any day during a taxable year. If Oxbridge Reinsurance Limited or Oxbridge Re NS is a CFC| 24 |
United States tax-exempt organizations who own ordinary shares may recognize unrelated business taxable income.
If you are a United States tax-exempt organization you may recognize unrelated business taxable income if a portion of our Code Subpart F insurance income is allocated to you. In general, Code Subpart F insurance income will be allocated to you if we are a CFC as discussed above and you are a United States 10% shareholder or there is related person insurance income and certain exceptions do not apply. Although we do not believe that any United States persons will be allocated Code Subpart F insurance income, we cannot assure you that this will be the case. If you are a United States tax-exempt organization, we advise you to consult your own tax advisor regarding the risk of recognizing unrelated business taxable income.
Changes in United States tax laws may be retroactive and could subject us, and/or United States persons who own ordinary shares to United States income taxation on our undistributed earnings.
The tax laws and interpretations regarding whether a company is engaged in a United States trade or business, is a CFC, has RPII, or is a PFIC are subject to change, possibly on a retroactive basis. There are currently no regulations regarding the application of the PFIC rules to an insurance company and the regulations regarding RPII are still in proposed form. New regulations or pronouncements interpreting or clarifying such rules may be forthcoming from the IRS. We are not able to predict if, when or in what form such guidance will be provided and whether such guidance will have a retroactive effect.
We do not intend to resume paying cash dividends in the foreseeable future.
On November 12, 2017, our board of directors decided to suspend our regular quarterly cash dividend. The board of directors intends to reconsider in the future the payment of a quarterly cash dividend, but the timing of such reconsideration has not been determined, and there is no intention to resume dividend payments in the foreseeable future, if at all. Any decision to resume dividend payments will be dependent upon a variety of factors, including the state of our business as well as general market conditions at the time of reconsideration, and there is no assurance that dividend payments will recommence.
Outages, computer viruses and similar events could disrupt our operations.
We rely on information technology networks and systems, some of which are owned and operated by third parties, to process, transmit and store electronic information. Any of these systems may be susceptible to outages due to fire, floods, power loss, telecommunications failures, terrorist or cyber-attacks and similar events. Despite the implementation of network security measures, our systems and those of third parties on which we rely may also be vulnerable to computer viruses and similar disruptions. If we or the third parties on whom we rely are unable to prevent such outages and breaches, our operations could be disrupted.
Increased Information Technology (“IT”) security threats and more sophisticated computer crime could pose a risk to our systems, networks, and services.
Cyber incidents can result from deliberate attacks or unintentional events. There have been an increased number of significant cyber-attacks targeted at the retail, insurance, financial and banking industries that include, but are not limited to, gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data or causing operational disruption. Cyber-attacks may also be carried out in a manner that does not require gaining unauthorized access, such as by causing denial-of-service attacks on websites. Cyber-attacks by third parties or insiders utilize techniques that range from highly sophisticated efforts to electronically circumvent network security or overwhelm a website to more traditional intelligence gathering, and social engineering aimed at obtaining information necessary to gain access.
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Increased global IT security threats are more sophisticated and targeted computer crimes pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. The open nature of interconnected technologies may allow for a network or Web outage or a privacy breach that reveals sensitive data or transmission of harmful/malicious code to business partners and clients. Because the techniques used to obtain unauthorized access, disable, or degrade service, or sabotage systems change frequently and may be difficult to detect for long periods of time, we may be unable to anticipate these techniques or implement adequate preventive measures.
Cyber-attacks may result in substantial financial and reputational cost, including but are not limited to:
| ● | Compromising of confidential information; | |
| ● | Manipulation and destruction of data; | |
| ● | Loss of trade secrets; | |
| ● | System downtimes and operational disruptions; | |
| ● | Remediation costs that may include liability for stolen assets or information and repairing system damage, as well as incentives offered to business partners in an effort to maintain business relationships; | |
| ● | Loss of revenues resulting from unauthorized use of proprietary information; | |
| ● | Cost to deploy additional protection strategies, training employees and engaging third party experts and consultants; | |
| ● | Reputational damage adversely affecting investor confidence; and | |
| ● | Costly litigation. |
The control environment for cybersecurity is an ever-changing risk landscape across the entire attack surface which includes risks from on-premises, cloud infrastructure, software as a service and mobile applications. While we attempt to mitigate these risks by employing a number of cybersecurity measures, such measures may be insufficient to prevent a cyberattack and our systems, networks, and services remain potentially vulnerable to advanced threats.
Increased scrutiny by and changing expectations from investors, employees, and other stakeholders regarding our environmental, social, and governance (“ESG”) practices and reporting could cause us to incur additional costs and adversely impact our reputation, tenant and employee acquisition and retention, and access to capital.
Companies across all industries are facing increasing scrutiny related to their ESG practices and disclosure. Investors, employees, and other stakeholders have begun to focus increasingly on ESG practices and to place heightened importance on the environmental and social cost of their investments, business decisions and consumer choices. For example, an increasing number of investment funds focus on positive ESG practices and sustainability scores when making an investment decision. Additionally, certain institutional investors have demonstrated increased activism with respect to their existing investments, including by urging companies to take certain actions in areas of perceived ESG significance.
Investors, particularly institutional investors, use or may use third-party benchmarks and scores to assess our ESG practices against our peers and if we are perceived as lagging, such investors may decide to not invest in our ordinary shares or to divest from their current investment, and we may face reputational challenges. Alternatively, such investors may decide to actively engage with us to improve ESG disclosure or performance, and may also make voting decisions on this basis. Given increased investor focus and demand, public disclosure regarding ESG practices is becoming more broadly expected. Any disclosure we make may include our policies and practices on a variety of ESG matters, including corporate governance, environmental compliance, human capital management, and workforce inclusion and diversity. It is possible that stakeholders may not be satisfied with our ESG practices, reporting and goals, or with our speed of adoption. If our ESG practices and disclosures do not meet investor, tenant, employee or other stakeholder expectations, which continue to evolve, our reputation and employee retention, and access to capital may be negatively impacted.
In 2022, the SEC proposed extensive rules aimed at enhancing and standardizing climate-related disclosures in an effort to foster greater consistency, comparability and reliability of climate-related information among public issuers. In March 2024, the SEC adopted final rules which will require public issuers to include prescribed climate-related information in their registration statements and annual reports, including information regarding greenhouse gas emissions and climate-related risks and opportunities and related financial impacts, governance and strategy. Additionally, we may become subject to new compliance requirements and/or new costs or taxes associated with natural resource or energy usage and related emissions (such as a “carbon tax”), which could increase our operating costs.
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We could incur additional costs relating to implementing, monitoring and reporting various ESG practices and initiatives, as well as complying with applicable law, which could place a strain on our personnel, systems and resources. Our failure, or perceived failure, to meet the goals and objectives we set in any ESG disclosure within the timelines announced or at all, or the expectations of our various stakeholders could negatively impact our reputation, tenant and employee retention, and access to capital.
ITEM 1B
The Company has no unresolved written comments regarding its periodic or current reports from the staff of the SEC.
ITEM 1C CYBERSECURITY
Governance
Cybersecurity is an integral part of the Board’s risk analysis and discussions with management. At least annually, the full Board is updated on the Company’s cybersecurity risks and risk mitigation strategy by our Chief Information Officer (“CIO”), who is responsible for management of our Information Technology program. The Board also receives ad hoc updates, as needed, about material changes to the Company’s cybersecurity program and/or the cybersecurity landscape, including briefings on major legislative and regulatory developments.
Our CIO regularly evaluates the Company’s cybersecurity risk profile and leads the development of strategies to mitigate risks and address cybersecurity issues that may arise in consultation with members of our senior management team. Our CIO holds a Ph.D. in Information Systems from the London School of Economics and has over 20 years’ experience and certifications in the field of information technology and data security.
We have formal policies and procedures that address cybersecurity incident response and disaster recovery from interference with our critical applications. Our Cybersecurity Incident Response Standard provides a documented framework for responding to cybersecurity incidents in coordination across multiple departments. In the event of such an incident, our Cybersecurity Incident Response Team (“CIRT”), which is comprised of our CIO, Chief Executive Officer, Chief Financial Officer, and outside legal counsel, would respond to such incident in accordance with our Cybersecurity Incident Response Standard. Any cybersecurity incident that is designated by the CIRT with a “High” severity classification according to the Cybersecurity Incident Response Standard or that otherwise necessitates regulatory disclosure because of its materiality, will be communicated by the CIRT to the Board within specified timeframes. All cybersecurity incidents, will be evaluated by our CIRT to assess the impact of the incident on the Company, considering qualitative and quantitative factors. In conducting this assessment and responding to an incident, the CIRT Team may utilize the services of third-party consultants. Third-party consultants may be engaged to assist with the identification of the source of any cybersecurity incidents, remediation and recovery from such incident, and the refinement of cybersecurity controls to avert similar future cybersecurity threats and incidents.
Cybersecurity user awareness training is mandatory for all new hires and for existing employees on an annual basis to help protect our employees and the Company against cybersecurity threats. Novel cybersecurity threats to the Company that are identified by our CIO are communicated to all employees by email, as needed, in an effort to promote awareness and protect the Company from cyber attacks.
Risk Management Strategy
We maintain an Enterprise Risk Management (“ERM”) program to identify and respond to the most critical risks to our business, including cybersecurity risks. Risks and vulnerabilities from our increased reliance on information technology systems are assessed at least annually by our CIO and Executive Management Team as part of our ERM program. In response to such assessments, controls are embedded into our processes and technology by our CIO and Executive Management Team to seek to mitigate risks to our systems and processes from cybersecurity incidents. We continuously evaluate whether we have adequate controls in place utilizing a risk-based approach that tailors and applies best practice from various industry standard IT Management frameworks such as Information Technology Infrastructure Library (ITIL), Control Objectives for Information Technologies (COBIT), National Institute of Standards and Technology CyberSecurity Framework, and ISO/IEC 27001.
Our daily operations are continuously monitored. We monitor traffic traversing our computer networks and have implemented IT controls and processes to secure our business applications and prevent unauthorized access to or the loss of sensitive data. Our controls include the use of multiple encryption layers for data in transit and at rest, multi-factor authentication, data classification, and data loss prevention. We plan to assess the adequacy of our cybersecurity IT controls through annual cybersecurity vulnerability testing.
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We maintain a risk-based approach to evaluating and overseeing cybersecurity risks presented by our third-party vendors. Third-party vendors that meet certain criteria, such as owning and operating any information technology networks and systems on which the Company relies, are evaluated to assess their performance across several domains, including data security and operations management. We seek to maintain effective communication with our third-party vendors to facilitate timely notification of cybersecurity incidents that might impact the Company. We also independently monitor reputable cybersecurity publications for notifications about vulnerabilities in widely used software libraries, APIs, and other generally available technologies upon which our third-party vendors’ products might rely.
Although risks from cybersecurity threats have to date not materially affected, and we do not believe they are reasonably likely to materially affect, us, our business strategy, results of operations or financial condition, like other companies in our industry, we could, from time to time, experience threats and security incidents related to our and our third-party vendors’ information systems. For more information, please see “Item 1A. Risk Factors - Increased Information Technology (“IT”) security threats and more sophisticated computer crime could pose a risk to our systems, networks, and services.”
ITEM 2
We currently lease office space at Strathvale House building at 90 North ChurchSuite 201, 42 Edward Street, Georgetown, Grand Cayman. This lease expires in February 2027. We believe that the Strathvale Houseour current office is suitable and sufficient for us to conduct our operations for the foreseeable future.
We are not currently involved in any litigation or arbitration. We anticipate that, similar to the rest of the insurance and reinsurance industry, we will be subject to litigation and arbitration in the ordinary course of business.
Not applicable.
Market Information for Ordinary Shares
The following table sets forth the high and low sales price per share of ourCompany’s ordinary shares as reportedand warrants are listed on The NASDAQ Capital Market forunder the periods indicated:
2017 | 2016 | |||
High | Low | High | Low | |
| First Quarter | $6.90 | $5.85 | $5.61 | $4.52 |
| Second Quarter | $6.68 | $5.60 | $5.40 | $4.81 |
| Third Quarter | $6.00 | $4.30 | $5.43 | $4.81 |
| Fourth Quarter | $4.22 | $2.15 | $6.00 | $4.38 |
Holders of Record and Tax Information
As of March 5, 2017,26, 2024, there were 1913 holders of record of our ordinary shares. There are no current applicable Cayman Islands laws, decrees or regulations relating to restrictions on the import or export of capital or exchange controls affecting remittances of dividends, interest and other payments to non-resident holders of our ordinary shares. There are no existing laws or regulations of the Cayman Islands imposing taxes or containing withholding provisions to which United States holders of our ordinary shares are subject. There are no reciprocal tax treaties between the Cayman Islands and the United States.
Dividend Policy
The declaration and payment of dividends will be at the discretion of our Board of Directors and will depend on our results of operations and cash flows, our financial position and capital requirements, general business conditions, rating agency guidelines (if applicable), any legal, tax, regulatory and contractual restrictions on the payment of dividends, and any other factors considered relevant by our Board of Directors. Our ability to pay dividends will also depend on the requirements of any future financing agreements to which we may be a party and the ability of our reinsurance subsidiary,subsidiaries, or other subsidiaries, to pay dividends to us. Although Oxbridge Re Holdings Limited is not subject to any significant legal prohibitions on the payment of dividends, Oxbridge Reinsurance Limited and Oxbridge Re NS, our reinsurance subsidiary, issubsidiaries, are subject to Cayman Islands regulatory constraints that affect itstheir ability to pay dividends to us and include a minimum net worth requirement. Currently, the minimum net worth requirement for Oxbridge Reinsurance Limited and Oxbridge Re NS is $500. As of December 31, 2017, Oxbridge Reinsurance Limited2023, both subsidiaries exceeded the minimum requirement. By law, Oxbridge Reinsurance Limited and Oxbridge Re NS is restricted from paying a dividend if such a dividend would cause its net worth to drop to less than the required minimum.
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We paid no dividends in both 2023 and 2022.
Any future determination to declare cash dividends will be made at the discretion of our Board of Directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions and other factors that our Board of Directors may deem relevant.
Unregistered Sales of Equity Securities
There were no unregistered sales of unregisteredequity securities by us during the year ended December 31, 2017.
Issuer Purchases of Equity Securities
The Company did not repurchase up to $2,000,000 of the Company’s commonany ordinary shares inclusive of commissions and fees.
The following management discussion and analysis is intended to help the reader understand our business, financial condition, results of operations, liquidity and capital resources. You should read this discussion in conjunction with our Consolidated Financial Statements and the related notes contained elsewhere in this Annual Report on Form 10-K for the fiscal year ended December 31, 2017.
This discussion contains forward-looking statements that are not historical facts, including statements about our beliefs and expectations. These statements are based upon current plans, estimates and projections. Our actual results may differ materially from those projected in these forward-looking statements as a result of various factors. See “
Forward Looking Statements” appearing at the beginning of this Annual Report on Form 10-K and Item 1A, “Risk Factors.”General
The following is a discussion and analysis of our results of operations for the years ended December 31, 20172023 and 20162022 and our financial condition as of December 31, 20172023 and 2016.2022. The following discussion should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. References to “we,” “us,” “our,” “our company,” or “the Company” refer to Oxbridge Re Holdings Limited and its wholly-owned subsidiaries, Oxbridge Reinsurance Limited, and Oxbridge Re NS, SurancePlus Holdings Ltd., SurancePlus, Inc. and DSN Blockchain Technologies Ltd., unless the context dictates otherwise.
Overview and Trends
We are a Cayman Islands specialty property and casualty reinsurer that provides reinsurance solutions through our reinsurance subsidiary,subsidiaries, Oxbridge Reinsurance Limited. We recently organized a new subsidiary,Limited and Oxbridge Re NS Ltd., which was incorporated on December 22, 2017 to facilitate potential future hedging and investment activities with respect to our reinsurance risks, but the subsidiary has not yet commenced operations and has no assets or liabilities.NS. We focus on underwriting fully-collateralizedfully collateralized reinsurance contracts primarily for property and casualty insurance companies in the Gulf Coast region of the United States, with an emphasis on Florida. We specialize in underwriting medium frequency, high severity risks, where we believe sufficient data exists to analyze effectively the risk/return profile of reinsurance contracts. Oxbridge Re NS functions as a reinsurance sidecar which increases the underwriting capacity of Oxbridge Reinsurance Limited. Oxbridge Re NS issues participating notes to third party investors, the proceeds of which are utilized to collateralize Oxbridge Reinsurance Limited’s reinsurance obligations.
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In addition to our historical reinsurance business operations, in 2023, our new subsidiary, SurancePlus, began developing, offering, and selling a tokenized reinsurance security representing fractionalized interests in reinsurance contracts, with each token representing an interest in participating notes issued by Oxbridge Re NS. These efforts culminated in the development, launch, and issuance of our first tokenized reinsurance security, the DeltaCat Re Token, which we believe is the first “on-chain” reinsurance security of its kind to be developed by a subsidiary of a public company. Following the issuance of the DeltaCat Re Token, we intend to develop, launch, and issue additional series of tokenized reinsurance securities representing fractional interests in reinsurance contracts, and we are also using our tokenization experience and activities as a foundation for developing Web3-focused business offerings and products relating to the tokenization of other RWAs, including RWAs held or being acquired by third parties. Our tokenization business will be conducted through SurancePlus and through other subsidiaries of our wholly owned subsidiary, SurancePlus Holdings Ltd. (“SurancePlus Holdings”), [a Cayman Islands exempted company] that we have organized to serve as a holding company for subsidiaries that will operate our developing Web3-focused business operations.
