UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q(Mark One)

 

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2021

 

☐     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission File Number: 1-36346

 

OXBRIDGE RE HOLDINGS LIMITED

(Exact name of registrant as specified in its charter)

 

Cayman Islands

 

98-1150254

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

Suite 201
42 Edward Street, GeorgetownP.O. Box 469

Grand Cayman, Cayman Islands

 

KY1-9006

(Address of principal executive offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (345) 749-7570

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes ☒

 

No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Yes ☒

 

No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Yes ☐

 

No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

As of November 12, 2021; 5,733,587 ordinary shares, par value $0.001 per share, were outstanding.

 

 

 

 

OXBRIDGE RE HOLDINGS LIMITED

 

INDEX

 

PART I – FINANCIAL INFORMATION

Page

 

 

 

 

 

Item 1.

Financial Statements

 

3

 

 

 

 

 

 

 

Consolidated Balance Sheets September 30, 2021 (unaudited) and December 31, 2020

 

3

 

 

 

 

 

 

 

Consolidated Statements of Operations Three and Nine Months Ended September 30, 2021 and 2020 (unaudited)

 

4

 

 

 

 

 

 

 

Consolidated Statements of Comprehensive Income (Loss) Three and Nine Months Ended September 30, 2021and 2020 (unaudited)

 

5

 

 

 

 

 

 

 

Consolidated Statements of Cash Flows Nine Months Ended September 30, 2021 and 2020 (unaudited)

 

6

 

 

 

 

 

 

 

Consolidated Statements of Changes in Shareholders’ Equity Three and Nine Months Ended September 30, 2021and 2020 (unaudited)

 

8

 

 

 

 

 

 

 

Notes to the Consolidated Financial Statements (unaudited)

 

9

 

 

 

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

29

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

40

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

40

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

41

 

 

 

 

 

 

Item 1A.

Risk Factors

 

41

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

42

 

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

42

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures

 

42

 

 

 

 

 

 

Item 5.

Other Information

 

42

 

 

 

 

 

 

Item 6.

Exhibits

 

43

 

 

 

 

 

 

 

Signatures

 

44

 

 

 
2

Table of Contents

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Consolidated Balance Sheets

(expressed in thousands of U.S. Dollars, except per share and share amounts)

 

 

 

At September 30,

2021

 

 

At December 31,

2020

 

 

 

(Unaudited)

 

 

 

Assets

Equity securities, at fair value (cost : $1,522 and $965)

 

$ 778

 

 

 

787

 

Cash and cash equivalents

 

 

3,748

 

 

 

5,562

 

Restricted cash and cash equivalents

 

 

1,816

 

 

 

1,914

 

Accrued interest and dividend receivable

 

 

-

 

 

 

1

 

Premiums receivable

 

 

697

 

 

 

464

 

Other investments

 

 

9,146

 

 

 

-

 

Due from related party

 

 

20

 

 

 

-

 

Deferred policy acquisition costs

 

 

62

 

 

 

45

 

Operating lease right-of-use assets

 

 

157

 

 

 

222

 

Prepayment and other assets

 

 

72

 

 

 

75

 

Property and equipment, net

 

 

6

 

 

 

13

 

Total assets

 

$ 16,502

 

 

 

9,083

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders Equity

Liabilities:

 

 

 

 

 

 

 

 

Losses payable

 

 

158

 

 

 

-

 

Notes payable to noteholders

 

 

216

 

 

 

216

 

Unearned premiums reserve

 

 

560

 

 

 

411

 

Operating lease liabilities

 

 

158

 

 

 

222

 

Accounts payable and other liabilities

 

 

340

 

 

 

209

 

Total liabilities

 

 

1,432

 

 

 

1,058

 

 

 

 

 

 

 

 

 

 

Shareholders equity:

 

 

 

 

 

 

 

 

Ordinary share capital, (par value $0.001, 50,000,000 shares authorized; 5,733,587 shares issued and outstanding)

 

 

6

 

 

 

6

 

Additional paid-in capital

 

 

32,337

 

 

 

32,294

 

Accumulated Deficit

 

 

(17,273 )

 

 

(24,275 )

Total shareholders equity

 

 

15,070

 

 

 

8,025

 

Total liabilities and shareholders equity

 

$ 16,502

 

 

 

9,083

 

   

The accompanying Notes to Consolidated Financial Statements are an integral

part of the Consolidated Financial Statements.

