Tawa to pay $7.4m up front for Bermudan insurer Island Capital

Insurance service provider and run-off investor, Tawa, has reached an agreement to acquire 94.3% of the issued shares of Bermuda-based insurer Island Capita and its wholly-owned UK subsidiary, Island Capital (Europe), for an initial consideration of $7.4m.

A deferred consideration is dependent on future financial performance of the company, which is expected to be largely driven by subrogation recoveries.

Tawa said that for for technical reasons the aggregate of all consideration has been capped at $40m, although it is unlikely that deferred consideration would exceed $15m.

The acquisition will give Tawa access to expertise in credit and political risk insurance.

Island Capital has a specialist underwriting portfolio of trade credit and political risk insurance business.

The Company went into run-off in November 2008 following the sale of its trade credit and political risk insurance underwriting platform.

At 31 December 2009 the company had gross reserves of $20.6m and net assets on its pro forma, US GAAP undiscounted balance sheet of $28.1m.

Following completion, Paul Mooney, president and chief executive of Island Capital, who owns 5.7% of the issued shares of Island Capital, will join the Tawa team and continue to manage the portfolio from the group's offices with an initial employment term from the closing of the transaction through 31 December 2012.

This transaction is subject to regulatory approval from the Bermuda Monetary Authority and the FSA, which is expected to be granted within 3 months.

It is intended that the acquisition cost will be financed from Tawa's existing cash resources. There will be no change to the board or senior management of Tawa arising from the acquisition.

Gilles Erulin, chief executive of Tawa plc, said: "One of our goals is to expand our involvement and develop our expertise in specialist and niche areas of the insurance arena. Trade credit insurance is definitely an area where the conjunction of Tawa and Island Capital will provide for further portfolio expansion.

"This acquisition fits with our strategy of enhancing our long term expansion by combining the existing skills of our people with those of acquired teams and represents an interesting development for Tawa."

"We look forward to welcoming Paul Mooney to the Group."