In our historical reinsurance business operations, we underwrite reinsurance contracts on a selective and opportunistic basis as opportunities arise based on our goal of achieving favorable long-term returns on equity for our shareholders. Our goal is to achieve long-term growth in book value per share by writing business that generates attractive underwriting profits relative to the risk we bear. Unlike other insurance and reinsurance companies,Additionally, we do not intend to pursue an aggressive investment strategy and instead will focus our business on underwriting profits rather than investment profits. However, we intend to complement our underwriting profits with investment profits on an opportunistic basis. Our primaryunderwriting business focus is on fully collateralized reinsurance contracts for property catastrophes, primarily in the Gulf Coast region of the United States, with an emphasis on Florida. Within that market and risk category, we attempt to select the most economically attractive opportunities across a variety of property and casualty insurers. As our capital base grows, however, we expect that we will consider further growth opportunities in other geographic areas and risk categories.
Our level of profitability in our historical reinsurance business is primarily determined by how adequately our premiums assumed and investment income cover our costs and expenses, which consist primarily of acquisition costs and other underwriting expenses, claim payments and general and administrative expenses. One factor leading to variation in our operational results is the timing and magnitude of any follow-on offerings we undertake (if any), as we are able to deploy new capital to collateralize new reinsurance treaties and consequently, earn additional premium revenue. In addition, our results of operations may be seasonal in that hurricanes and other tropical storms typically occur during the period from June 1 through November 30. Further, our results of operations may be subject to significant variations due to factors affecting the property and casualty insurance industry in general, which include competition, legislation, regulation, general economic conditions, judicial trends, and fluctuations in interest rates and other changes in the investment environment.
Because we employ an opportunistic underwriting and investment philosophy, period-to-period comparisons of our underwriting results may not be meaningful. In addition, our historical investment results may not necessarily be indicative of future performance. Due to the nature of our reinsurance and investment strategies, our operating results will likely fluctuate from period to period.
Compared to influxmost of new risk capital from alternative capital market participants such as hedge fundsour competitors, we are small and pension funds, wehave low overhead expenses. We believe that our expense efficiency, agility and existing relationships support our competitive position and allows us to profitably participate in lines of business that fit within our strategy. Over time we expect our expense advantage could erode as the reinsurance industry is currently over-capitalized and will continue in this trendseeks to reduce frictional costs.
Recent Developments
Formation of SurancePlus
SurancePlus, an indirect wholly-owned subsidiary of the Company, was incorporated as a British Virgin Islands Business Company on December 19, 2022 for the foreseeable future.purpose of tokenizing reinsurance contracts underwritten by its affiliated licensed reinsurer, Oxbridge Re NS.
On March 27, 2023, we, through SurancePlus, issued a press release announcing the commencement of an offering by SurancePlus of up to $5.0 million of DeltaCat Re Tokens with a purchase price of $10.00 per DeltaCat Re Token and representing one share of Series DeltaCat Re Preferred Shares per DeltaCat Re Token (the “Private Placement”).
On June 27, 2023, SurancePlus completed the Private Placement. The over-capitalizationaggregate amount raised in the Private Placement was $2,447,760 for the issuance of 244,776 DeltaCat Re Tokens, of which approximately $1,280,000 was received from third-party investors and approximately $1,167,000 was received from Oxbridge Re Holdings Limited.
On September 11, 2023, the DeltaCat Re tokens were reclassified as tokenized interests carrying rights equivalent to the DeltaCat Re Preferred Shares in accordance with the provisions of British Virgin Islands law.
Oxbridge Acquisition Corp.
On February 28, 2023, the Company announced in a press release that Oxbridge Acquisition Corp. (“Oxbridge Acquisition”) filed a Current Report on Form 8-K with the Securities and Exchange Commission in connection with Oxbridge Acquisition’s business combination with Jet Token Inc., a Delaware corporation. Upon the closing of the markettransaction, the combined company became Jet.AI Inc. (“Jet.AI”). Jet.AI offers fractional aircraft ownership, jet card, aircraft brokerage and charter service through its fleet of private aircraft and those of Jet.AI’s Argus Platinum operating partner. Jet AI’s charter app enables travelers to look, book and fly. The funding and capital markets access from this transaction is expected to enable Jet.AI to continue its growth strategy of AI software development and fleet expansion. The business combination was completed on August 10, 2023.
The Company’s wholly-owned licensed reinsurance subsidiary, Oxbridge Reinsurance Limited (“Oxbridge Reinsurance”), was the lead investor in Oxbridge Acquisition’s sponsor and currently indirectly holds the equivalent of 1,423,827 of Jet.AI common stock (NASDAQ: JTAI), 3,094,999 of Jet.AI public warrants (NASDAQ: JTAIW) and 285 of Jet.AI Series A-1 Convertible Preferred Stock with purchase price of $285,000.
Bridge Loan with Affiliate
On September 11, 2023, the Company, along with seven (7) other investors, entered into a binding term sheet (“Bridge Agreement”) with Jet.AI to provide Jet.AI with an aggregate sum of $500,000 of short-term bridge financing pending its receipt of funds from its other existing financing arrangements. During the month of September 2023, and prior to the Bridge Agreement, Jet.AI had engaged in discussions with numerous third parties to secure short-term bridge funding but was not uniform as there are a number of insurers and reinsurers that have suffered and continue to suffer from capacity issues. We continue to assess the opportunities that may be available to us with insurance and reinsurance companies with this profile. If the reinsurance market continues to soften, our strategy is to reduce premium writings rather than accept mispriced risk and conserve our capital for a more opportune environment. Significant rate increases could occur if financial and credit markets experience adverse shocks that result in the loss of capital of insurers and reinsurers, or if there are major catastrophic events, especially in North America. offered terms it found acceptable.
The persistent low interest rate environment has reduced the earnings of many insurance and reinsurance companies and we believe that the continuation of low interest rates, coupled with the reduction of prior years' reserve redundancies, could cause the industry to adopt overall higher pricing.
An event of default under the Notes includes failing to redeem the Notes as provided above and other typical bankruptcy events of Jet.AI. In an event of default, the outstanding principal amount of the Notes will continue until otherwise determinedincrease by 120%, and the boardcompany may convert its Note into shares of directors.common stock of Jet.AI at the conversion price set forth in the Bridge Agreement with registration rights associated with those shares.
The Company invested the sum of $100,000 in the Notes and is recorded as “Loan Receivable” on the consolidated balance sheets at cost. On March 11, 2024, the Notes matured and were redeemed by Jet.AI in accordance with the Bridge Agreement. The Company receive an aggregate of $140,000 upon the redemption of the Notes.
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PRINCIPAL REVENUE AND EXPENSE ITEMS
Revenues
We derive our most significant revenues from twothree principal sources:
| ● | premiums assumed from reinsurance on property and casualty business; | |
| ● | income from investments and unrealized (loss)/ gain on other investments; | |
| ● | income under our Administrative Services Agreement | |
| ● | income from SurancePlus ITOM fees |
Premiums Assumed
Premiums assumed include all premiums received by a reinsurance company during a specified accounting period, even if the policy provides coverage beyond the end of the period. Premiums are earned over the term of the related policies. At the end of each accounting period, the portion of the premiums that are not yet earned are included in the unearned premiums reserve and are realized as revenue in subsequent periods over the remaining term of the policy. Our policies typically have a term of twelve months. Thus, for example, for a policy that is written on July 1, 2017,2023, typically one-half of the premiums will be earned in 20172023 and the other half will be earned during 2018.2024. However, in the event of limit losses on our policies, as we have experienced during the quarter ended September 30, 2017, premium recognition has beenwill be accelerated to match losses incurred in the period, when there is no possibility of any future treaty-year losses under the contracts.
Premiums from reinsurance on property and casualty business assumed are directly related to the number, type and pricing of contracts we write.
Premiums assumed are recorded net of change in loss experience refund, which consists of changes in amounts due to the cedants under two of our reinsurance contracts. These contracts contain retrospective provisions that adjust premiums in the event losses are minimal or zero. We recognize a liability pro-rata over the period in which the absence of loss experience obligates us to refund premiums under the contracts, and we will derecognize such liability in the period in which a loss experience arises. The change in loss experience refund is negatively correlated to loss and loss adjustment expenses described below.
Investment Income
Income from our investments is primarily comprised of net realized and unrealized gains (losses) interest income dividends and net realized gainsdividends on investment securities. Such income is primarily from the Company’s investments, which includes other investments in Jet.AI and investments held in trust accounts that collateralize the reinsurance policies that we write. The investment parameters for trust accounts are generally be established by the cedant for the relevant policy.
Administrative Services Agreement
Commencing on the effective date of the SPAC’s IPO, the Sponsor agreed to pay the Company a total of up to $10,000 per month for office space, utilities, secretarial and administrative support to the Sponsor and the SPAC. Upon completion of the SPAC’s initial Business Combination or the SPAC’s liquidation, the Sponsor will cease paying these monthly fees. For the year ended December 31, 2023, the Company received $80,000, and recorded income of $80,000 from the Sponsor under the Administrative Services Agreement, which is included in “net investment and other income” in the consolidated statements of operations.
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SurancePlus receives an incentive, technology, origination and management (“ITOM”) fee to cover costs associated with origination, structuring and the blockchain technology related to the DeltaCat Re Tokens. These fees are included in SurancePlus fees income line item in the consolidated statement of operations.
Expenses
Our expenses consist primarily of the following:
| ● | losses and loss adjustment expenses; | |
| ● | policy acquisition costs and underwriting expenses; and | |
| ● | general and administrative expenses. |
Loss and loss adjustment expenses;
Loss and loss adjustment expenses are a function of the amount and type of reinsurance contracts we write and of the loss experience of the underlying coverage. As described below, loss and loss adjustment expenses are based on the claims reported by our Company’s ceding insurers, and may include an actuarial analysis of the estimated losses, including losses incurred during the period and changes in estimates from prior periods. Depending on the nature of the contract, loss and loss adjustment expenses may be paid over a period of years.
Policy Acquisition Costs and Underwriting Expenses
Policy acquisition costs and underwriting expenses consist primarily of brokerage fees, ceding commissions, premium taxes and other direct expenses that relate to our writing of reinsurance contracts. We amortize deferred acquisition costs over the related contract term.
General and Administrative Expenses
General and administrative expenses consist of salaries and benefits and related costs, including costs associated with our professional fees, rent and other general operating expenses consistent with operating as a public company.
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RESULTS OF OPERATIONS
The following table summarizes our results of operations for the years ended December 31, 20172023 and 20162022 (dollars in thousands, except per share amounts):
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY | ||
Consolidated Statements of Income | ||
(expressed in thousands of U.S. Dollars, except per share and share amounts) | ||
Years Ended December 31, | ||
2017 | 2016 | |
| Revenue | ||
| Assumed premiums | $18,263 | 15,065 |
| Premiums ceded | (880) | - |
| Change in loss experience refund payable | 1,335 | 883 |
| Change in unearned premiums reserve | 4,849 | 2,110 |
| Net premiums earned | 23,567 | 18,058 |
| Net realized investment (losses) gains | (138) | 554 |
| Net investment income | 412 | 450 |
| Total revenue | 23,841 | 19,062 |
| Expenses | ||
| Losses and loss adjustment expenses | 42,427 | 14,775 |
| Policy acquisition costs and underwriting expenses | 681 | 286 |
| General and administrative expenses | 1,325 | 1,420 |
| Total expenses | 44,433 | 16,481 |
| Net (loss) income | $(20,592) | 2,581 |
| Basic (loss) earnings per share | $(3.55) | 0.43 |
| Diluted (loss) earnings per share | $(3.55) | 0.43 |
| Weighted-average shares outstanding | ||
| Basic and Diluted | 5,808,354 | 6,022,985 |
| Dividends paid per share | $0.36 | 0.48 |
| Performance ratios to net premiums earned: | ||
| Loss ratio | 180.0% | 81.8% |
| Acquisition cost ratio | 2.9% | 1.6% |
| Expense ratio | 8.5% | 9.4% |
| Combined ratio | 188.5% | 91.3% |
| Years Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenue | ||||||||
| Assumed premiums | $ | 2,170 | 645 | |||||
| Change in unearned premiums reserve | (915 | ) | 350 | |||||
| Net premiums earned | 1,255 | 995 | ||||||
| Net investment and other income | 303 | 201 | ||||||
| Management fee income | 300 | - | ||||||
| Net realized investment gain | - | 27 | ||||||
| Unrealized loss on other investments | (8,945 | ) | (35 | ) | ||||
| Change in fair value of equity securities | 38 | (338 | ) | |||||
| Total revenue | (7,049 | ) | 850 | |||||
| Expenses | ||||||||
| Losses and loss adjustment expenses | - | 1,073 | ||||||
| Policy acquisition costs and underwriting expenses | 141 | 110 | ||||||
| General and administrative expenses | 2,183 | 1,413 | ||||||
| Total expenses | 2,324 | 2,596 | ||||||
| Loss before income attributable to noteholders | (9,373 | ) | (1,746 | ) | ||||
| Income attributable to noteholders | (542 | ) | (43 | ) | ||||
| Net loss | $ | (9,915 | ) | (1,789 | ) | |||
| Loss per share | ||||||||
| Basic and Diluted | $ | (1.69 | ) | (0.31 | ) | |||
| Weighted-average shares outstanding | ||||||||
| Basic and Diluted | 5,867,129 | 5,772,396 | ||||||
| Performance ratios to net premiums earned: | ||||||||
| Loss ratio | 0.0 | % | 107.8 | % | ||||
| Acquisition cost ratio | 11.2 | % | 11.0 | % | ||||
| Expense ratio | 185.2 | % | 153.1 | % | ||||
| Combined ratio | 185.2 | % | 260.9 | % | ||||
Comparison of the Year Ended December 31, 20172023 to Year Ended December 31, 2016
General
.Net loss for the year ended December 31,Premium Income
. Net premiums earned typically reflects the pro-rata inclusion into income of premiums assumed| 34 |
Losses Incurred
.Losses incurred for the year ended December 31,Policy Acquisition Costs and Underwriting Expenses
. Acquisition costs represent the amortization of the brokerage fees and federal excise taxes incurred on reinsurance contracts placed. Policy acquisition costs and underwriting expenses for the year ended December 31,General and Administrative Expenses
.General and administrative expenses for the year ended December 31,MEASUREMENT OF RESULTS
We use various measures to analyze the growth and profitability of business operations. For our reinsurance business, we measure growth in terms of premiums assumed and we measure underwriting profitability by examining our loss, underwriting expense and combined ratios. We analyze and measure profitability in terms of net income and return on average equity.
Premiums Assumed.
We use gross premiums assumed to measure our sales of reinsurance products. Gross premiums assumed also correlates to our ability to generate net premiums earned. See also the analysis above relating to the growth in premiums assumed.Loss Ratio.
The loss ratio is the ratio of losses and loss adjustment expenses incurred to premiums earned and measures the underwriting profitability of our reinsurance business. The loss ratioAcquisition Cost Ratio.
The acquisition cost ratio is the ratio of policy acquisition costs and other underwriting expenses to net premiums earned. The acquisition cost ratio measures our operational efficiency in producing, underwriting and administering our reinsurance business. The acquisition cost ratio increasedExpense Ratio.
The expense ratio is the ratio of policy acquisition costs, other underwriting expenses and general and administrative expenses to net premiums earned. We use the expense ratio to measure our operating performance. The expense ratioCombined Ratio.
We use the combined ratio to measure our underwriting performance. The combined ratio is the sum of the loss ratio and the expense ratio.FINANCIAL CONDITION – DECEMBER 31, 20172023 COMPARED TO DECEMBER 31, 2016
Restricted Cash and Cash Equivalents
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Investments. As of December 31, 2023, our equity securities increased marginally by collateral returned on$38,000 to $680,000, from $642,000 as of December 31, 2023. The increase is primarily a result of the expirationpositive change in value of reinsurance contracts, coupled with withdrawals by the cedants for settlement of losses under the reinsurance contractsequity securities market during the year ended December 31, 2017.
Other investments. As of December 31, 2017,2023, our available for sale securitiesother investments decreased by $4.5 million, or 41%, to $6.5$2.5 million from $11$11.4 million as ofat December 31, 2016.2022. The decrease is primarily a resultdue to the fair value changes of net salesour investment in Jet.AI in which the Company has an equity investment measured at fair value.
Reserve of fixed-maturitylosses and equity securities during the year ended December 31, 2017.
Notes Payable to Noteholders. As of December 31, 2017,2023, our notes payable decreased by $98,000 to $118,000 from $216,000 at December 31, 2022, The decrease is due to a payment made to noteholders on the underlying contracts for previous treaty periods.
Unearned Premiums Reserve. As of December 31, 2023, our unearned premiums reserve decreasedincreased by $1.5 million, or 42%,$915,000, to $2.0 million,$915,000 from $3.5 million$0 at December 31, 2016.2022. The decreaseincrease is due primarilywholly to the successful placementrecognition of premium income on in-force reinsurance contracts forduring the treaty year effective June 1, 2017 more than offsetting by the acceleration of premium recognition due to the full limit losses on all of our contracts.