 

 
3

Table of Contents

  

OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Consolidated Statements of Income (unaudited)

(expressed in thousands of U.S. Dollars, except per share amounts)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Assumed premiums

 

$ -

 

 

 

-

 

 

 

904

 

 

 

864

 

Change in unearned premiums reserve

 

 

370

 

 

 

247

 

 

 

(149 )

 

 

(218 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net premiums earned

 

 

370

 

 

 

247

 

 

 

755

 

 

 

646

 

Net investment and other income

 

 

25

 

 

 

32

 

 

 

64

 

 

 

90

 

Net realized investment (loss) gains

 

 

-

 

 

 

(2 )

 

 

755

 

 

 

325

 

Unrealized gain on other investments

 

 

7,146

 

 

 

-

 

 

 

7,146

 

 

 

-

 

Change in fair value of equity securities

 

 

(512 )

 

 

(18 )

 

 

(566 )

 

 

(343 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

 

7,029

 

 

 

259

 

 

 

8,154

 

 

 

718

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Losses and loss adjustment expenses

 

 

158

 

 

 

-

 

 

 

158

 

 

 

-

 

Policy acquisition costs and underwriting expenses

 

 

41

 

 

 

27

 

 

 

83

 

 

 

71

 

General and administrative expenses

 

 

280

 

 

 

239

 

 

 

845

 

 

 

767

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total expenses

 

 

479

 

 

 

266

 

 

 

1,086

 

 

 

838

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) before income attributable to noteholders

 

 

6,550

 

 

 

(7 )

 

 

7,068

 

 

 

(120 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income attributable to noteholders

 

 

(24 )

 

 

(26 )

 

 

(66 )

 

 

(112 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$ 6,526

 

 

 

(33 )

 

 

7,002

 

 

 

(232 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (Loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

$ 1.14

 

 

 

(0.01 )

 

 

1.22

 

 

 

(0.04 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

 

5,733,587

 

 

 

5,733,587

 

 

 

5,733,587

 

 

 

5,733,587

 

 

The accompanying Notes to Consolidated Financial Statements are an integral

part of the Consolidated Financial Statements.

 

 
4

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OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(expressed in thousands of U.S. Dollars)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$ 6,526

 

 

 

(33 )

 

 

7,002

 

 

 

(232 )
Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss)

 

$ 6,526

 

 

 

(33 )

 

 

7,002

 

 

 

(232 )

  

The accompanying Notes to Consolidated Financial Statements are an integral

part of the Consolidated Financial Statements.

 

 
5

Table of Contents

 

OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Consolidated Statements of Cash Flows (Unaudited)

(expressed in thousands of U.S. Dollars)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2021

 

 

2020

 

Operating activities

 

 

 

 

 

 

Net income (loss)

 

$ 7,002

 

 

 

(232 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

43

 

 

 

24

 

Depreciation and amortization

 

 

6

 

 

 

7

 

Net realized investment gains

 

 

(755 )

 

 

(325 )

Change in fair value of equity securities

 

 

566

 

 

 

343

 

Change in fair value of other investments

 

 

(7,146 )

 

 

-

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accrued interest and dividend receivable

 

 

1

 

 

 

11

 

Premiums receivable

 

 

(233 )

 

 

(186 )

Due from related party

 

 

(20 )

 

 

-

 

Deferred policy acquisition costs

 

 

(17 )

 

 

(24 )

Operating leases right-of-use assets and liabilities

 

 

2

 

 

 

1

 

Prepayment and other assets

 

 

3

 

 

 

10

 

Losses payable

 

 

158

 

 

 

-

 

Unearned premiums reserve

 

 

149

 

 

 

218

 

Accounts payable and other liabilities

 

 

131

 

 

 

(125 )

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

$ (110 )

 

 

(278 )

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

 

Purchase of equity securities

 

 

(1,148 )

 

 

(2,390 )

Purchase of other investments 

 

 

(2,000

)

 

 

-

 

Proceeds from sale of equity securities

 

 

1,346

 

 

 

2,429

 

Purchase of property and equipment

 