LIQUIDITY AND CAPITAL RESOURCES
General
We are organized as a holding company and provide administrative and management services to our subsidiaries, as well as to Oxbridge Acquisition Corp., a special purpose acquisition company, up to the time of its business combination with substantially no operations at the holding company level.Jet.AI Inc. (“Jet.AI”) in August 2023. Our operations are conducted through our reinsurance subsidiary,subsidiaries, Oxbridge Reinsurance Limited and Oxbridge Re NS and our Web3 focused subsidiary, SurancePlus, which underwritesincludes the underwriting of risks associated with our property and casualty reinsurance programs.programs, as well as the tokenization of RWAs such as reinsurance contracts. We have minimal continuing cash needs at the holding company level, with such expensesneeds principally being related to the payment of administrative expenses and shareholder dividends if any.(if any). There are restrictions on Oxbridge Reinsurance Limited’s and Oxbridge Re NS’ ability to pay dividends which are described in more detail below.
Sources and Uses of Funds
Our sources of funds primarily consist of premium receipts (net of brokerage fees and federal excise taxes, where applicable) and investment income, including interest, dividends and realized gains. We use cash to pay losses and loss adjustment expenses, other underwriting expenses, dividends, and general and administrative expenses. Substantially all of our surplus funds, net of funds required for cash liquidity purposes, are invested in accordance with our business plan and investment guidelines. Our investment portfolio, except for our investment in Jet.AI, is primarily comprised of cash and highly liquid securities, which can be liquidated, if necessary, to meet current liabilities.liabilities, We believe that we have sufficient flexibility to liquidate any long-term securities that we own in a rising market to generate liquidity.
As of December 31, 2017,2023, we believe we had sufficient cash flows from operations to meet our liquidity requirements. We expect that our operational needs for liquidity will be met by cash, investment income and funds generated from underwriting activities. We have no current plans to issue debt and expect to fund our operations for the foreseeable future from operating cash flows, as well as from potential future equity offerings. However, we cannot provide assurances that in the future we will not incur indebtedness to implement our business strategy, pay claims or make acquisitions.
Although Oxbridge Re Holdings Limited is not subject to any significant legal prohibitions on the payment of dividends, its subsidiaries Oxbridge Reinsurance Limited isand Oxbridge Re NS are subject to Cayman Islands regulatory constraints that affect its ability to pay dividends to us and include a minimum net worth requirement. Currently, the minimum net worth requirement for Oxbridge Reinsurance Limitedeach subsidiary is $500. As of December 31, 2017, Oxbridge Reinsurance Limited2023, each subsidiary exceeded the minimum required. By law, Oxbridge Reinsurance Limitedeach subsidiary is restricted from paying a dividend if such a dividend would cause its net worth to drop to less than the required minimum.
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Cash Flows
Our cash flows from operating, investing, and financing activities for the years ended December 31, 20172023 and 20162022 are summarized below.
Cash Flows for the Year ended December 31, 20172023 (in thousands)
Net cash used in operating activities for the year ended December 31, 20172023 totaled $26,310,$1,260, which consisted primarily of cash received from net written premiums less cash disbursed for operating expenses and net loss payments. Net cash provided by investing activities of $24,983 was primarily due to the net sales of available for sale securities and collateral withdrawals from trust accounts to settle losses arising during the year. Net cash used in financing activities totaled $3,152 representing net cash dividend payments and cash used to repurchase ordinary shares under the Company’s share repurchase plan.
Cash Flows for the Year ended December 31, 2022 (in thousands)
Net cash used in operating activities for the year ended December 31, 2022 totaled $829, which consisted primarily of cash received on net written premiums less cash disbursed for operating expenses and reserve for loss and loss adjustment expenses. Net cash used in investing activities of $661 was primarily due to other investments and the net purchase and sales of available for sale securities and collateral withdrawals from trust accounts. Netequity securities. There was no cash used in or provided by financing activities totaled $3,627 representing net cash dividend payments and cash used to repurchase ordinary shares under the Company’s share repurchase plan.
OFF-BALANCE SHEET ARRANGEMENTS
As of December 31, 2017,2023, we had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K.
Exposure to Catastrophes
As with other reinsurers, our operating results and financial condition could be adversely affected by volatile and unpredictable natural and man-made disasters, such as hurricanes, windstorms, earthquakes, floods, fires, riots and explosions.explosions, and particularly to weather events in the State of Florida. Although we attempt to limit our exposure to levels we believe are acceptable, it is possible that an actual catastrophic event or multiple catastrophic events could have a material adverse effect on our financial condition, results of operations and cash flows. As described under “CRITICAL ACCOUNTING POLICIES—Reserves for Losses and Loss Adjustment Expenses” below, under accounting principles generally accepted in the United States generally accepted accounting principlesof America (“U.S. GAAP”), we are not permitted to establish loss reserves with respect to losses that may be incurred under reinsurance contracts until the occurrence of an event which may give rise to a claim. As a result, only loss reserves applicable to losses incurred up to the reporting date may be established, with no provision for a contingency reserve to account for expected future losses.
CRITICAL ACCOUNTING POLICIES
We are required to make estimates and assumptions in certain circumstances that affect amounts reported in our Consolidated Financial Statementsconsolidated financial statements and related notes.footnotes. We evaluate these estimates and assumptions on an on-going basis based on historical developments, market conditions, industry trends and other information that we believe to be reasonable under the circumstances. These accounting policies pertain to fair value measurements, particular with respect to our investment in Jet.AI., premium revenues and risk transfer, reserve for loss and loss adjustment expenses, and reporting of deferred acquisition costs.
Fair value measurement: GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
The three levels of the fair value hierarchy under GAAP are as follows:
Level 1 Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date;
| 37 |
Level 2 Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active;
and
Level 3 Inputs that are unobservable.
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. For fixed maturity securities, inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, broker quotes for similar securities and other factors. The fair value of investments in stocks and exchange-traded funds is based on the last traded price. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the Company’s investment custodians and management. The investment custodians and management consider observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant markets.
Premium Revenue and Risk Transfer
. We record premiums revenue as earned pro-rata over the terms of the reinsurance agreements and the unearned portion at the balance sheet date is recorded as unearned premiums reserve. A reserve is made for estimated premium deficiencies to the extent that estimated losses and loss adjustment expenses exceed related unearned premiums. Investment income is not considered in determining whether or not a deficiency exists.We account for reinsurance contracts in accordance with ASC 944, ‘‘Financial Services – Insurance.” Assessing whether or not a reinsurance contract meets the conditions for risk transfer requires judgment. The determination of risk transfer is critical to reporting premiums written. If we determine that a reinsurance contract does not transfer sufficient risk, we must account for the contract as a deposit liability.
Reserves for Losses and Loss Adjustment Expenses
. We determine our reserves for losses and loss adjustment expenses on the basis of the claims reported by our ceding insurers and for lossesWe believe that the amounts are adequate; however, the inherent impossibility of predicting future events with precision, results in uncertainty as to the amount which will ultimately be required for the settlement of losses and loss expenses, and the differences could be material. Adjustments are reflected in the consolidated statements of income in the period in which they are determined.
Under U.S. GAAP, we are not permitted to establish loss reserves until the occurrence of an actual loss event. As a result, only loss reserves applicable to losses incurred up to the reporting date may be recorded, with no allowance for the provision of a contingency reserve to account for expected future losses. Losses arising from future events, which could be substantial, are estimated and recognized at the time the loss is incurred.
As at December 31, 2017 our best estimate for2023 we had no reserves for loss and loss adjustment expenses was $4.8 million, with IBNR representing approximately 27% of such reserves.due to no significant events occurring during the year and no reported claims on contract in force. See Note 67 to the consolidated financial statements.
Our reserving methodology does not lend itself well to a statistical calculation of a range of estimates surrounding the best point estimate of our reserve for loss and loss adjustment expense. Due to the low frequency and high severity nature of claims within much of our business, our reserving methodology principally involves arriving at a specific point estimate for the ultimate expected loss on a contract by contractcontract-by-contract basis, and our aggregate loss reserves are the sum of the individual loss reserves established.
Deferred Acquisition Costs.
We defer certain expenses that are directly related to and vary with producing reinsurance business, including brokerage fees on gross premiums assumed, premium taxes and certain other costs related to the acquisition of reinsurance contracts. These costs are capitalized and the resulting asset, deferred acquisition costs, is amortized and charged to expense in future periods as premiums assumed are earned. The method followed in computing deferred acquisition costs limits the amount of such deferral to its estimated realizable value. The ultimate recoverability of deferred acquisition costs is dependent on the continued profitability of our reinsurance underwriting. If our underwriting ceases to be profitable, we may have to write off a portion of our deferred acquisition costs, resulting in a further charge to income in the period in which the underwriting losses are recognized.| 38 |
As a smaller reporting company as defined by Rule 229.10(f)(1) of the Exchange Act, we are not required to provide the information under this item.
The financial statements and supplementary data have been filed as a part of this Annual Report on Form 10-K as indicated in the Index to Consolidated Financial Statements and Financial Statement Schedules appearing on page 4950 of this Annual Report on Form 10-K.
None.
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our Chief Executive Officer (our principal executive officerofficer) and our Chief Financial Officer (our principal financial officer,officer), we have evaluated the effectiveness of our disclosure controls and procedures (as(as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K (December 31, 2017)2023). Our disclosure controls and procedures are intended to ensure that the information we are required to disclose in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including the principal executive officer and principal financial officer to allow timely decisions regarding required disclosures.
Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were effective.
It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over our financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.
Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Our management, with the participation of our Principal Executive Officerprincipal executive officer and Principal Financial Officer,principal financial officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in
| 39 |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commissionscaled disclosure requirements applicable to non-accelerated filers that permit us to provide only management’s report in this Annual Report.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the fiscalthree months and the year ended December 31, 20172023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
Other than the information regarding our code of ethics set forth below, the information required by this Item is incorporated herein by reference to the definitive proxy statement for our 2018 annual meeting2024 Annual Meeting of stockholdersShareholders to be filed with the SEC not later than 120 days after December 31, 2017.
We have adopted a code of ethics applicable to all employees and directors, including our principal executive officer, principal financial officer and principal accounting officer. We have posted the text of our code of ethics to our internet website:
The information required by this Item is incorporated herein by reference to the definitive proxy statement for our 2018 annual meeting2024 Annual Meeting of stockholdersShareholders or an amendment to this Form 10-K to be filed with the SEC not later than 120 days after December 31, 2017.
The information required by this Item is incorporated herein by reference to the definitive proxy statement for our 2018 annual meeting2024 Annual Meeting of stockholdersShareholders or an amendment to this Form 10-K to be filed with the SEC not later than 120 days after December 31, 2017.2023.
| 40 |
The information required by this Item is incorporated herein by reference to the definitive proxy statement for our 2018 annual meeting2024 Annual Meeting of stockholdersShareholders or an amendment to this Form 10-K to be filed with the SEC not later than 120 days after December 31, 2017.
The information required by this Item is incorporated herein by reference to the definitive proxy statement for our 2018 annual meeting2024 Annual Meeting of stockholdersShareholders or an amendment to this Form 10-K to be filed with the SEC not later than 120 days after December 31, 2017.
(a)
The Consolidated Financial Statements, other financial information, financial statement schedules and report of independent registered public accounting firm have been filed as part of this Annual Report on Form 10-K as indicated in the Index to Consolidated Financial Statements and Financial Statement chedulesSchedules appearing on page 4950 of this Annual Report on Form 10-K.
(b)
Reference is made to the separate exhibit index contained on pages 46 through 47page 48 filed herewith.
ITEM 16 FORM 10-K SUMMARY
None.
Oxbridge Re Holdings Limited
Index to Exhibits
| 41 |
| List of Subsidiaries of Oxbridge Re Holdings Limited. | ||
| 23.1 | Consent of Independent Registered Public Accounting Firm. | |
| 31.1 | Certifications of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934. |
| 42 |
| 31.2 | ||
| Certifications of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934. | ||
| Written Statement of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. § 1350. | ||
| 101 | The following materials from Oxbridge Re Holdings Limited’s Annual Report on Form 10-K for the fiscal year ended December 31, | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Indicates a management contract or compensatory plan or arrangement.
# Filed herewith
| 43 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| OXBRIDGE RE HOLDINGS LIMITED | ||||
By | /s/ JAY MADHU | |||
| Jay Madhu | ||||
Chief Executive Officer and President (Principal Executive Officer) | ||||
Date: | March | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below as of March 10, 201825, 2024 by the following persons on behalf of the registrant and in the capacities indicated:
/s/ WRENDON TIMOTHY | /s/ JAY MADHU | |
| Wrendon Timothy | Jay Madhu | |
| Chief Financial Officer and Secretary | Chief Executive Officer, President and Director | |
| (Principal Financial Officer and Principal Accounting Officer) | (Principal Executive Officer) |
| /s/ LESLEY THOMPSON | /s/ DWIGHT MERREN | |
| Lesley Thompson | Dwight Merren | |
| Director | Director |
| /s/ ARUN GOWDA | ||
| Director |
Index to Consolidated Financial Statements and Financial Statement Schedules
| Form 10-K | ||
| Page(s) | ||
| Consolidated Financial Statements | ||
| F-1 | ||
| F-2 | ||
| F-3 | ||
| F-4 | ||
| F-6 | ||
| F-7 |
| Financial Statements Schedules | ||
| F-31 | ||
| F-32 | ||
| F-35 | ||
| F-36 |
| 45 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors
Oxbridge Re Holdings Limited
Grand Cayman, Cayman Islands:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Oxbridge Re Holdings Limited and SubsidiarySubsidiaries (the "Company"“Company”), as of December 31, 20172023 and 20162022 and the related consolidated statements of income, comprehensive income,operations, changes in shareholders'shareholders’ equity and cash flows for the years then ended and the related notes and the consolidated financial statement schedules (collectively referred to as the "financial statements"“consolidated financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company atas of December 31, 20172023 and 2016,2022, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB"(“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, thefraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
HACKER, JOHNSON & SMITH PA
We have served as the Company'sCompany’s auditor since 2013.
Tampa, Florida
March 26, 2024
| F-1 |
Consolidated Balance Sheets
(expressed in thousands of U.S. Dollars, except per share and share amounts)
At December | ||
2017 | 2016 | |
| Assets | ||
| Investments: | ||
| Fixed-maturity securities, available for sale, at fair value (amortized cost: $4,450 and $6,060, respectively) | $4,433 | 6,051 |
| Equity securities, available for sale, at fair value (cost: $2,058 and $5,343, respectively) | 2,036 | 4,941 |
| Total investments | 6,469 | 10,992 |
| Cash and cash equivalents | 7,763 | 12,242 |
| Restricted cash and cash equivalents | 3,124 | 23,440 |
| Accrued interest and dividend receivable | 39 | 48 |
| Premiums receivable | 3,798 | 4,038 |
| Deferred policy acquisition costs | 48 | 88 |
| Prepayment and other receivables | 116 | 98 |
| Property and equipment, net | 36 | 54 |
| Total assets | $21,393 | 51,000 |
| Liabilities and Shareholders’ Equity | ||
| Liabilities: | ||
| Reserve for losses and loss adjustment expenses | $4,836 | 8,702 |
| Loss experience refund payable | 135 | 1,470 |
| Losses payable | 386 | - |
| Unearned premiums reserve | 2,012 | 3,461 |
| Accounts payable and other liabilities | 106 | 204 |
| Total liabilities | 7,475 | 13,837 |
| Shareholders’ equity: | ||
| Ordinary share capital, (par value $0.001, 50,000,000 shares authorized; 5,733,587 and 5,916,149 shares issued and outstanding) | 6 | 6 |
| Additional paid-in capital | 32,100 | 33,034 |
| (Accumulated Deficit) Retained earnings | (18,149) | 4,534 |
| Accumulated other comprehensive loss | (39) | (411) |
| Total shareholders’ equity | 13,918 | 37,163 |
| Total liabilities and shareholders’ equity | $21,393 | 51,000 |
| 2023 | 2022 | |||||||
| At December 31, | ||||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Investments: | ||||||||
| Equity securities, at fair value (cost: $1,926) | $ | 680 | 642 | |||||
| Cash and cash equivalents | 495 | 1,207 | ||||||
| Restricted cash and cash equivalents | 3,250 | 2,721 | ||||||
| Premiums receivable | 977 | 282 | ||||||
| Other investments | 2,478 | 11,423 | ||||||
| Loan receivable | 100 | - | ||||||
| Due from related parties | 63 | 45 | ||||||
| Deferred policy acquisition costs | 101 | - | ||||||
| Operating lease right-of-use assets | 9 | 44 | ||||||
| Prepayment and other assets | 96 | 114 | ||||||
| Prepaid offering costs | - | 133 | ||||||
| Property and equipment, net | 4 | 5 | ||||||
| Total assets | $ | 8,253 | 16,616 | |||||
| Liabilities and Shareholders’ Equity | ||||||||
| Liabilities: | ||||||||
| Other Liabilities – Delta Cat Re Tokenholders | $ | 1,523 | - | |||||
| Notes payable to noteholders | 118 | 216 | ||||||
| Reserve for losses and loss adjustment expenses | - | 1,073 | ||||||
| Unearned premiums reserve | 915 | - | ||||||
| Operating lease liabilities | 9 | 44 | ||||||
| Accounts payable and other liabilities | 356 | 294 | ||||||
| Total liabilities | 2,921 | 1,627 | ||||||
| Shareholders’ equity: | ||||||||
| Ordinary share capital, (par value $, shares authorized; and shares issued and outstanding) | 6 | 6 | ||||||
| Additional paid-in capital | 32,740 | 32,482 | ||||||
| Accumulated Deficit | (27,414 | ) | (17,499 | ) | ||||
| Total shareholders’ equity | 5,332 | 14,989 | ||||||
| Total liabilities and shareholders’ equity | $ | 8,253 | 16,616 | |||||
See accompanying Notes to Consolidated Financial Statements
| F-2 |
Consolidated Statements of Income
(expressed in thousands of U.S. Dollars, except per share amounts)
Years Ended December 31, | ||
2017 | 2016 | |
| Revenue | ||
| Assumed premiums | $18,263 | 15,065 |
| Premiums ceded | (880) | - |
| Change in loss experience refund payable | 1,335 | 883 |
| Change in unearned premiums reserve | 4,849 | 2,110 |
| Net premiums earned | 23,567 | 18,058 |
| Net realized investment (losses) gains | (138) | 554 |
| Net investment income | 412 | 450 |
| Total revenue | 23,841 | 19,062 |
| Expenses | ||
| Losses and loss adjustment expenses | 42,427 | 14,775 |
| Policy acquisition costs and underwriting expenses | 681 | 286 |
| General and administrative expenses | 1,325 | 1,420 |
| Total expenses | 44,433 | 16,481 |
| Net (loss) income | $(20,592) | 2,581 |
| Basic (loss) earnings per share | $(3.55) | 0.43 |
| Diluted (loss) earnings per share | $(3.55) | 0.43 |
| Weighted-average shares outstanding | ||
| Basic and Diluted | 5,808,354 | 6,022,985 |
| Dividends paid per share | $0.36 | 0.48 |
| 2023 | 2022 | |||||||
| Years Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenue | ||||||||
| Assumed premiums | $ | 2,170 | 645 | |||||
| Change in unearned premiums reserve | (915 | ) | 350 | |||||
| Net premiums earned | 1,255 | 995 | ||||||
| SurancePlus fee income | 300 | - | ||||||
| Net investment and other income | 303 | 201 | ||||||
| Net realized investment gain | - | 27 | ||||||
| Unrealized loss on other investments | (8,945 | ) | (35 | ) | ||||
| Change in fair value of equity securities | 38 | (338 | ) | |||||
| Total revenue | $ | (7,049 | ) | 850 | ||||
| Expenses | ||||||||
| Losses and loss adjustment expenses | $ | - | 1,073 | |||||
| Policy acquisition costs and underwriting expenses | 141 | 110 | ||||||
| General and administrative expenses | 2,183 | 1,413 | ||||||
| Total expenses | $ | 2,324 | 2,596 | |||||
| Loss before income attributable to noteholders and tokenholders | $ | (9,373 | ) | (1,746 | ) | |||
| Income attributable to noteholders and tokenholders | (542 | ) | (43 | ) | ||||
| Net loss | $ | (9,915 | ) | (1,789 | ) | |||
| Loss per share | ||||||||
| Basic and Diluted | ) | ) | ||||||
| Weighted-average shares outstanding | ||||||||
| Basic and Diluted | ||||||||
See accompanying Notes to Consolidated Financial Statements
| F-3 |
Consolidated Statements of Comprehensive Income
(expressed in thousands of U.S. Dollars)
| 2023 | 2022 | |||||||
| Years ended December 31 | ||||||||
| 2023 | 2022 | |||||||
| Operating activities | ||||||||
| Net loss | $ | (9,915 | ) | (1,789 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Share-based compensation | 258 | 127 | ||||||
| Depreciation and amortization | 6 | 4 | ||||||
| Net realized investment gains | - | (27 | ) | |||||
| SurancePlus fee income | (300 | ) | - | |||||
| Change in fair value of equity securities | (38 | ) | 338 | |||||
| Change in fair value of other investments | 8,945 | 35 | ||||||
| Change in operating assets and liabilities: | ||||||||
| Premiums receivable | (695 | ) | 2 | |||||
| Due from related parties | (18 | ) | (40 | ) | ||||
| Deferred policy acquisition costs | (101 | ) | 38 | |||||
| Prepayment and other assets | 18 | (64 | ) | |||||
| Prepaid offering costs | 133 | (133 | ) | |||||
| Other Liablities Delta Cat Re Tokenholders | 543 | - | ||||||
| Losses payable | (1,073 | ) | 1,073 | |||||
| Unearned premiums reserve | 915 | (350 | ) | |||||
| Accounts payable and other liabilities | 62 | (43 | ) | |||||
| Net cash used in operating activities | $ | (1,260 | ) | (829 | ) | |||
| Investing activities | ||||||||
| Purchase of equity securities | - | (1,002 | ) | |||||
| Purchase of loan receivable | (100 | ) | - | |||||
| Purchase of other investments | - | (285 | ) | |||||
| Proceeds from sale of equity securities | - | 626 | ||||||
| Purchase of property and equipment | (5 | ) | - | |||||
| Net cash used in investing activities | $ | (105 | ) | (661 | ) | |||
| Financing activities | ||||||||
| Partial redemption of notes payable to noteholders | (98 | ) | - | |||||
| Gross proceeds from the issuance of Delta Cat Re tokens | 1,280 | - | ||||||
| Net cash provided by financing activities | $ | 1,182 | - | |||||
| (continued) | ||||||||
| F-4 |
Years Ended December 31, | ||
2017 | 2016 | |
| Net (loss) income | $(20,592) | 2,581 |
| Other comprehensive income: | ||
| Change in unrealized loss on investments: | ||
| Unrealized gain arising during the year | 234 | 1,617 |
| Reclassification adjustment for net realized losses (gains) included in net (loss) income | 138 | (554) |
| Net change in unrealized loss | 372 | 1,063 |
| Total other comprehensive income | 372 | 1,063 |
| Comprehensive (loss) income | $(20,220) | 3,644 |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Consolidated Statements of Cash Flows, continued
(expressed in thousands of U.S. Dollars)
| Years ended December 31 | ||||||||
| 2023 | 2022 | |||||||
| Cash and cash equivalents, and restricted cash and cash equivalents: | ||||||||
| Net change during the year | $ | (183 | ) | (1,490 | ) | |||
| Balance at beginning of year | $ | 3,928 | 5,418 | |||||
| Balance at end of year | $ | 3,745 | 3,928 | |||||
See accompanying Notes to Consolidated Financial Statements
| F-5 |
Years ended December 31 | |||||
2017 | 2016 | ||||
| Operating activities | |||||
| Net (loss) income | $(20,592) | 2,581 | |||
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | |||||
| Stock-based compensation | 127 | �� 119 | |||
| Net amortization of premiums on investments in fixed-maturity securities | 84 | 21 | |||
| Depreciation and amortization | 24 | 21 | |||
| Net realized investment losses (gains) | 138 | (554) | |||
| Change in operating assets and liabilities: | |||||
| Accrued interest and dividend receivable | 9 | (23) | |||
| Premiums receivable | 240 | 79 | |||
| Deferred policy acquisition costs | 40 | 2 | |||
| Prepayment and other receivables | (18) | (7) | |||
| Reserve for losses and loss adjustment expenses | (3,866) | 8,702 | |||
| Loss experience refund payable | (1,335) | (8,443) | |||
| Losses payable | 386 | - | |||
| Unearned premiums reserve | (1,449) | (2,110) | |||
| Accounts payable and other liabilities | (98) | 28 | |||
| Net cash (used in) / provided by operating activities | $(26,310) | 416 | |||
| Investing activities | |||||
| Change in restricted cash and cash equivalents | 20,316 | 6,928 | |||
| Purchase of fixed-maturity securities | (3,988) | (3,111) | |||
| Purchase of equity securities | (18,659) | (10,024) | |||
| Proceeds from sale of fixed-maturity securities | 5,538 | 119 | |||
| Proceeds from sale of equity securities | 21,782 | 12,968 | |||
| Purchase of property and equipment | (6) | (11) | |||
| Net cash provided by investing activities | $24,983 | 6,869 | |||
| Financing activities | |||||
| Repurchases of common stock under share repurchase plan | (1,061) | (742) | |||
| Dividends paid | (2,091) | (2,885) | |||
| Net cash used in financing activities | $(3,152) | (3,627) | |||
(continued) | |||||
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Years ended December 31 | ||
2017 | 2016 | |
| Net change in cash and cash equivalents | (4,479) | 3,658 |
| Cash and cash equivalents at beginning of period | 12,242 | 8,584 |
| Cash and cash equivalents at end of period | $7,763 | 12,242 |
| Supplemental disclosure of cash flow information | ||
| Interest paid | - | - |
| Income taxes paid | - | - |
| Non-cash investing activities | ||
| Net change in unrealized loss on securities available for sale | 372 | 1,063 |
Consolidated Statements of Changes in Shareholders’ Equity
Years ended December 31, 20172023 and 2016
(expressed in thousands of U.S. Dollars, except per share amounts)
Ordinary Share Capital | Additional Paid-in | (Accumulated Deficit) Retained | Accumulated Other Comprehensive | Total Shareholders' | ||
Shares | Amount | Capital | Earnings | Loss | Equity | |
| Balance at December 31, 2015 | 6,060,000 | 6 | 33,657 | 4,838 | (1,474) | 37,027 |
| Cash dividends paid | - | - | - | (2,885) | - | (2,885) |
| Repurchase and retirement of common stock under share repurchase plan | (143,851) | - | (742) | - | - | (742) |
| Net income for the year | - | - | - | 2,581 | - | 2,581 |
| Stock-based compensation | - | - | 119 | - | - | 119 |
| Total other comprehensive income | - | - | - | - | 1,063 | 1,063 |
| Balance at December 31, 2016 | 5,916,149 | 6 | 33,034 | 4,534 | (411) | 37,163 |
| Balance at December 31, 2016 | 5,916,149 | 6 | 33,034 | 4,534 | (411) | 37,163 |
| Cash dividends paid | - | - | - | (2,091) | - | (2,091) |
| Repurchase and retirement of common stock under share repurchase plan | (182,562) | - | (1,061) | - | - | (1,061) |
| Net loss for the year | - | - | - | (20,592) | - | (20,592) |
| Stock-based compensation | - | - | 127 | - | - | 127 |
| Total other comprehensive income | - | - | - | - | 372 | 372 |
| Balance at December 31, 2017 | 5,733,587 | 6 | 32,100 | (18,149) | (39) | 13,918 |
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Ordinary Share Capital | Additional Paid-in | Accumulated | Total Shareholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||
| Balance at December 31, 2021 | 5,749,587 | $ | 6 | $ | 32,355 | $ | (15,710 | ) | $ | 16,651 | ||||||||||
| Net loss for the year | - | - | - | (1,789 | ) | (1,789 | ) | |||||||||||||
| Issuance of restricted stock | 20,000 | - | - | - | - | |||||||||||||||
| Share-based compensation | - | - | 127 | - | 127 | |||||||||||||||
| Balance at December 31, 2022 | 5,769,587 | $ | 6 | $ | 32,482 | $ | (17,499 | ) | $ | 14,989 | ||||||||||
| Balance at December 31, 2022 | 5,769,587 | $ | 6 | 32,482 | (17,499 | ) | 14,989 | |||||||||||||
| Balance | 5,769,587 | $ | 6 | 32,482 | (17,499 | ) | 14,989 | |||||||||||||
| Net loss for the year | - | - | - | (9,915 | ) | (9,915 | ) | |||||||||||||
| Issuance of Restricted stock, net | 100,647 | - | - | - | - | |||||||||||||||
| Share-based compensation | - | - | 258 | - | 258 | |||||||||||||||
| Balance at December 31, 2023 | 5,870,234 | $ | 6 | $ | 32,740 | $ | (27,414 | ) | $ | 5,332 | ||||||||||
| Balance | 5,870,234 | $ | 6 | 32,740 | (27,414 | ) | 5,332 | |||||||||||||
See accompanying Notes to Consolidated Financial Statements.Statements
| F-6 |
Notes to Consolidated Financial Statements
1.
(a)
Oxbridge Re Holdings Limited (the “Company”) was incorporated as an exempted company on April 4, 2013 under the laws of the Cayman Islands. Oxbridge Re Holdings LimitedThe Company directly owns 100%100% of the equity interest in Oxbridge Reinsurance Limited, an exempted entity incorporated on April 23, 2013 under the laws of the Cayman Islands and for which a Class “C” Insurer’s license was granted on April 29, 2013 under the provisions of the Cayman Islands Insurance Law. Oxbridge Re Holdings LimitedThe Company also indirectly owns 100%100% of the equity interest in Oxbridge Re NS, Ltd., an entity incorporated as an exempted company on December 22, 2017 under the laws of the Cayman Islands to facilitate potential future hedgingfunction as a reinsurance sidecar facility and investment activities with respect to our reinsurance risks but that does not yet have any operations, assets, or, liabilities asincrease the underwriting capacity of December 31, 2017.Oxbridge Reinsurance Limited. The Company throughalso indirectly owns 100% of the equity interest in SurancePlus, an entity incorporated as a business company on December 19, 2022 under the laws of the British Virgin Islands to issue digital securities. The Company and its subsidiaries (collectively “Oxbridge Re”) provide the following: SurancePlus; is a Web3-focused subsidiary that currently leverages blockchain technology to democratize access to high-return reinsurance contracts via digital securities. Oxbridge Reinsurance Limited; is a licensed reinsurance subsidiary that provides collateralized reinsurance business solutions primarily to property and casualty insurers in the property catastrophe market and invests in various insurance-linked securities.Gulf Coast region of the United States; Oxbridge Re NS; a licensed reinsurance SPV/side car that provides third-party investors with access to reinsurance contracts with returns uncorrelated to the financial markets. The Company operates as a single business segment through its wholly-owned subsidiaries. The Company’s headquarters and principal executive offices are located at Strathvale House, 90 North ChurchSuite 201, 42 Edward Street, Georgetown,George Town, Grand Cayman, Cayman Islands, and have their registered offices at P.O. Box 309, Ugland House, Grand Cayman, Cayman Islands.
The Company’s ordinary shares and warrants are listed on The NASDAQ Capital Market under the symbols “OXBR” and “OXBRW,” respectively.
(b)
The accompanying consolidated financial statements for the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All significant intercompany transactions and balances have been eliminated upon consolidation.
The Company consolidates in these consolidated financial statements the results of operations and financial position of all voting interest entities (“VOE”) in which the Company has a controlling financial interest and all variable interest entities (“VIE”) in which the Company is considered to be the primary beneficiary. The consolidation assessment, including the determination as to whether an entity qualifies as a VIE or VOE, depends on the facts and circumstances surrounding each entity.
2.
Use of Estimates
: In preparing the consolidated financial statements, management was required to make certain estimates and assumptions that affect the reported amounts of the consolidated assets, liabilities, revenues, expenses and related disclosures at the financial reporting date and throughout the periods being reported upon. Certain of the estimates result from judgments that can be subjective and complex and consequently actual results may differ from these estimates, which would be reflected in future periods.| F-7 |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements,
2.
Revenue Recognition
SurancePlus incentive, technology, origination and management (“ITOM”) fee income represents fee income related to the completion of the DeltaCat tokenized reinsurance securities as well as placement of the underlying insurance policies. The Company recognizes the associated revenue at the time of the placement of the underlying insurance policies as the performance obligation is satisfied at that time.
Cash and cash equivalents
: Cash and cash equivalents are comprised of cash andRestricted cash and cash equivalents
:Restricted cash and cash equivalents represent funds held in accordance with the Company’s trust agreements with ceding insurers and trustees, which requires the Company to maintain collateral with a market value greater than or equal to the limit of liability, less unpaid premium.Investments
:TheUnrealized gains or losses are determined by comparing the fair market value of the securities with their cost or amortized cost. Realized gains and losses on investments are recorded on the trade date and are included in the consolidated statements of income.operations. The cost of securities sold is based on the specified identification method. Investment income is recognized as earned and discounts or premiums arising from the purchase of debt securities are recognized in investment income using the interest method over the remaining term of the security.
Fair value measurement
: GAAP establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under GAAP are as follows:| Level 1 | Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date; |
| Level 2 | Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly, including inputs in markets that are not considered to be active; and |
| Level 3 | Inputs that are unobservable. |
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. For debtfixed maturity securities, inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, broker quotes for similar securities and other factors. The fair value of investments in common stocks and exchange-traded funds is based on the last traded price. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by management and the Company’s investment custodians.
| F-8 |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to management and the investment custodians’ perceived risk of that instrument.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Deferred policy acquisition costs (“DAC”)
:Policy acquisition costs consist of brokerage fees, federal excise taxes and other costs related directly to the successful acquisition of new or renewal insurance contracts and are deferred and amortized over the terms of the reinsurance agreements to which they relate. The Company evaluates the recoverability of DAC by determining if the sum of future earned premiums and anticipated investment income is greater than the expected future claims and expenses. If a loss is probable on the unexpired portion of policies in force, a premium deficiency loss is recognized.Offering Expenses:
During the year ended December 31, 20172023 the Company recognized offering costs totaling $133,000 on the consolidated statements of operations which was related to an equity distribution agreement with Maxim Group LLC (“Maxim”) for the sale of the ordinary shares. During the year ended December 31, 2023, the Company recognized in the consolidated statements of operations $236,000 of offering expenses in relation to the offering of Delta Cat Re digital securities issuable by the Company’s new subsidiary, SurancePlus Inc. (See Note 6)
In accordance with the terms of the equity distribution agreement with Maxim, we intend to offer and 2016, the DAC was considered fully recoverable and no premium deficiency loss was recorded.