 

-

 

 

 

(14 )

 

 

 

 

 

 

 

 

 

Net cash (used in) provided by investing activities

 

$ (1,802

 

 

25

 

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

 

Proceeds on issuance of notes

 

 

-

 

 

 

216

 

Redemption of notes

 

 

-

 

 

 

(600 )

 

 

 

 

 

 

 

 

 

Net cash used in financing activities

 

$ -

 

 

 

(384 )

 

 
6

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OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(expressed in thousands of U.S. Dollars)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Cash and cash equivalents, and restricted cash and cash equivalents:

 

 

 

 

 

 

Net change during the period

 

 

(1,912 )

 

 

(637 )

Balance at beginning of period

 

 

7,476

 

 

 

8,016

 

 

 

 

 

 

 

 

 

 

Balance at end of period

 

$ 5,564

 

 

 

7,379

 

 

 

 

 

 

 

 

 

 

Non-cash investing activities

 

 

 

 

 

 

 

 

Operating lease right-of-use assets

 

$ -

 

 

 

169

 

Operating lease liability

 

$ -

 

 

 

169

 

  

The accompanying Notes to Consolidated Financial Statements are an integral

part of the Consolidated Financial Statements.

 

 
7

Table of Contents

 

OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARY

Consolidated Statements of Changes in Shareholders' Equity

Nine Months Ended September 30, 2021 and 2020 (unaudited)

(expressed in thousands of U.S. Dollars, except number of shares )

   

 

 

Ordinary Share Capital

 

 

Additional Paid-in

 

 

Accumulated

 

 

Total Shareholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2019

 

 

5,733,587

 

 

 

6

 

 

 

32,262

 

 

 

(24,225 )

 

 

8,043

 

Net loss for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(364 )

 

 

(364 )

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

8

 

 

 

-

 

 

 

8

 

Balance at March 31, 2020

 

 

5,733,587

 

 

 

6

 

 

 

32,270

 

 

 

(24,589 )

 

 

7,687

 

Net income for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

165

 

 

 

165

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

8

 

 

 

-

 

 

 

8

 

Balance at June 30, 2020

 

 

5,733,587

 

 

 

6

 

 

 

32,278

 

 

 

(24,424 )

 

 

7,860

 

Net loss for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(33 )

 

 

(33 )

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

8

 

 

 

-

 

 

 

8

 

Balance at September 30, 2020

 

 

5,733,587

 

 

 

6

 

 

 

32,286

 

 

 

(24,457 )

 

 

7,835

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2020

 

 

5,733,587

 

 

 

6

 

 

 

32,294

 

 

 

(24,275 )

 

 

8,025

 

Net income for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

28

 

 

 

28

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

15

 

 

 

-

 

 

 

15

 

Balance at March 31, 2021

 

 

5,733,587

 

 

 

6

 

 

 

32,309

 

 

 

(24,247 )

 

 

8,068

 

Net income for the period

 

 

-

 

 

 

 

 

 

 

 

 

 

 

448

 

 

 

448

 

Stock-based compensation

 

 

-

 

 

 

 

 

 

 

15

 

 

 

-

 

 

 

15

 

Balance at June 30, 2021

 

 

5,733,587

 

 

 

6

 

 

 

32,324

 

 

 

(23,799 )

 

 

8,531

 

Net income for the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

6,526

 

 

 

6,526

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

13

 

 

 

-

 

 

 

13

 

Balance at September 30, 2021

 

 

5,733,587

 

 

 

6

 

 

 

32,337

 

 

 

(17,273 )

 

 

15,070

 

  

The accompanying Notes to Consolidated Financial Statements are an integral

part of the Consolidated Financial Statements.