Property and equipment
:Property and equipment are recorded at cost when acquired. Property and equipment are comprised of motor vehicles, furniture and fixtures, computer equipment and leasehold improvements and are depreciated, using the straight-line method, over their estimated useful lives, which are five years for furniture and fixtures and computer equipment and four years for motor vehicles. Leasehold improvements are amortized over the lesser of the estimated useful lives of the assets or remaining lease term. The Company periodically reviews property and equipment that have finite lives, and that are not held for sale, for impairment by comparing the carrying value of the assets to their estimated future undiscounted cash flows. For the years ended December 31,Reserves for losses
and loss adjustment expenses: The Company determines its reserves for losses and loss adjustment expenses, if any, on the basis of the claims reported by the Company’s ceding insurers and for losses incurred but not reportedLoss experience refund payable
: Certain contracts include retrospective provisions that adjust premiums or result in profit commissions in the event losses are minimal or zero. In accordance with GAAP, the Company will recognize a liability in the period in which the absence of loss experience obligates the Company to pay cash or other consideration under the contracts. On the contrary, the Company will derecognize such liability in the period in which a loss experience arises. Such adjustments to the liability, which accrue throughout the contract terms, will reduce the liability should a catastrophic loss eventPremiums assumed
: The Company records premiums assumed, net of loss experience refunds, as earned pro-rata over the terms of the reinsurance agreements, or period of risk, where applicable, and the unearned portion at the consolidated balance sheet date is recorded as unearned premiums reserve. A reserve is made for estimated premium deficiencies to the extent that estimated losses and loss adjustment expenses exceed related unearned premiums. Investment income is not considered in determining whether or not a deficiency exists.| F-9 |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Subsequent adjustments of premiums assumed, based on reports of actual premium by the ceding companies, or revisions in estimates of ultimate premium, are recorded in the period in which they are determined. Such adjustments are generally determined after the associated risk periods have expired, in which case the premium adjustments are fully earned when assumed.
Certain contracts allow for reinstatement premiums in the event of a full limit loss prior to the expiration of the contract. A reinstatement premium is not due until there is a full limit loss event and therefore, in accordance with GAAP, the Company records a reinstatement premium as written only in the event that the reinsured incurs a full limit loss on the contract and the contract allows for a reinstatement of coverage upon payment of an additional premium. For catastrophe contracts which contractually require the payment of a reinstatement premium equal to or greater than the original premium upon the occurrence of a full limit loss, the reinstatement premiums are earned over the original contract period.
Unearned Premiums Ceded:
Ceded premiums are written during the period in which the risk incept and are expensed over the contract period in proportion to the period of protection. Unearned premiums ceded consist of the unexpired portion of the reinsurance obtained.
SurancePlus Fee Income: SurancePlus incentive, technology, origination and management (“ITOM”) fee income represents fee income related to the completion of the DeltaCat tokenized reinsurance securities as well as placement of the underlying insurance policies. The Company recognizes the associated revenue at the time of the placement of the underlying insurance policies as the performance obligation is satisfied at that time.
Uncertain income tax positions
: The authoritative GAAP guidance on accounting for, and disclosure of, uncertainty in income tax positions requires the Company to determine whether an income tax position of the Company is more likely than not to be sustained upon examination by the relevant tax authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. For income tax positions meeting the more likely than not threshold, the tax amount recognized in the consolidated financial statements, if any, is reduced by the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. The application of this authoritative guidance has had no effect on the Company’s consolidated financial statements because the Company had no uncertain tax positions at December 31,:The Company accounts for
| F-10 |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Additionally, the Company uses the fullguidance in the SEC’s Staff Accounting Bulletin No. 107 to determine the estimated life of the options ten years, as the estimated term of the options,issued and has assumed no forfeitures during the life of the options.
The Company uses the straight-line attribution method for all grants that include only a service condition. Compensation expense related to all awards is included in general and administrative expenses.
Segment Information
: Under GAAP, operating segments are based on the internal information that management uses for allocating resources and assessing performance as the source of the Company’s reportable segments. The Company manages its business on the basis of one operating segment, Property and Casualty Reinsurance, in accordance with the qualitative and quantitative criteria established under GAAP.Reclassifications
:3. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS
December 31, | ||
2017 | 2016 | |
(in thousands) | ||
| Cash on deposit | $4,052 | $6,868 |
| Cash held with custodians | 3,711 | 5,374 |
| Restricted cash held in trust | 3,124 | 23,440 |
| Total | 10,887 | 35,682 |
SUMMARY OF CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS
| 2023 | 2022 | |||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| (in thousands) | ||||||||
| Cash held on deposit | $ | 495 | $ | 1,207 | ||||
| Restricted cash held in trust | 3,250 | 2,721 | ||||||
| Total | $ | 3,745 | $ | 3,928 | ||||
Cash anand cash equivalents are held by large and reputable counterparties in the United States of America and in the Cayman Islands. Restricted cash held in trust is custodied with Truist Bank, of New York Mellon and SunTrust Bank N.A. and is held in accordance with the Company’s trust agreements with the ceding insurers and trustees, which require that the Company provide collateral having a market value greater than or equal to the limit of liability, less unpaid premium.
| F-11 |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements,
4. INVESTMENTS
The Company holds investmentsfrom time to time invests in fixed-maturity securities and equity securities, that arewith its fixed-maturity securities classified as available for sale.available-for-sale. At December 31, 20172023 and 2016,2022, the cost or amortized cost, gross unrealized gains and losses, and estimated fair value of the Company’sCompany did not hold any available-for-sale securities by security type were as follows:
Cost or Amortized Cost | Gross Unrealized Gain | Gross Unrealized Loss | Estimated Fair Value ($000) | |
($ in thousands) | ||||
| As of December 31, 2017 | ||||
| Fixed-maturity securities | ||||
| U.S. Treasury and agency securities | $4,450 | $- | $(17) | $4,433 |
| Total fixed-maturity securities | 4,450 | - | (17) | 4,433 |
| Mutual funds | 400 | 29 | - | 429 |
| Preferred stocks | 200 | - | (1) | 199 |
| Common stocks | 1,458 | 12 | (62) | 1,408 |
| Total equity securities | 2,058 | 41 | (63) | 2,036 |
| Total available for sale securities | $6,508 | $41 | $(80) | $6,469 |
| As of December 31, 2016 | ||||
| Fixed-maturity securities | ||||
| U.S. Treasury and agency securities | $6,060 | $28 | $(37) | $6,051 |
| Total fixed-maturity securities | 6,060 | 28 | (37) | 6,051 |
| Mutual funds | 400 | 2 | (6) | 396 |
| Preferred stocks | 687 | 8 | (4) | 691 |
| Common stocks | 4,256 | 126 | (528) | 3,854 |
| Total equity securities | 5,343 | 136 | (538) | 4,941 |
| Total available for sale securities | $11,403 | $164 | $(575) | $10,992 |
Amortized Cost | Estimated Fair Value | |
| ($ in thousands) | ||
| As of December 31, 2017 | ||
| Available for sale | ||
| Due within one year | $3,007 | 3,003 |
| Due after one year through five years | 1,443 | 1,430 |
$4,450 | $4,433 | |
| As of December 31, 2016 | ||
| Available for sale | ||
| Due within one year | $2,970 | $2,998 |
| Due after one year through five years | 3,090 | 3,053 |
$6,060 | $6,051 |
Proceeds received, and the gross realized gains and losses from salessale of available-for-saleequity securities, for the years ended December 31, 20172023 and 20162022 are as follows:
SCHEDULE OF GROSS REALIZED GAINS AND LOSSES FROM SALE OF EQUITY SECURITIES
Gross proceeds from sales | Gross Realized Gains | Gross Realized Losses | ||||||||||
| ($ in thousands) | ||||||||||||
| Year ended December 31, 2023 | ||||||||||||
| Equity securities | $ | - | $ | - | $ | - | ||||||
| Year ended December 31, 2022 | ||||||||||||
| Equity securities | $ | 626 | $ | 27 | $ | - | ||||||
Other Investments
On August 7, 2023, OXAC held an extraordinary general meeting at which the business combination with Jet Token, Inc. was approved by OXAC shareholders. In conjunction with the business combination, OXAC was redomesticated as a Delaware entity, and changed its name to Jet.AI Inc (“Jet.AI”). The business combination was closed on August 10, 2023, and on August 11, 2023, OXAC common stock and warrants began trading on the Nasdaq under the new ticker symbols JTAI and JTAIW.
The Company’s beneficial interests in Jet. AI’s ordinary shares, public warrants and Extension Loan are recorded at fair value and are classified in “Other Investments” on the consolidated balance sheets. The fair value calculation of the Company’s beneficial interest in Jet.AI’s ordinary shares and public warrants is dependent on the observable trading prices of JetAI’s Class A shares and public warrants. The fair value calculation of the Company’s beneficial interest in the Extension Loan is estimated to be the pro-rata original principal amount of the Extension Loan due to the short-term nature.
The Sponsor holds ordinary shares, Series A-1 preferred shares with purchase price of $ each, along with the 4,897,500 warrants. One of the Company’s executive officers is an independent member of Jet.AI’s board.
As a result of the re-measurement of our investment in Jet.AI, we recognized for the year ended December 31, 2023, an unrealized loss of $8,945,000 within our consolidated statements of operations.
Other investments as of December 31, 2023 and 2022 consist of the following (in thousands):
SCHEDULE OF OTHER INVESTMENT
| 2023 | 2022 | |||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| Jet.AI Series A-1 Convertible Preferred Stock | $ | 285 | $ | - | ||||
| Jet.AI. Promissory Note | - | 214 | ||||||
| Jet.AI. common stock (2022: Class B Ordinary Shares) | 2,193 | 11,209 | ||||||
| Total | $ | 2,478 | $ | 11,423 | ||||
| Beginning of year | $ | 11,423 | $ | 11,173 | ||||
| Investment in affiliate | - | 285 | ||||||
| Unrealized loss on investment in affiliate | (8,945 | ) | (35 | ) | ||||
| End of year | $ | 2,478 | $ | 11,423 | ||||
| F-12 |
Gross proceeds from sales | Gross Realized Gains | Gross Realized Losses | |
($ in thousands) | |||
| Year ended December 31, 2017 | |||
| Fixed-maturity securities | $5,538 | $30 | $(7) |
| Equity securities | $21,782 | $1,422 | $(1,583) |
| Year ended December 31, 2016 | |||
| Fixed-maturity securities | $119 | $8 | $- |
| Equity securities | $12,968 | $1,663 | $(1,117) |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements,
4.
Less Than Twelve | Twelve Months or | ||||||
Months | Greater | Total | |||||
Gross | Estimated | Gross | Estimated | Gross | Estimated | ||
Unrealized | Fair | Unrealized | Fair | Unrealized | Fair | ||
| As of December 31, 2017 | Loss | Value | Loss | Value | Loss | Value | |
($ in thousands) | ($ in thousands) | ($ in thousands) | |||||
| Fixed maturity securities | |||||||
| U.S. Treasury and agency securities | 13 | 1,428 | 4 | 3,003 | 17 | 4,431 | |
| Total fixed-maturity securities | 13 | 1,428 | 4 | 3,003 | 17 | 4,431 | |
| Equity securities | |||||||
| Preferred stocks | 1 | 199 | - | - | 1 | 199 | |
| All other common stocks | 36 | 769 | 26 | 174 | 62 | 943 | |
| Total equity securities | 37 | 968 | 26 | 174 | 63 | 1,142 | |
| Total available for sale securities | $50 | $2,396 | $30 | $3,177 | $80 | $5,573 | |
Less Than Twelve | Twelve Months or | ||||||
Months | Greater | Total | |||||
Gross | Estimated | Gross | Estimated | Gross | Estimated | ||
Unrealized | Fair | Unrealized | Fair | Unrealized | Fair | ||
| As of December 31, 2016 | Loss | Value | Loss | Value | Loss | Value | |
($ in thousands) | ($ in thousands) | ($ in thousands) | |||||
| Fixed maturity securities | |||||||
| U.S. Treasury and agency securities | 37 | 3,053 | - | - | 37 | 3,053 | |
| Total fixed-maturity securities | 37 | 3,053 | - | - | 37 | 3,053 | |
| Equity securities | |||||||
| Mutual funds | 6 | 193 | - | - | 6 | 193 | |
| Preferred stocks | 4 | 396 | - | - | 4 | 396 | |
| All other common stocks | 84 | 1,142 | 444 | 1,088 | 528 | 2,230 | |
| Total equity securities | 94 | 1,731 | 444 | 1,088 | 538 | 2,819 | |
| Total available for sale securities | $131 | $4,784 | $444 | $1,088 | $575 | $5,872 | |
Assets Measured at Estimated Fair Value on a Recurring Basis
The following table presents information about the Company’s financial assets measured at estimated fair value on a recurring basis that is reflected in the consolidated balance sheets at carrying value. The table indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value as of December 31, 20172023 and 2016:2022:
SCHEDULE OF FAIR VALUE OF ASSETS MEASURED ON RECURRING BASIS
| (Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
| Fair Value Measurements Using | ||||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
| As of December 31, 2023 | ($ in thousands) | |||||||||||||||
| Financial Assets: | ||||||||||||||||
| Cash and cash equivalents | $ | 495 | $ | - | $ | - | $ | 495 | ||||||||
| Restricted cash and cash equivalents | $ | 3,250 | $ | - | $ | - | $ | 3,250 | ||||||||
| Other investments | $ | 2,193 | $ | - | $ | 285 | $ | 2,478 | ||||||||
| Equity securities | $ | 680 | $ | - | $ | - | $ | 680 | ||||||||
| Total | $ | 6,618 | $ | - | $ | 285 | $ | 6,903 | ||||||||
| (Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
| Fair Value Measurements Using | ||||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | Total | |||||||||||||
| As of December 31, 2022 | ($ in thousands) | |||||||||||||||
| Financial Assets: | ||||||||||||||||
| Cash and cash equivalents | $ | 1,207 | $ | - | $ | - | $ | 1,207 | ||||||||
| Restricted cash and cash equivalents | $ | 2,721 | $ | - | $ | - | $ | 2,721 | ||||||||
| Other investments | $ | - | $ | - | $ | 11,423 | $ | 11,423 | ||||||||
| Equity securities | $ | 642 | $ | - | $ | - | $ | 642 | ||||||||
| Total | $ | 4,570 | $ | - | $ | 11,423 | $ | 15,993 | ||||||||
| F-13 |
Fair Value Measurements Using | ||||
(Level 1) | (Level 2) | (Level 3) | Total | |
| As of December 31, 2017 | ($ in thousands) | |||
| Financial Assets: | ||||
| Cash and cash equivalents | $7,763 | $- | $- | $7,763 |
| Restricted cash and cash equivalents | $3,124 | $- | $- | $3,124 |
| Fixed-maturity securities: | ||||
| U.S. Treasury and agency securities | 4,433 | - | - | 4,433 |
| Total fixed-maturity securities | 4,433 | - | - | 4,433 |
| Mutual funds | 429 | - | - | 429 |
| Preferred stocks | 199 | - | - | 199 |
| All other common stocks | 1,408 | - | - | 1,408 |
| Total equity securities | 2,036 | - | - | 2,036 |
| Total available for sale securities | 6,469 | - | - | 6,469 |
| Total | $17,356 | $- | $- | $17,356 |
Fair Value Measurements Using | ||||
(Level 1) | (Level 2) | (Level 3) | Total | |
| As of December 31, 2016 | ($ in thousands) | |||
| Financial Assets: | ||||
| Cash and cash equivalents | $12,242 | $- | $- | $12,242 |
| Restricted cash and cash equivalents | $23,440 | $- | $- | $23,440 |
| Fixed-maturity securities: | ||||
| U.S. Treasury and agency securities | 6,051 | - | - | 6,051 |
| Total fixed-maturity securities | 6,051 | - | - | 6,051 |
| Mutual funds | 396 | - | - | 396 |
| Preferred stocks | 691 | - | - | 691 |
| All other common stocks | 3,854 | - | - | 3,854 |
| Total equity securities | 4,941 | - | - | 4,941 |
| Total available for sale securities | 10,992 | - | - | 10,992 |
| Total | $46,674 | $- | $- | $46,674 |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements,
4. INVESTMENTS (continued)
Assets Measured at Estimated Fair Value on a Recurring Basis
There were no transfers between Levels 1, 2 or 3 during the years ended December 31, 20172023 and 20162022 except as disclosed below.
In the financial statements for the year ended December 31, 2023, there has been a notable change in the classification of our investment in Jet.AI from Level 3 to Level 1 within the fair value hierarchy. This change is attributed to Oxbridge Acquisition Corp. (“OXAC”) successfully completing a business combination with Jet.AI Inc (“Jet.AI”) in August 2023, resulting in the investment now having an active market with readily available quoted prices.
Previously classified as Level 3 due to the reliance on unobservable inputs, the investment is now categorized as Level 1, as it is valued based on quoted prices in an active market. This change reflects the increased liquidity and transparency associated with Jet.AI’s publicly traded status, allowing for a more reliable and market-driven valuation of our investments.
The following table provides a reconciliation of changes in fair value of the beginning and ending balances for the other investments classified as Level 3:
SCHEDULE OF RECONCILIATION OF CHANGES IN FAIR VALUE
| Year ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| ($ in thousands) | ||||||||
| Fair value of Level 3 other investments at beginning of year | $ | 11,423 | $ | 11,173 | ||||
| Transfer to Level 1 | (11,138 | ) | ||||||
| Investment in affiliate | - | 285 | ||||||
| Change in valuation inputs or other assumptions | - | (35 | ) | |||||
| Fair value of Level 3 other investment at December 31, 2023 | $ | 285 | $ | 11,423 | ||||
| F-14 |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
5.
Under current Cayman Islands law, no corporate entity, including the Company and the licensed subsidiary,subsidiaries, is obligated to pay taxes in the Cayman Islands on either income or capital gains. The Company and the licensed subsidiaryOxbridge Reinsurance Limited have an undertaking from the Governor-in-Cabinet of the Cayman Islands, pursuant to the provisions of the Tax Concessions Law, as amended, that, in the event that the Cayman Islands enacts any legislation that imposes tax on profits, income, gains or appreciations, or any tax in the nature of estate duty or inheritance tax, such tax will not be applicable to the Company and the licensed subsidiaryOxbridge Reinsurance Limited, or their operations, or to the ordinary shares or related obligations, until April 23, 2033 and May 17, 2033, respectively.
The Company and its subsidiaries intend to conduct substantially all of their operations in the Cayman Islands in a manner such that they will not be engaged in a trade or business in the U.S. However, because there is no definitive authority regarding activities that constitute being engaged in a trade or business in the U.S. for federal income tax purposes, the Company cannot assure that the U.S. Internal Revenue Service will not contend, perhaps successfully, that the Company or its subsidiaries isare engaged in a trade or business in the U.S. A foreign corporation deemed to be so engaged would be subject to U.S. federal income tax, as well as branch profits tax, on its income that is treated as effectively connected with the conduct of that trade or business unless the corporation is entitled to relief under an applicable tax treaty.
6. VARIABLE INTEREST ENTITIES
Oxbridge Re NS. On December 22, 2017, the Company established Oxbridge Re NS, a Cayman domiciled and licensed special purpose insurer, formed to provide additional collateralized capacity to support Oxbridge Reinsurance Limited’s reinsurance business. In respect of the debt issued by Oxbridge Re NS to investors, Oxbridge Re NS has entered into a retrocession agreement with Oxbridge Reinsurance Limited effective June 1, 2020. Under this agreement, Oxbridge Re NS receives a quota share of Oxbridge Reinsurance Limited’s catastrophe business. Oxbridge Re NS is a non-rated insurer and the risks have been fully collateralized by way of funds held in trust for the benefit of Oxbridge Reinsurance Limited. Oxbridge Re NS is able to provide investors with access to natural catastrophe risk backed by the distribution, underwriting, analysis and research expertise of Oxbridge Re.
The Company has determined that Oxbridge Re NS meets the definition of a VIE as it does not have sufficient equity capital to finance its activities. The Company concluded that it is the primary beneficiary and has consolidated the subsidiary upon its formation, as it owns 100% of the voting shares, 100% of the issued share capital and has a significant financial interest and the power to control the activities of Oxbridge Re NS that most significantly impacts its economic performance. The Company has no other obligation to provide financial support to Oxbridge Re NS. Neither the creditors nor beneficial interest holders of Oxbridge Re NS have recourse to the Company’s general credit.
Upon issuance of a series of participating notes by Oxbridge Re NS, all of the proceeds from the issuance are deposited into collateral accounts, to fund any potential obligation under the reinsurance agreements entered into with Oxbridge Reinsurance Limited underlying such series of notes. The outstanding principal amount of each series of notes generally is expected to be returned to holders of such notes upon the expiration of the risk period underlying such notes, unless an event occurs which causes a loss under the applicable series of notes, in which case the amount returned is expected to be reduced by such noteholder’s pro rata share of such loss, as specified in the applicable governing documents of such notes.
In addition, holders of such notes are generally entitled to interest payments, payable annually, as determined by the applicable governing documents of each series of notes.
Oxbridge Re Holdings Limited receives an origination and structuring fee in connection with the formation, operation, and management of Oxbridge Re NS.
| F-15 |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
6. VARIABLE INTEREST ENTITIES (continued)
Notes Payable to Series 2020-1 noteholders
Oxbridge Re NS entered into a retrocession agreement with Oxbridge Reinsurance Ltd on June 1, 2020 and issued $216,000 of participating notes which provides quota share support for Oxbridge Re’s global property catastrophe excess of loss reinsurance business. The participating notes have been assigned Series 2020-1 and matured on June 1, 2023. Participating notes totaling $98,000 were redeemed during the year-ended December 31, 2023 resulting in a balance due of $118,000 at December 31, 2023. None of the participating notes were redeemed during the year ended December 31, 2022.
The income from Oxbridge Re NS operations that are attributable to the participating notes noteholders for year ended December 31, 2023 was $0. The income from Oxbridge Re NS operations that are attributable to the participating notes noteholders for the year ended December 31, 2022 was $43,000 and are included within accounts payable and other liabilities at December 31, 2023 and 2022.
SurancePlus Inc.
SurancePlus Inc., a wholly-owned subsidiary of Oxbridge Re Holdings Limited, was incorporated as a British Virgin Islands Business Company on December 19, 2022 for the purposes of tokenizing reinsurance contracts underwritten by its affiliated licensed reinsurer, Oxbridge Re NS.
On March 27, 2023, the Company and SurancePlus Inc. (“SurancePlus”), issued a press release announcing the commencement of an offering by SurancePlus of DeltaCat Re tokenized reinsurance securities (the “Tokens”), which represent Series DeltaCat Preferred Shares of SurancePlus (“Preferred Shares”, and together with the Tokens, the “Securities”). Each digital security or token, which will have a purchase price of $ per Token, will represent one Preferred Share of SurancePlus. On September 11, 2023, the DeltaCat Re tokens were reclassified as tokenized interests carrying rights equivalent to the DeltaCat Re Preferred Shares in accordance with the provisions of British Virgin Islands law.
The proceeds from the offer and sale of the Securities will be used by SurancePlus to purchase one or more participating notes of Oxbridge Re NS, and the proceeds from the sale of participating notes will be invested in collateralized reinsurance contracts to be underwritten by Oxbridge Re NS. The holders of the digital Securities will generally be entitled to proceeds from the payment of participating notes in the amount of a preferred return of 20% plus an additional 80% of any proceeds in excess of the amount necessary to pay the preferred return. Assuming no casualty losses to properties reinsured by Oxbridge Re’s reinsurance subsidiaries, DeltaCat Re token investors are expected to receive an annual return on the original purchase price of 42%.
On June 27, 2023, SurancePlus Inc. completed its private placement (the “Private Placement”) of Series DeltaCat Re Preferred Shares represented by DeltaCat Re Tokens (the “Securities”). On June 27, 2023, SurancePlus entered into subscription agreements with accredited investors and non-U.S. persons in the Private Placement with respect to of the Securities at a purchase price of $ per token for aggregate gross proceeds of $2,297,660. SurancePlus also previously entered into subscription agreements for and sold of the Securities between April 5, 2023 and May 18, 2023 for gross proceeds of $150,100, also at a purchase price of $ per token. The aggregate amount raised in the Private Placement was $2,447,760 for the issuance of Securities of which approximately $1,280,000 was received from third-party investors and approximately $1,167,000 from Oxbridge Re Holdings Limited. Approximately $300,000 and $274,000 of ITOM fees were deducted from the gross proceeds from the third-party investors and Oxbridge Re Holdings Limited, respectively., The tokens were issued on the Avalanche blockchain. Ownership of DeltaCat Re tokenized reinsurance securities indirectly confers fractionalized interests in reinsurance contracts underwritten by Oxbridge Re’s reinsurance subsidiary, Oxbridge Re NS, for the 2023-2024 treaty year.
On June 28, 2023, Oxbridge issued a press release announcing the completion of the Private Placement
The Securities have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state or other securities laws and may not be offered or sold in the United States absent an effective registration statement or an applicable exemption from registration requirements or a transaction not subject to the registration requirements of the Securities Act or any state or other securities laws. The Securities were sold in a transaction exempt from registration under the Securities Act and were sold only to persons reasonably believed to be accredited investors in the United States under SEC Rule 506(c) under the Securities Act and outside the United States only to non-U.S. persons in accordance with Regulation S under the Securities Act.
| F-16 |
The selected unconsolidated historical financial information and other data presented below is derived from SurancePlus’ standalone unaudited financial statements for year ended December 31, 2023 and the balance sheet data as of December 31, 2023.
SCHEDULE OF FINANCIAL STATEMENTS
| For Year Ended | ||||
| Statement of Operations Data: | December 31, 2023 | |||
| (Unaudited) | ||||
| Surance Plus fee income | $ | 574 | ||
| Underwriting related income | 1,140 | |||
| Total revenue | $ | 1,714 | ||
| Expenses | $ | (272 | ) | |
| Income attributable to tokenholders | $ | (1,036 | ) | |
| Net income | $ | 406 | ||
| Balance Sheet Data: | At December 31, 2023 | |||
| (Unaudited) | ||||
| (In thousands) | ||||
| Total assets | $ | 3,588 | ||
| Amounts due to Delta Cat Re Tokenholders* | $ | 2,016 | ||
| Due to Parent | $ | 47 | ||
| Total shareholder’s equity | $ | 1,525 | ||
| * | includes underwriting profit of $494,000 due to Parent. |
| F-17 |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
7. RESERVE FOR LOSSES AND LOSS ADJUSTMENT EXPENSES
The following table summarizes the Company’s loss and loss adjustment expenses (“LAE”) and the reserve for loss and LAE reserve movements for the years endingended December 31, 20172023 and 2016.
December 31, | ||
2017 | 2016 | |
($ in thousands) | ||
| Gross balance, beginning of year | $8,702 | - |
| Incurred, net of reinsurance, related to: | ||
| Current period | 38,401 | 14,775 |
| Prior period | 4,026 | - |
| Total incurred, net of reinsurance | 42,427 | 14,775 |
| Paid, net of reinsurance, related to: | ||
| Current period | (36,293) | (6,073) |
| Prior period | (10,000) | - |
| Total paid, net of reinsurance | (46,293) | (6,073) |
| Net balance, end of year | $4,836 | 8,702 |
| Add: reinsurance recoverable | - | - |
| Gross balance, end of period | $4,836 | 8,702 |
SCHEDULE OF LOSS ADJUSTMENT EXPENSE
| 2023 | 2022 | |||||||
| Year ended | ||||||||
| December 31, | ||||||||
| 2023 | 2022 | |||||||
| ($ in thousands) | ||||||||
| Gross balance, beginning of year | $ | 1,073 | - | |||||
| Incurred, net of reinsurance, related to: | ||||||||
| Current year | - | 1,073 | ||||||
| Prior year | - | - | ||||||
| Total incurred | - | 1,073 | ||||||
| Paid related to: | ||||||||
| Current year | - | - | ||||||
| Prior year | (1,073 | ) | - | |||||
| Total paid | - | - | ||||||
| Balance, end of year | $ | - | 1,073 | |||||
When losses occur, the reserves for losses and LAE are typically comprised of case reserves (which are based on claims that have been reported) and IBNR reserves (which are based on losses that are believed to have occurred but for which claims have not yet been reported and include a provision for expected future development on existing case reserves). The Company uses the assistance of an independent actuarytypically suffers limit losses in the determinationevent of IBNR and expected future development of existing case reserves.
The uncertainties inherent in the reserving process and potential delays by cedants and brokers in the reporting of loss information, together with the potential for unforeseen adverse developments, may result in the reserve for losses and LAE ultimately being significantly greater or less than the reserve provided at the end of any given reporting period. The degree of uncertainty is further increased when a significant loss event takes place near the end of a reporting period. Reserve for losses and LAE estimates are reviewed periodically on a contract by contractcontract-by-contract basis and updated as new information becomes known. Any resulting adjustments are reflected in income in the period in which they become known.
The Company’s reserving process is highly dependent on the timing of loss information received from its cedants and related brokers.
There were no losses incurred during the year ended December 31, 2023. The losses incurred during the year ended December 31, 2022 related to a first limit loss suffered by the Company as a result of underwriting exposure to Hurricane Ian, which made landfall in Florida on September 28, 2022.
| F-18 |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements,
7. RESERVE FOR LOSSES AND LOSS ADJUSTMENT EXPENSES (continued)
Reserving methodologies and assumptions
Loss reserves are generally established based on loss payments and case reserves reported by clients when, and if, received. Estimates for IBNR losses are added to the case reserves. To establish IBNR loss estimates, the Company uses quarterly actuarial estimates from its independent actuary, who utilizes loss data reported by the Company along with industry loss data and information, knowledge of the business written and actuary’s own professional judgment.
The independent actuary employs standard actuarial methods for its analysis each quarter. Such methods may include the:
| ● | Reported Loss Development Method. Ultimate losses are estimated by calculating past reported loss development factors and applying them to exposure periods with further expected reported loss development. Since reported losses include payments and case reserves, changes in both of these amounts are incorporated in this method. | |
| ● | Expected Loss Ratio Method. Ultimate losses are estimated by multiplying earned premiums by an expected loss ratio. The expected loss ratio is selected using industry data, historical company data and actuarial professional judgment. This method is typically used for lines of business and contracts where there are no historical losses or where past loss experience is not credible. | |
| ● | Bornhuetter-Ferguson Reported Loss Method. Ultimate losses are estimated by modifying expected loss ratios to the extent reported losses experienced to date differ from what would have been expected to have been reported based upon the selected reported loss development pattern. This method avoids some of the distortions that could result from a large development factor being applied to a small base of reported losses to calculate ultimate losses. | |
| ● | Frequency / Severity Method. Ultimate losses are estimated under this method by multiplying the ultimate number of claims (i.e. the frequency multiplied by the exposure base on which the frequency has been determined), by the estimated ultimate average cost per claim (i.e. the severity). By analyzing claims experience by its frequency and severity components, the Company can examine trends and patterns in the rates of claims emergence (i.e. reporting) and settlement (i.e. closure) as well as in the average cost of claims. | |
| The approach is valuable because sometimes there is more inherent stability in the frequency and severity data when viewed separately rather than in the total losses |
| F-19 |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
7. RESERVE FOR LOSSES AND LOSS ADJUSTMENT EXPENSES (continued)
Reserving methodologies and assumptions (continued)
In addition, the Company may supplement its analysis with other reserving methodologies that are deemed to be relevant to specific contracts.
For each contract, the Company utilizes reserving methodologies that are deemed appropriate to calculate a best estimate, or point estimate, of reserves. The decision of whether to use a single methodology or a combination of multiple methodologies depends upon the judgment of the independent actuary, if utilized. The Company’s reserving methodology does not require a fixed weighting of the various methods used. Certain methods are considered more appropriate depending on the type and structure of the contract, the age and maturity of the contract, and the duration of the expected paid losses on the contract.
The Company’s gross aggregate reserves are the sum of the point estimate reserves of all portfolio exposures. Generally, IBNR loss reserves are calculated by estimating the ultimate incurred losses at any point in time and subtracting cumulative paid claims and case reserves, which incorporate specific exposures, loss payment and reporting patterns and other relevant factors.
There were no significant changes in the Company’s methodology or assumptions relating to the Company’s reserve for loss and loss adjustment expenses for the years ended December 31, 2023 or 2022.
Claims Development Tables, IBNR Reserves and Claims Frequency
The following table discloses information about the Company’s incurred and paid claims development as of December 31, 2017,2023, as well as cumulative claim frequency and the total of incurred-but-not-reporting and expected development on reported claims included within the net incurred claims amounts.