 

 
8

Table of Contents

 

OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021

 

1. ORGANIZATION AND BASIS OF PRESENTATION

 

(a) Organization

 

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 Limited owns 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 Limited also owns 100% of the equity interest in Oxbridge Re NS, an entity incorporated as an exempted company on December 22, 2017 under the laws of the Cayman Islands to function as a reinsurance sidecar facility and to increase the underwriting capacity of Oxbridge Reinsurance Limited. The Company, through its subsidiaries (collectively “Oxbridge Re”) provides collateralized reinsurance in the property catastrophe market and makes investments that can contribute to the growth of capital and surplus in its licensed reinsurance subsidiaries over time. The Company operates as a single business segment through its wholly-owned subsidiaries. The Company’s headquarters and principal executive offices are located at Suite 201, 42 Edward Street, Georgetown, 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) Basis of Presentation and Consolidation

 

The accompanying unaudited, consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, and the Securities and Exchange Commission (“SEC”) rules for interim financial reporting. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. However, in the opinion of management, the accompanying interim consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the Company’s consolidated financial position as of September 30, 2021 and the consolidated results of operations and cash flows for the periods presented. The consolidated results of operations for interim periods are not necessarily indicative of the results of operations to be expected for any subsequent interim period or for the fiscal year ended December 31, 2021. The accompanying unaudited consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020 included in the Company’s Form 10-K, which was filed with the SEC on March 30, 2021.

 

In preparing the interim unaudited consolidated financial statements, management was required to make certain estimates and assumptions that affect the reported amounts of 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.

 

Material estimates that are particularly susceptible to significant change in the near-term relate to the fair value of the Company’s investment in Oxbridge Acquisition Corp. and the determination of the reserve for losses and loss adjustment expenses (if any), which may include amounts estimated for claims incurred but not yet reported. The Company uses various assumptions and actuarial data it believes to be reasonable under the circumstances to make these estimates. In addition, accounting policies specific to valuation of investments involve significant judgments and estimates material to the Company’s consolidated financial statements. Although considerable variability is likely to be inherent in these estimates, management believes that the amounts provided are reasonable. These estimates are continually reviewed and adjusted if necessary. Such adjustments are reflected in current operations.

 

 
9

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OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021 

 

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.

 

All significant intercompany balances and transactions have been eliminated.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

Cash and cash equivalents: Cash and cash equivalents are comprised of cash and short- term investments with original maturities of three months or less.

 

Restricted 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: The Company from time to time invests in fixed-maturity securities and equity securities, and for which its fixed-maturity securities are classified as available-for-sale. The Company’s available for sale debt investments are carried at fair value with changes in fair value included as a separate component of accumulated other comprehensive income (loss) in shareholders’ equity. For the Company’s investment in equity securities, and for the Company’s investment in the special purpose acquisition company Oxbridge Acquisition Corp. classified as “other investments”, the changes in fair value are recorded within the consolidated statements of operations.

 

Unrealized 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 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).

 

 
10

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OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021 

 

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Fair value measurement (continued)

 

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 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 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. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument, as well as the marketability of the instrument and the inherent risk of forfeiture of such instrument.

 

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. At September 30, 2021, 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 three and nine-month periods ended September 30, 2021 and 2020, there were no impairments in property and equipment.

 

 
11

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OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021

 

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Allowance for uncollectible receivables: Management evaluates credit quality by evaluating the exposure to individual counterparties; where warranted management also considers the credit rating or financial position, operating results and/or payment history of the counterparty. Management establishes an allowance for amounts for which collection is considered doubtful. Adjustments to previous assessments are recognized in operations in the year in which they are determined. At September 30, 2021, no receivables were determined to be overdue or impaired, and accordingly, no allowance for uncollectable receivables has been established.

 

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 reported (“IBNR”), management uses the assistance of an independent actuary. The reserves for losses and loss adjustment expenses represent management’s best estimate of the ultimate settlement costs of all losses and loss adjustment expenses. Management believes 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 operations in the period in which they are determined.

 

Loss experience refund payable: Certain contracts may 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 event covered by the Company occur.

 

Premiums 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. 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 may 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. Reinstatement premiums that are contractually calculated on a pro-rata basis of the original premiums are earned over the remaining coverage period.

 

 
12

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OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021

 

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Unearned Premiums Ceded: The Company from time to time reduces the risk of future losses on business assumed by reinsuring certain risks and exposures with other reinsurers (retrocessionaires). The Company remains liable to the extent that any retrocessionaire fails to meet its obligations and to the extent that the Company does not hold sufficient security for their unpaid obligations.

 

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.

 

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 September 30, 2021.