As of December 31, 2017 | ||||
Total of Incurred-but-Not-Reported Liabilities Plus Expected Development on Reported Claims | Cumulative Number of Reported Claims | |||
(dollars in thousands) | ||||
| Accident Year | 2016 | 2017 | ||
| 2016 | $14,775 | $18,801 | $1,269 | 5 |
| 2017 | $38,401 | $25 | 8 | |
Total | $57,202 | $1,294 | ||
| F-20 |
| Accident Year | 2016 | 2017 | ||
| 2016 | $6,073 | $16,073 | ||
| 2017 | $36,293 | |||
Total | $52,366 | |||
Reserve for loss and loss adjustment expenses at December 31, 2017, net of reinsurance | $4,836 | |||
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements,
7. RESERVE FOR LOSSES AND LOSS ADJUSTMENT EXPENSES (continued)
Property Catastrophe Reinsurance
SCHEDULE OF INCURRED LOSSES AND ADJUSTMENT EXPENSES
(continued)
Incurred Losses and Loss Adjustment Expenses
| Accident Year | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | As of December 31, 2023 Total of Incurred-but | Cumulative Number of Reported Claims | ||||||||||||||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||
| 2016 | $ | 14,775 | $ | 18,801 | $ | 17,795 | $ | 17,689 | $ | 17,689 | $ | 17,689 | $ | 17,689 | $ | 17,689 | $ | - | 5 | |||||||||||||||||||||
| 2017 | $ | 38,401 | $ | 38,401 | $ | 38,401 | $ | 38,401 | $ | 38,401 | $ | 38,401 | $ | 38,401 | $ | - | 8 | |||||||||||||||||||||||
| 2018 | $ | 10,000 | $ | 10,000 | $ | 10,000 | $ | 10,000 | $ | 10,000 | $ | 10,000 | $ | - | 2 | |||||||||||||||||||||||||
| 2019 | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | - | |||||||||||||||||||||||||||
| 2020 | $ | - | $ | - | $ | - | $ | - | $ | - | - | |||||||||||||||||||||||||||||
| 2021 | $ | 158 | $ | 158 | $ | 158 | $ | - | 1 | |||||||||||||||||||||||||||||||
| 2022 | $ | 1,073 | $ | 1,073 | $ | - | 1 | |||||||||||||||||||||||||||||||||
| 2023 | $ | - | $ | - | $ | - | - | |||||||||||||||||||||||||||||||||
| Total | $ | 67,321 | $ | 67,321 | $ | - | ||||||||||||||||||||||||||||||||||
Cumulative Paid Losses and Loss Adjustment Expenses
| Accident Year | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |||||||||||||||||||||||
| 2016 | $ | 6,073 | $ | 16,073 | $ | 17,687 | $ | 17,689 | $ | 17,689 | $ | 17,689 | $ | 17,689 | $ | 17,689 | |||||||||||||||
| 2017 | $ | 36,293 | $ | 38,401 | $ | 38,401 | $ | 38,401 | $ | 38,401 | $ | 38,401 | $ | 38,401 | |||||||||||||||||
| 2018 | $ | 6,000 | $ | 10,000 | $ | 10,000 | $ | 10,000 | $ | 10,000 | $ | 10,000 | |||||||||||||||||||
| 2019 | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||||||
| 2020 | $ | - | $ | - | $ | - | $ | - | |||||||||||||||||||||||
| 2021 | $ | 158 | $ | 158 | $ | 158 | |||||||||||||||||||||||||
| 2022 | $ | 1,073 | $ | 1,073 | |||||||||||||||||||||||||||
| 2023 | $ | - | $ | - | |||||||||||||||||||||||||||
| Total | $ | 67,321 | $ | 67,321 | |||||||||||||||||||||||||||
| Reserve for loss and loss adjustment expenses at December 31, 2023, net of reinsurance | $ | - | $ | - | |||||||||||||||||||||||||||
The following table shows the historical average annual percentage payout of claims as at December 31, 2017.2022.
SCHEDULE OF HISTORICAL AVERAGE ANNUAL PERCENTAGE PAYOUT
| Average Annual Percentage Payout of Incurred Claims by Age | ||||||||||||||||||||||||
| Years | 1 | 2 | 3 | 4 | 5 | 6 | ||||||||||||||||||
| Property Catastrophe Reinsurance | 57.8 | % | 34.0 | % | 9.1 | % | 0.0 | % | 0.0 | % | 0 | % | ||||||||||||
| F-21 |
Average Annual Percentage Payout of Incurred Claims by Age | ||
| Years | 1 | 2 |
| Property Catastrophe Reinsurance | 63.4% | 53.2% |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Years ended December 31 | ||
2017 | 2016 | |
| Numerator: | ||
| Net (loss) earnings | $(20,592) | 2,581 |
| Denominator: | ||
| Weighted average shares - basic | 5,808,354 | 6,022,985 |
| Effect of dilutive securities - Stock options | - | - |
| Shares issuable upon conversion of warrants | - | - |
| Weighted average shares - diluted | 5,808,354 | 6,022,985 |
| Basic (loss) earnings per share | $(3.55) | 0.43 |
| Diluted (loss) earnings per share | $(3.55) | 0.43 |
SCHEDULE OF COMPUTATION OF BASIC AND DILUTED LOSS EARNING PER SHARE
| 2023 | 2022 | |||||||
| Years ended December 31 | ||||||||
| 2023 | 2022 | |||||||
| Numerator: | ||||||||
| Net loss | $ | (9,915 | ) | (1,789 | ) | |||
| Denominator: | ||||||||
| Weighted average shares - basic | 5,867,129 | 5,772,396 | ||||||
| Effect of dilutive securities - Stock options | - | - | ||||||
| Shares issuable upon conversion of warrants | - | - | ||||||
| Weighted average shares - diluted | 5,867,129 | 5,772,396 | ||||||
| Loss per share - basic | $ | (1.69 | ) | (0.31 | ) | |||
| Loss earnings per share - diluted | $ | (1.69 | ) | (0.31 | ) | |||
For the years ended December 31, 20172023, and 2016, 250,0002022, options to purchase 250,000 ordinary shares and 215,000 options to purchase 215,000 ordinary shares, respectively, were anti-dilutive as the sum of the proceeds, including unrecognized compensation expense, exceeded the average market price of the Company’s ordinary share during the periods presented.
GAAP requires the Company to use the two-class method in computing basic earnings (loss)loss per share since holders of the Company’s restricted stock have the right to share in dividends, if declared, equally with common stockholders. These participating securities effect the computation of both basic and diluted earningsloss per share during periods of net (loss) income.the years ended December 31, 2023 and 2022.
| F-22 |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements,
9. WARRANTS
There were 8,230,700 warrants outstanding at December 31, 20172023 and 2016
On January 29, 2024, the Company declared and paid quarterly cash dividends of $0.12 per ordinary share duringextended the first three quartersexpiration date of the year ended December 31, 2017,warrants (NASDAQ: OXBRW) (the “Warrants”) to 5:00 p.m. Philadelphia time on the earlier to occur of (a) March 26, 2029 and (b) the date fixed for each ofcancellation by the quarters during 2016. The total amount of such dividends declared and paid during 2017 and 2016 were approximately $2.1 million and $2.9 million, respectively.
10. DIVIDENDS
As of December 31, 2017 and 2016,2023, none of the Company’s retained earningsaccumulated deficit were restricted from payment of dividends to the Company’scompany’s shareholders. However, since most of the Company’s capital and retained earnings may be invested in its licenced subsidiary,subsidiaries, a dividend from the licensed subsidiarysubsidiaries would likely be required in order to fund a dividend to the Company’s shareholders and would require notification to CIMA.
Under Cayman Islands law, the use of additional paid-in capital is restricted, and the Company will not be allowed to pay dividends out of additional paid-in capital if such payments result in breaches of the prescribed and minimum capital requirement. See also Note 10.
The Company currently has outstanding stock-basedshare-based awards granted under the 2014 Omnibus Incentive Plan (the “Plan”“2014 Plan”) and the 2021 Omnibus Incentive Plan (the “2021 Plan”) (herein collectively referred to as “the Plans”).
Stock options
Stock options granted and outstanding under the PlanPlans vests quarterly over four years and are exercisable over the contractual term of
SCHEDULE OF STOCK OPTION ACTIVITY
| Number of Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||
| Outstanding at December 31, 2022 | 871,250 | $ | years | $ | - | |||||||||||
| Exercisable at December 31, 2022 | 721,250 | $ | years | $ | - | |||||||||||
| Outstanding at December 31, 2022 | 871,250 | years | $ | - | ||||||||||||
| Forfeited | (25,000 | ) | ) | |||||||||||||
| Outstanding at December 31, 2023 | 846,250 | $ | years | $ | - | |||||||||||
| Exercisable at December 31, 2023 | 783,750 | $ | years | $ | - | |||||||||||
| F-23 |
Number of Options | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Term | Aggregate Intinsic Value ($000) | |
| Outstanding at January 1, 2016 | 180,000 | |||
| Granted | 35,000 | $6.00 | ||
| Outstanding at December 31, 2016 | 215,000 | $6.00 | 9 years | $- |
| Granted | 35,000 | $6.06 | ||
| Outstanding at December 31, 2017 | 250,000 | $6.01 | 7.4 years | $- |
| Exercisable at December 31, 2017 | 161,250 | $6.01 | 7.4 years | $- |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
11. SHARE-BASED COMPENSATION (continued)
Compensation expense recognized for the years ended December 31, 20172023 and 20162022 totaled $39,000$ and $31,000,$, respectively, and is included in general and administrative expenses. At December 31, 20172023 and 2016,2022, there was approximately $54,000$ and $67,000,$, respectively, of total unrecognized compensation expense related to non-vested stock options granted under the Plan.Plans. The
There were options granted during the yearsyear ended December 31, 2017 and 2016, 35,000 options were granted with fair value estimated on the date of grant using the following assumptions and the Black-Scholes option pricing model:
2017 | 2016 | |
| Expected dividend yield | 8% | 9.6% |
| Expected volatility | 35% | 35% |
| Risk-free interest rate | 2.48% | 2.03% |
| Expected life (in years) | 10 | 10 |
| Per share grant date fair value of options issued | $0.73 | $0.34 |
Restricted Stock Awards
The Company has granted and may grant restricted stock awards to eligible individuals in connection with their service to the Company. The terms of the Company’s outstanding restricted stock grants may include service, performance and market-based conditions. The fair value of the awards with market-based conditions is determined using a Monte Carlo simulation method, which calculates many potential outcomes for an award and then establishes fair value based on the most likely outcome. The determination of fair value with respect to the awards with only performance or service-based conditions is based on the value of the Company’s stock on the grant date.
Weighted-Number of Restricted Stock Awards | Weighted-Average Grant Date Fair Value | |
| Nonvested at January 1, 2016 | 45,000 | $5.86 |
| Vested | (15,000) | |
| Nonvested at December 31, 2016 | 30,000 | $5.86 |
| Nonvested at January 1, 2017 | 30,000 | $5.86 |
| Vested | (15,000) | |
| Nonvested at December 31, 2017 | 15,000 | $5.86 |
SCHEDULE OF ACTIVITY OF UNVESTED RESTRICTED STOCK AWARDS
Weighted- Number of Restricted Stock Awards | Weighted- Average Grant Date Fair Value | |||||||
| Nonvested at January 1, 2022 | 15,000 | |||||||
| Granted | 32,000 | $ | 3.57 | |||||
| Vested | (12,000 | ) | ||||||
| Forfeited | (12,000 | ) | 3.57 | |||||
| Nonvested at December 31, 2022 | 23,000 | |||||||
| Granted | 100,647 | $ | 2.37 | |||||
| Vested | (77,574 | ) | 2.37 | |||||
| Nonvested at December 31, 2023 | 46,073 | |||||||
Compensation expense recognized for the years ended December 31, 20172023 and 20162022 totaled $88,000$ and $, respectively, and is included in general and administrative expenses. At December 31, 20172023 and 2016,2022, there was approximately $88,000$ and $176,000,$, respectively, of total unrecognized compensation expense related to non-vested restricted stock granted under the Plan.Plans. The
| F-24 |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
12. NET WORTH FOR REGULATORY PURPOSES
The Company’s licensed subsidiary, Oxbridge Reinsurance Limited issubsidiaries are subject to a minimum and prescribed capital requirement as established by CIMA. Under the terms of its license, thetheir respective licenses, Oxbridge Reinsurance Limited isand Oxbridge Re NS are required to maintain a minimum and prescribed capital requirement of $500 in accordance with itsthe relevant subsidiary’s approved business plan filed with CIMA.
At December 31, 2017 and 2016,2023, the Oxbridge Reinsurance Limited’s net worth of $2.7 million and $22.9 million, respectively,$10 thousand exceeded the minimum and prescribed capital requirement. For the years ended December 31, 20172023 and 2016,2022, Oxbridge Reinsurance Ltd.’s net loss was approximately $11.29 million and $2.0 million, respectively.
At December 31, 2023, the itsOxbridge Re NS’ net (loss)worth of $223 thousand exceeded the minimum and prescribed capital requirement. For the years ended December 31, 2023 and 2022, Oxbridge Re NS’ net income was approximately ($21) million$68,000 and $1.2 million,$11,000, respectively.
The Subsidiaries are not required to prepare separate statutory financial statements for filing with CIMA, and there were no material differences between itsthe Subsidiaries’ GAAP capital, surplus and net (loss) income, and its statutory capital, surplus and net (loss) income as of December 31, 2017 and 20162023 or for the yearsyear then ended.
13. FAIR VALUE AND CERTAIN RISKS AND UNCERTAINTIES
Fair values
With the exception of balances in respect of insurance contracts (which are specifically excluded from fair value disclosures under GAAP) and investment securities as disclosed in Note 4 of these consolidated financial statements, the carrying amounts of all other financial instruments, which consist of cash and cash equivalents, restricted cash and cash equivalents, accrued interest and dividends receivable, premiums receivable and other receivablesassets, loan receivable, notes payable, and accounts payable and accruals,other liabilities, approximate their fair values due to their short-term nature.
Concentration of underwriting risk
A substantial portion of the Company’s current reinsurance business ultimately relates to the risks of two entities domiciled in Florida ina limited number of entities; accordingly, the United States, oneCompany’s underwriting risks are not diversified.
Concentrations of which is under common directorship; accordingly the
The Company is exposedmarkets retrocessional and reinsurance policies worldwide through its brokers. Credit risk exists to credit risk in relationthe extent that any of these brokers may be unable to counterparties that may default onfulfill their contractual obligations to the Company. For example, the Company is required to pay amounts owed on claims under policies to brokers, and these brokers, may fail to pay over the money to the cedants. In some jurisdictions, if a broker fails to make such a payment, the Company might remain liable to the ceding company for the deficiency. In addition, in certain jurisdictions, when the ceding company pays premiums for these policies to brokers, these premiums are considered to have been paid and the ceding insurer is no longer liable to the Company for those amounts, whether or not the premiums have actually been received.
The amount of counterparty credit risk predominantly relatesCompany remains liable for losses it incurs to premiums receivable,the extent that any third-party reinsurer is unable or unwilling to make timely payments under reinsurance recoverable and assets held with counterparties. agreements. The Company would also be liable in the event that its ceding companies were unable to collect amounts due from underlying third-party reinsurers.
The Company mitigates its concentration of credit risk and counterparty risk by using reputable several counterparties which decreases the likelihood of any significant concentration of credit risk with any one counterparty, as well as using reputable and highly rated counterparties. In addition, the Company is exposedcounterparty.
| F-25 |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to credit risk on fixed-maturity debt instruments to the extent that the debtors may default on their debt obligations.
13. FAIR VALUE AND CERTAIN RISKS AND UNCERTAINTIES (continued)
Market risk
Market risk exists to the extent that the values of the Company’s monetary assets fluctuate as a result of changes in market prices. Changes in market prices can arise from factors specific to individual securities or their respective issuers, or factors affecting all securities traded in a particular market. Relevant factors for the Company are both volatility and liquidity of specific securities and markets in which the Company holds investments. The Company has established investment guidelines that seek to mitigate significant exposure to market risk.
14. LEASES
Operating lease right-of-use assets and operating lease liabilities are recognized in the consolidated balance sheets. We determine if a contract contains a lease at inception and recognize operating lease right-of-use assets and operating lease liabilities based on the present value of the future minimum lease payments at the commencement date. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Lease agreements that have lease and non-lease components, are accounted for as a single lease component. Lease expense is recognized on a straight-line basis over the lease term.
The Company has antwo operating lease obligations namely for the Company’s office spacefacilities located at Strathvale House, 2nd Floor, 90 North ChurchSuite 201, 42 Edward Street Grand Cayman, Cayman Islands and residential space at Turnberry Villas in Grand Cayman, Cayman Islands. The office lease has a remaining lease term of theapproximately two (2) month and was renewed subsequent to year end for a period of five (5) years. The residential lease is thirty-eight monthshas a remaining lease term of less than 1 month and commenced on April 17, 2015. Rentwas renewed subsequent to year end for a period of three (3) years.
| F-26 |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
14. LEASES (continued)
The components of lease expense under thisand other lease for the year ended December 31, 2017information as of and 2016 was $62,000 and $59,000, respectively, and lease commitments at December 31, 2017 were $32,000.