 

Earnings (Loss) Per Share: Basic earnings (loss) per share has been computed on the basis of the weighted-average number of ordinary shares outstanding during the periods presented. Diluted earnings (loss) per share is computed based on the weighted-average number of ordinary shares outstanding and reflects the assumed exercise or conversion of diluted securities, such as stock options and warrants, computed using the treasury stock method.

 

Stock-Based Compensation: The Company accounts for stock-based compensation under the fair value recognition provisions of GAAP which requires the measurement and recognition of compensation for all stock-based awards made to employees and directors, including stock options and restricted stock issuances based on estimated fair values. The Company measures compensation for restricted stock based on the price of the Company’s ordinary shares at the grant date. Determining the fair value of stock options at the grant date requires significant estimation and judgment. The Company uses an option-pricing model (Black-Scholes option pricing model) to assist in the calculation of fair value for stock options. When estimating the expected volatility, the Company takes into consideration the historical volatility of entities similar to itself. The Company considers factors such as an entity’s industry, stage of life cycle, size and financial leverage when selecting similar entities. The Company may use a sample peer group of companies in the reinsurance industry and/or the Company’s own historical volatility in determining the expected volatility. Additionally, the Company uses the guidance in the SEC’s Staff Accounting Bulletin No. 107 to determine the estimated life of 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.

 

 
13

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OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021

 

2. SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Pending Accounting Updates:

 

Accounting Standards Update No. 2016-13. In June 2016, the FASB issued ASU 2016-13, ”Financial Instruments - Credit Losses (Topic 326): Measurements of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 amends the guidance on reporting credits losses and affects loans, debt securities, trade receivables, reinsurance recoverable and other financial assets that have the contractual right to receive cash. The amendments are effective for annual periods beginning after December 15, 2022 (as amended), and interim periods within those annual periods. The Company is in the process of evaluating the impact of the requirements of ASU 2016-13 on the Company’s consolidated financial statements.

 

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: Any reclassifications of prior period amounts have been made to conform to the current period presentation.

 

3. CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS

 

 

 

At September 30,

 

 

At December 31,

 

 

 

2021

 

 

2020

 

 

 

(in thousands)

 

 

 

 

 

 

 

 

Cash on deposit

 

$ 2,749

 

 

$ 2,253

 

Cash held with custodians

 

 

999

 

 

 

3,309

 

Restricted cash held in trust

 

 

1,816

 

 

 

1,914

 

Total

 

$ 5,564

 

 

$ 7,476

 

 

Cash and 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, f/k/a SunTrust Bank 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.

 

 
14

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OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021

 

4. INVESTMENTS

 

The Company from time to time invests in fixed-maturity securities and equity securities. At September 30, 2021 and December 31, 2020, the Company did not hold any available-for-sale debt securities.

 

Proceeds received, and the gross realized gains and losses from sales of equity securities, for the three and nine months ended September 30, 2021 and 2020 were as follows:

 

 

 

Gross

 proceeds

from sales

 

 

Gross

Realized

Gains

 

 

Gross

Realized

Losses

 

 

 

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2021

 

 

 

 

 

 

 

 

 

Equity securities

 

$ -

 

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

$ 1,346

 

 

$ 755

 

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

$ 294

 

 

$ -

 

 

$ (2 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Equity securities

 

$ 2,429

 

 

$ 327

 

 

$ (2 )

 

Other Investments

 

In connection with Oxbridge Acquisition Corp. (“OXAC”) initial public offering (“IPO”) in August 2021, the Company’s affiliate OAC Sponsor Ltd. (“Sponsor”) purchased an aggregate 4,897,500 private placement warrants from OXAC (“Private Placement Warrants”) at a price of $1.00 per warrant. Each Private Placement Warrant is exercisable for one of OXAC’s Class A ordinary share at a price of $11.50 per share, and as such meets the definition of a derivative as outlined within ASC 815, Derivatives and Hedging. The Sponsor also purchased an aggregate of 2,875,000 of OXAC’s Class B ordinary shares (the “Class B shares”) par value $0.0001 per share for $25,000. The Class B shares and Private Placement Warrants were issued to and are held by Sponsor. The Class B shares of OXAC held by Sponsor will automatically convert into shares of OXAC’s Class A ordinary shares on a one-for-one basis at the time of OXAC’s initial business combination and are subject to certain transfer restrictions.