SCHEDULE OF OPERATING LEASE COST
| (in thousands) | 2023 | 2022 | ||||||
Year Ended December 31, | ||||||||
| (in thousands) | 2023 | 2022 | ||||||
| Operating Lease Cost (1) | $ | 108 | $ | 96 | ||||
| Cash paid for amounts included in the measurement of lease liabilities | ||||||||
| Operating cash flows from operating leases | $ | 108 | $ | 96 | ||||
| (1) | Includes short-term leases |
SCHEDULE OF OPERATING LEASE OBLIGATIONS
| (in thousands) | 2023 | 2022 | ||||||
| At December 31, | ||||||||
| (in thousands) | 2023 | 2022 | ||||||
| Operating lease right-of-use assets | $ | 9 | $ | 44 | ||||
| Operating lease liabilities | $ | 9 | $ | 44 | ||||
| Weighted-average remaining lease term - operating leases | 0.39 years | 1.17 years | ||||||
| Weighted-average discount rate - operating leases | 7.13 | % | 6.5 | % | ||||
Future minimum lease commitmentspayments under this leasenon-cancellable leases as atof December 31, 2017.2023 and 2022, reconciled to our discounted operating lease liability presented on the consolidated balance sheets are as follows:
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS
| (in thousands) | 2023 | 2022 | ||||||
| At December 31, | ||||||||
| (in thousands) | 2023 | 2022 | ||||||
| 2023 | $ | - | $ | 40 | ||||
| 2024 | 9 | 6 | ||||||
| Total future minimum lease payments | $ | 9 | $ | 46 | ||||
| Less imputed interest | - | (2 | ) | |||||
| Total operating lease liabilities | $ | 9 | $ | 44 | ||||
| F-27 |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements,
15. RELATED PARTY TRANSACTIONS
Administrative Services Agreement
Commencing on the effective date of the SPAC’s IPO, the Sponsor agreed to pay the Company a total of up to $10,000 per month for office space, utilities, secretarial and administrative support to the Sponsor and the SPAC. Upon completion of the SPAC’s initial Business Combination or the SPAC’s liquidation, the Sponsor will cease paying these monthly fees. For the years ended December 31, 20172023 and 2016
Participating Notes
During the year ending December 31, 2021, Mr. Jay Madhu, a director and 2016,officer of the Company and its subsidiaries, invested a principal amount of $68,000 in Series 2020-1 participating notes. During the year ended December 31, 2023, Mr. Madhu received a payment of $76,000 representing partial redemption of principal and return on investment.
DeltaCat Re Tokens
During the year ended December 31, 2023, Mr. Jay Madhu, a director and officer of the Company and its subsidiaries, entered into subscription agreement to purchase a total of Series DeltaCat Re tokens at a purchase price of $ per token for aggregate gross proceeds of $62,000. Ownership of DeltaCat Re tokenized reinsurance securities indirectly confers fractionalized interests in reinsurance contracts underwritten by Oxbridge Re NS for the 2023-2024 treaty year.
TypTap Insurance Company (“TypTap”) Contract
During the year ended December 31, 2023 the Company entered into a reinsurance agreement with TypTap, an insurance subsidiary of HCI Group, Inc., which is a related entity through common directorship. At December 31, 2023, included within loss experience refund payablepremium receivable, deferred acquisition costs and unearned premiums reserve on the consolidated balance sheets are amounts equal to $489,000, $50,000 and $458,000 respectively, relating to the following related-party amounts:
December 31, | ||
2017 | 2016 | |
(in thousands) | ||
| Loss experience refund payable | $135 | $1,470 |
| Unearned premiums reserve | $2,012 | $1,417 |
Bridge Loan with Affiliate
On September 11, 2023, the following related-party amounts:Company, along with seven (7) other investors, entered into a binding term sheet (“Bridge Agreement”) with Jet.AI to provide Jet.AI with an aggregate sum of $500,000 of short-term bridge financing pending its receipt of funds from its other existing financing arrangements. During the month of September 2023, and prior to the Bridge Agreement, Jet.AI had engaged in discussions with numerous third parties to secure short-term bridge funding but was not offered terms it found acceptable.
The Bridge Agreement provides for the issuance of Notes in an aggregate principal amount of $625,000, reflecting a 20% original issue discount. The Notes bear interest at 5% per annum and mature on March 11, 2024. Jet.AI is required to redeem the Notes with 100% of the proceeds of any equity or debt financing at a redemption premium of 110% of the principal amount of the Notes. Jet.AI anticipates redeeming the Notes in full with proceeds expected to be received over the next several months from existing financing arrangements.
An event of default under the Notes includes failing to redeem the Notes as provided above and other typical bankruptcy events of Jet.AI. In an event of default, the outstanding principal amount of the Notes will increase by 120%, and the company may convert its Note into shares of common stock of Jet.AI at the conversion price set forth in the Bridge Agreement with registration rights associated with those shares.
The Company invested the sum of $100,000in the Notes and is recorded as “Loan Receivable” on the consolidated balance sheets at cost. On March 11, 2024, the Notes matured and were redeemed by Jet.AI in accordance with the Bridge Agreement. The Company receive an aggregate of $140,000 upon the redemption of the Notes.
| F-28 |
December 31, | ||
2017 | 2016 | |
(in thousands) | ||
| Revenue | ||
| Assumed premiums | $3,400 | $3,400 |
| Change in loss experience refund payable | $1,335 | $(2,520) |
| Change in unearned premiums reserve | $2,805 | $(25) |
16. PROPERTY AND EQUIPMENT, NET
Property and equipment, net consist of the following (in thousands):
SCHEDULE OF PROPERTY AND EQUIPMENT,NET
| 2023 | 2022 | |||||||
| At December 31, | ||||||||
| 2023 | 2022 | |||||||
| Leasehold improvements | $ | 21 | $ | 21 | ||||
| Furniture and Fixtures | 41 | 38 | ||||||
| Motor vehicle | 34 | 34 | ||||||
| Computer equipment and software | 39 | 37 | ||||||
| Total, at cost | 135 | 130 | ||||||
| less accumulated depreciation and amortization | (131 | ) | (125 | ) | ||||
| Property and equipment, net | $ | 4 | $ | 5 | ||||
| F-29 |
At December 31, | ||
2017 | 2016 | |
| Leasehold improvements | $21 | 21 |
| Furniture and Fixtures | 38 | 38 |
| Motor vehicle | 21 | 21 |
| Computer equipment and software | 32 | 26 |
| Total, at cost | 112 | 106 |
| less accumulated depreciation and amortization | (76) | (52) |
| Property and equipment, net | $36 | 54 |
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
Notes to Consolidated Financial Statements,
17. SUBSEQUENT EVENTS
We evaluate all subsequent events and transactions for potential recognition or disclosure in our consolidated financial statements. There
Other than as disclosed in Notes 9 and 15 above, there were no other events subsequent to December 31, 20172023 for which disclosure was required.
| F-30 |
SCHEDULE I
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES
AS OF DECEMBER 31, 2023
(expressed in thousands of U.S. dollars)
Schedule I - Summary of Investments - Other Than Investments in Related Parties
| Cost or | Consolidated | |||||||||||
| Amortized | Fair | Balance Sheet | ||||||||||
| Type of investment | Cost | Value | Value | |||||||||
| Equity securities | $ | 1,926 | $ | 680 | $ | 680 | ||||||
| Total investments | $ | 1,926 | $ | 680 | $ | 680 | ||||||
Type of investment | Cost or Amortized Cost | Fair Value | Balance Sheet Value |
| Fixed-maturity securities | |||
| U.S. Treasury and agency securities | $4,450 | $4,433 | $4,433 |
| Total fixed-maturity securities | 4,450 | 4,433 | 4,433 |
| Mutual Funds | 400 | 429 | 429 |
| Preferred stocks | 200 | 199 | 199 |
| Common stocks | 1,458 | 1,408 | 1,408 |
| Total equity securities | 2,058 | 2,036 | 2,036 |
| Total investments | $6,508 | $6,469 | 6,469 |
| F-31 |
SCHEDULE II
OXBRIDGE RE HOLDINGS LIMITED
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEET - PARENT COMPANY ONLY
(expressed in thousands of U.S. Dollars)
Schedule II - Condensed Financial Information of Registrant
| 2023 | 2022 | |||||||
| At December 31, | ||||||||
| 2023 | 2022 | |||||||
| Assets | ||||||||
| Cash and cash equivalents | 247 | 931 | ||||||
| Equity securities | 680 | 642 | ||||||
| Investment in subsidiaries | 1,757 | 9,389 | ||||||
| Due from subsidiaries | 2,905 | 3,872 | ||||||
| Due from related party | - | 35 | ||||||
| Loan receivable | 100 | - | ||||||
| Prepayment and other assets | 82 | 105 | ||||||
| Prepaid offering costs | - | 133 | ||||||
| Operating lease right-of-use assets | 9 | 44 | ||||||
| Property and equipment, net | 4 | 5 | ||||||
| Total assets | $ | 5,784 | 15,156 | |||||
| Liabilities and Shareholders’ Equity | ||||||||
| Liabilities: | ||||||||
| Operating lease liabilities | 9 | 44 | ||||||
| Due to Subsidiary | 250 | - | ||||||
| Accounts payable and other liabilities | 193 | 123 | ||||||
| Total liabilities | 452 | 167 | ||||||
| Shareholders’ equity: | ||||||||
| Ordinary share capital | 6 | 6 | ||||||
| Additional paid-in capital | 32,740 | 32,482 | ||||||
| Accumulated Deficit | (27,414 | ) | (17,499 | ) | ||||
| Total shareholders’ equity | 5,332 | 14,989 | ||||||
| Total liabilities and shareholders’ equity | $ | 5,784 | 15,156 | |||||
| F-32 |
OXBRIDGE RE HOLDINGS LIMITED | ||
CONDENSED FINANCIAL INFORMATION OF REGISTRANT | ||
CONDENSED BALANCE SHEET - PARENT COMPANY ONLY | ||
(expressed in thousands of U.S. Dollars) | ||
At December 31, | ||
2017 | 2016 | |
| Assets | ||
| Cash and cash equivalents | 4,251 | 6,360 |
| Investments, available for sale, at fair value | 5,039 | 7,490 |
| Investment in subsidiaries | 2,698 | 22,894 |
| Accrued interest and dividend receivable | 35 | 41 |
| Due from subsidiaries | 1,857 | 439 |
| Prepayment and other receivables | 108 | 89 |
| Property and equipment, net | 36 | 54 |
| Total assets | $14,024 | 37,367 |
| Liabilities and Shareholders’ Equity | ||
| Liabilities: | ||
| Accounts payable and other liabilities | 106 | 204 |
| Shareholders’ equity: | ||
| Total shareholders’ equity | 13,918 | 37,163 |
| Total liabilities and shareholders’ equity | $14,024 | 37,367 |
SCHEDULE II (continued)
OXBRIDGE RE HOLDINGS LIMITED
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS - PARENT COMPANY ONLY
(expressed in thousands of U.S. Dollars)
| 2023 | 2022 | |||||||
| Years Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Revenue | ||||||||
| Net investment income | $ | 71 | 47 | |||||
| Change in fair value of equity securities | 38 | (338 | ) | |||||
| Net realized investment gain | - | 27 | ||||||
| Management fees and other income | 2,978 | 1,883 | ||||||
| Operating expenses | (1,912 | ) | (1,406 | ) | ||||
| Income before equity in loss of subsidiaries | 1,175 | 213 | ||||||
| Equity in loss of subsidiaries | (11,090 | ) | (2,002 | ) | ||||
| Net loss | $ | (9,915 | ) | (1,789 | ) | |||
| F-33 |
Years Ended December 31, | ||
2017 | 2016 | |
| Revenue | ||
| Net investment income | $298 | 413 |
| Net realized investment (losses) gains | (175) | 646 |
| Other income | 1,644 | 1,776 |
| Operating expenses | (1,316) | (1,410) |
| Income before equity in (loss) earnings of subsidiary | 451 | 1,425 |
| Equity in (loss) earnings of subsidiary | (21,043) | 1,156 |
| Net (loss) income | $(20,592) | 2,581 |
SCHEDULE II (continued)
OXBRIDGE RE HOLDINGS LIMITED | ||
CONDENSED FINANCIAL INFORMATION OF REGISTRANT | ||
CONDENSED STATEMENT OF CASH - PARENT COMPANY ONLY | ||
(expressed in thousands of U.S. Dollars) | ||
Years Ended December 31, | ||
2017 | 2016 | |
| Operating activities | ||
| Net (loss) income | $(20,592) | 2,581 |
| Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: | ||
| Equity in (loss) earnings of subsidiary | 21,043 | (1,156) |
| Stock-based compensation | 127 | 119 |
| Net amortization of premiums on investments in fixed-maturity securities | 84 | 21 |
| Depreciation | 24 | 21 |
| Net realized investment losses (gains) | 175 | (646) |
| Change in operating assets and liabilities: | ||
| Accrued interest and dividend receivable | 6 | (23) |
| Due from subsidiary | (1,418) | 915 |
| Prepayment and other receivables | (19) | (7) |
| Accounts payable and other liabilities | (98) | 29 |
| Net cash (used in) / provided by operating activities | $(668) | 1,854 |
| Investing activities | ||
| Investment in subsidiary | (3,000) | - |
| Dividends from subsidiary | 2,108 | 2,880 |
| Purchase of available for sale securities | (18,659) | (13,136) |
| Proceeds from sale of available for sale securities | 21,268 | 12,857 |
| Purchase of property and equipment | (6) | (11) |
| Net cash provided by investing activities | $1,711 | 2,590 |
| Financing activities | ||
| Repurchases of common stock under share repurchase plan | (1,061) | (742) |
| Cash dividends paid | (2,091) | (2,885) |
| Net cash used in financing activities | $(3,152) | (3,627) |
| Net change in cash and cash equivalents | (2,109) | 817 |
| Cash and cash equivalents at beginning of year | 6,360 | 5,543 |
| Cash and cash equivalents at end of year | $4,251 | 6,360 |
| 2023 | 2022 | |||||||
| Years Ended December 31, | ||||||||
| 2023 | 2022 | |||||||
| Operating activities | ||||||||
| Net loss | $ | (9,915 | ) | (1,789 | ) | |||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||
| Equity in loss of subsidiaries | 11,090 | 2,002 | ||||||
| Share-based compensation | 258 | 127 | ||||||
| Underwriting Income – SurancePlus | (494 | ) | - | |||||
| Depreciation | 6 | 4 | ||||||
| Net realized investment gain | - | (27 | ) | |||||
| Change in fair value of equity securities | (38 | ) | 338 | |||||
| Change in operating assets and liabilities: | ||||||||
| Due from subsidiary | 967 | (1,763 | ) | |||||
| Due from related party | 35 | (30 | ) | |||||
| Due to subsidiary | 250 | - | ||||||
| Prepayment and other assets | 23 | (55 | ) | |||||
| Prepaid offering costs | 133 | (133 | ) | |||||
| Accounts payable and other liabilities | 70 | (87 | ) | |||||
| Net cash provided by (used in) operating activities | $ | 2,385 | (1,413 | ) | ||||
| Investing activities | ||||||||
| Purchase of equity securities | - | (1,002 | ) | |||||
| Purchase of loan receivable | (100 | ) | - | |||||
| Investment in subsidiary | (2,964 | ) | (507 | ) | ||||
| Proceeds from sale of equity securities | - | 626 | ||||||
| Purchase of property and equipment | (5 | ) | - | |||||
| Net cash used in investing activities | $ | (3,069 | ) | (883 | ) | |||
| Net change in cash and cash equivalents | (684 | ) | (2,296 | ) | ||||
| Cash and cash equivalents at beginning of year | 931 | 3,227 | ||||||
| Cash and cash equivalents at end of year | $ | 247 | 931 | |||||
SCHEDULE III
OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
(expressed in thousands of U.S. dollars)
Schedule III - Supplementary Insurance Information
| Year | Segment | Deferred acquisition costs, net | Reserves for losses and loss adjustment expenses – gross | Unearned premiums – gross | Net premiums earned | Investment income | Net losses, and loss adjustment expenses | Amortization of deferred acquisition costs | Operating expenses | Gross premiums written | ||||||||||||||||||||||||||||
| 2023 | Property & Casualty | $ | - | $ | - | $ | - | $ | 1,255 | $ | - | $ | - | $ | 141 | $ | 2,183 | $ | 2,170 | |||||||||||||||||||
| 2022 | Property & Casualty | $ | - | $ | 1,073 | $ | - | $ | 995 | $ | 27 | $ | 1,073 | $ | 110 | $ | 1,413 | $ | 645 | |||||||||||||||||||
Reserves | |||||||||||
for losses | |||||||||||
and loss | Net losses, | Amortization | |||||||||
Deferred | adjustment | Unearned | Net | and loss | of deferred | Gross | |||||
acquisition | expenses | premiums | premiums | Investment | adjustment | acquisition | Operating | premiums | |||
| Year | Segment | costs, net | – gross | – gross | earned | income (loss) | expenses | costs | expenses | written | |
| 2017 | Property & Casualty | $48 | $4,836 | $2,012 | $23,567 | $274 | $42,427 | $681 | $1,325 | $18,263 | |
| 2016 | Property & Casualty | $88 | $8,702 | $3,461 | $18,058 | $1,004 | $14,775 | $286 | $1,420 | $15,065 |
| Year | Segment | Direct Gross Premiums | Premiums ceded to other companies | Premiums assumed from other companies | Net amount | Percentage of amount assumed to net | ||||||||||||||||
| 2023 | Property & Casualty | $ | - | $ | - | $ | 2,170 | $ | 2,170 | 100 | % | |||||||||||
| 2022 | Property & Casualty | $ | - | $ | - | $ | 645 | $ | 645 | 100 | % | |||||||||||
Year | Segment | Direct Gross Premiums | Premiums ceded to other companies | Premiums assumed from other companies | Net amount | Percentage of amount assumed to net | |
| 2017 | Property & Casualty | $- | $880 | $18,263 | $17,383 | 105% | |
| 2016 | Property & Casualty | $- | $- | $15,065 | $15,065 | 100% |