 

On August 11, 2021, the Company acquired an aggregate of 1,500,000 ordinary shares and 3,094,999 preferred shares of Sponsor for an aggregate purchase price of $2,000,000. In connection with the organization of Sponsor, the Company placed approximately 34.7% of the risk capital and owns approximately 49.6% and 63.1% of the ordinary shares and preferred shares, respectively, of the Sponsor (the “Sponsor Equity Interest”). The preferred shares of Sponsor are nonvoting shares and entitle the holders thereof to receive the net proceeds, if any, received by Sponsor from the sale, exchange, or disposition of the Private Placement Warrants or the shares issuable upon the exercise thereof, and the ordinary shares of Sponsor (which are voting shares in Sponsor) are equivalent to the value of the Class B Shares of OXAC held by Sponsor.

 

 
15

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OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021 

 

4. INVESTMENTS (cont’d)

 

Other Investments (continued)

    

The registration statement for OXAC’s IPO was declared effective on August 11, 2021 and on August 16, 2021, OXAC consummated the IPO with the sale of 11,500,000 units (the “Units”) at $10.00 per Unit, generating gross proceeds of $115,000,000. The Units trade on the NASDAQ Capital Market under the ticker symbol “OXACU”. After the securities comprising the units began separate trading on October 1, 2021, the Class A ordinary shares and public warrants were listed on NASDAQ under the symbols “OXAC” and “OXACW,” respectively.

 

The Company’s beneficial interests in OXAC’s Class B shares and the Private Placement Warrants 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 OXAC’s Class B shares and Private Placement Warrants is dependent on company-specific adjustments applied to the observable trading prices of OXAC Class A shares and public warrants. The Company’s management estimates that a specific discount range of 20% to 40% sufficiently captures the risk or profit that a market participant would require as compensation for assuming the inherent risk of forfeiture if a business combination doesn’t occur and the lack of marketability of the Company’s beneficial interests in the OXAC. The Company has selected a discount of 40%, and due to the unobservable nature of the company-specific adjustment, the Company classifies the Other Investment as Level 3 in the fair value hierarchy. Subsequent changes in fair value will be recorded in the consolidated statement of operations during the period of the change.

 

As a result of the re-measurement of our investment in OXAC, we recognize for the three and nine months ended September 30, 2021, an unrealized gain on securities of $7,145,857 within our consolidated statement of operations.

 

Other investments as of September 30, 2021 consist of the following:

 

 

 

September 30,

2021

 

 

 

(Unaudited)

 

Oxbridge Acquisition Corp. Private Placement Warrants

 

$ 742,800

 

Oxbridge Acquisition Corp. Class B Ordinary Shares

 

 

8,403,057

 

End of period

 

$ 9,145,857

 

 

 

 

 

 

 

 

June 30,

2021

 

 

 

(Unaudited)

 

Beginning of year

 

$ -

 

Investments in affiliate

 

 

2,000,000

 

Unrealized gain on investment in affiliate

 

 

7,145,857

 

End of period

 

$ 9,145,857

 

 

If OXAC does not complete a business combination within 15 months from the closing of the IPO (or up to 21 months from the closing of the IPO if OXAC extends the period of time to consummate a business), the proceeds from the sale of the Private Placement Warrants (after OXAC IPO transaction costs) will be used to fund the redemption of the shares sold in the OXAC IPO (subject to the requirements of applicable law), and the Private Placement Warrants will expire without value. The Sponsor holds approximately 20% of the total ordinary shares (Class A and Class B) in OXAC along with the 4,897,500 Private Placement Warrants, and OXAC is managed by the Company’s executive officers.

 

 
16

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OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021 

 

4. INVESTMENTS (continued)

 

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 September 30, 2021 and December 31, 2020:

 

 

 

Fair Value Measurements Using

 

 

 

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Total

 

As of September 30, 2021

 

($ in thousands)

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$ 3,748

 

 

$ -

 

 

$ -

 

 

$ 3,748

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted cash and cash equivalents

 

$ 1,816

 

 

$ -

 

 

$ -

 

 

$ 1,816

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other investments

 

$ -

 

 

$ -

 

 

$ 9,146

 

 

$ 9,146

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity securities

 

 

778

 

 

 

-

 

 

 

-

 

 

 

778

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$ 6,342

 

 

$ -

 

 

$ 9,146

 

 

$ 15,488

 

 

 

 

Fair Value Measurements Using

 

 

 

 

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

 

Total

 

As of December 31, 2020

 

($ in thousands)

 

Financial Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$ 5,562

 

 

$ -

 

 

$ -

 

 

$ 5,562

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted cash and cash equivalents

 

$ 1,914

 

 

$ -

 

 

$ -

 

 

$ 1,914

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total equity securities

 

 

787

 

 

 

-

 

 

 

-

 

 

 

787

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$ 8,263

 

 

$ -

 

 

$ -

 

 

$ 8,263

 

 

 

Table of Contents

 

OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021  

 

5. TAXATION

 

Under current Cayman Islands law, no corporate entity, including the Company and the subsidiaries, is obligated to pay taxes in the Cayman Islands on either income or capital gains. The Company and its subsidiaries 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 its subsidiaries 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 subsidiary is 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.

 

 
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OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021 

 

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.

 

 
19

Table of Contents

 

OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021 

 

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 thousand 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 are due to mature on June 1, 2023. None of the participating notes were redeemed during the three and nine-month periods ending September 30, 2021.

 

The income from Oxbridge Re NS operations that are attributable to the participating notes noteholders for the three and nine months ended September 30, 2021 was $24,000 and $66,000, respectively, and are included within accounts payable and other liabilities as at September 30, 2021. The income from Oxbridge Re NS operations that are attributable to the participating notes noteholders for the three and nine months ended September 30, 2020 was $26,000 and $112,000, respectively, and are included within accounts payable and other liabilities as at September 30, 2020.

 

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 three and nine-month periods ending September 30, 2021 and 2020:

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

($ in thousands)

 

 

($ in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$ -

 

 

 

-

 

 

$ -

 

 

 

-

 

Incurred related to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current period

 

 

158

 

 

 

-

 

 

 

158

 

 

 

-

 

Prior period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total incurred

 

 

158

 

 

 

-

 

 

 

158

 

 

 

-

 

Paid related to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current period

 

 

(158 )

 

 

-

 

 

 

(158 )

 

 

-

 

Prior period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total paid

 

 

(158 )

 

 

-

 

 

 

(158 )

 

 

-

 

Balance, end of period

 

$ -

 

 

 

-

 

 

$ -

 

 

 

-

 

 

 
20

Table of Contents

 

OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021

 

7. RESERVE FOR LOSSES AND LOSS ADJUSTMENT EXPENSES (continued)

 

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 actuary in the determination 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 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.

 

The losses incurred during the three and nine-month period ended September 30, 2021 related to the a first limit loss suffered by the Company as a result of underwriting exposure to Hurricane Ida, which made landfall in Louisiana on August 29, 2021.

 

 
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OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021

 

8. EARNINGS (LOSS) PER SHARE

 

A summary of the numerator and denominator of the basic and diluted loss per share is presented below (dollars in thousands except per share amounts):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss)

 

$ 6,526

 

 

 

(33 )

 

$ 7,002

 

 

 

(232 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares - basic

 

 

5,733,587

 

 

 

5,733,587

 

 

 

5,733,587

 

 

 

5,733,587

 

Effect of dilutive securities - Stock options

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Shares issuable upon conversion of warrants

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Weighted average shares - diluted

 

 

5,733,587

 

 

 

5,733,587

 

 

 

5,733,587

 

 

 

5,733,587

 

Earnings (loss) per share - basic

 

$ 1.14

 

 

 

(0.01 )

 

$ 1.22

 

 

 

(0.04 )

Earnings (loss) per share - diluted

 

$ 1.14

 

 

 

(0.01 )

 

$ 1.22

 

 

 

(0.04 )

 

For the three and nine-month periods ended September 30, 2021, options to purchase 896,250 ordinary shares were anti-dilutive due to the sum of the proceeds, including unrecognized compensation expense, exceeded the average market price of the Company’s ordinary share during the periods presented. For the three and nine-month period ended September 30, 2020, options to purchase 540,000 ordinary shares were anti-dilutive due to net loss during the period presented.

 

For the three and nine-month period ended September 30, 2021, 8,230,700 warrants to purchase an aggregate of 8,230,700 ordinary shares were anti-dilutive because the exercise price of $7.50 exceeded the average market price of the Company’s ordinary share during the periods presented. For the three and nine-month period ended September 30, 2020, 8,230,700 warrants to purchase an aggregate of 8,230,700 ordinary shares were anti-dilutive due to net loss during the period presented.

 

GAAP requires the Company to use the two-class method in computing basic earnings (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 earnings (loss) per share during periods of net income (loss).

 

 
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OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021

 

9. WARRANTS

 

There were 8,230,700 warrants outstanding at September 30, 2021 and December 31, 2020. One warrant may be exercised to acquire one ordinary share at an exercise price equal to $7.50 per share on or before March 26, 2024. The Company at its option may cancel the warrants in whole or in part, provided that the closing price per ordinary share has exceeded $9.38 for at least ten trading days within any period of twenty consecutive trading days, including the last trading day of the period. No warrants were exercised during the three and nine-month periods ended September 30, 2021 and 2020.

 

10. DIVIDENDS

 

As of September 30, 2021, none of the Company’s retained earnings were restricted from payment of dividends to the company’s shareholders. However, since most of the Company’s capital and retained earnings may be invested in its subsidiaries, a dividend from the subsidiaries would likely be required in order to fund a dividend to the Company’s shareholders and would require notification to the Cayman Islands Monetary Authority (“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.

 

11. SHARE-BASED COMPENSATION

 

The Company currently has outstanding stock-based awards granted under the 2014 Omnibus Incentive Plan (the “2014 Plan”). Under the Plan, the Company has discretion to grant equity and cash incentive awards to eligible individuals. At September 30, 2021, there were 43,750 shares available for grant under the 2014 Plan.

 

During the nine months ended September 30, 2021, the Company’s shareholder approved the 2021 Omnibus Incentive Plan (the “2021 Plan”). Under the Plan, the Company has discretion to grant equity and cash incentive awards to eligible individuals. At September 30, 2021, there were 1,000,000 shares available for grant under the 2021 Plan (collectively, the “Plans”).

 

Stock options

 

Stock options granted and outstanding under the Plans vests quarterly over four years and are exercisable over the contractual term of ten years.

 

A summary of the stock option activity for the three and nine-month periods ended September 30, 2021 and 2020 is as follows:

 

 
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OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021 

 

11. SHARE-BASED COMPENSATION (cont’d)

 

 

 

Number

of

Options

 

 

Weighted-

Average

Exercise

Price

 

 

Weighted-

Average

Remaining

Contractual

Term

 

Aggregate

Intrinsic

Value

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at January 1, 2021

 

 

540,000

 

 

$ 3.86

 

 

 

 

 

 

Granted

 

 

400,000

 

 

$ 6.00

 

 

 

 

 

 

Outstanding at March 31, 2021

 

 

940,000

 

 

$ 4.77

 

 

7.7 years

 

$ -

 

Outstanding at June 30, 2021

 

 

940,000

 

 

$ 4.77

 

 

7.5 years

 

$ -

 

Forfeited

 

 

(43,750 )

 

$ 6.00

 

 

 

 

 

 

 

Outstanding at September 30, 2021

 

 

896,250

 

 

$ 4.71

 

 

7.1 years

 

$ -

 

Exercisable at September 30, 2021

 

 

521,250

 

 

$ 4.47

 

 

5.9 years

 

$ -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at January 1, 2020

 

 

540,000

 

 

$ 3.86

 

 

 

 

$ -

 

Outstanding at March 31, 2020

 

 

540,000

 

 

$ 3.86

 

 

7.1 years

 

$ -

 

Outstanding at June 30, 2020

 

 

540,000

 

 

$ 3.86

 

 

6.9 years

 

$ -

 

Outstanding at September 30, 2020

 

 

540,000

 

 

$ 4.65

 

 

6.6 years

 

$ -

 

Exercisable at September 30, 2020

 

 

374,688

 

 

$ 4.78

 

 

5.9 years

 

$ -

 

 

Compensation expense recognized for the three-month periods ended September 30, 2021 and 2020 totaled $13,000 and $8,000, respectively, and for the nine-month periods ended September 30, 2021 and 2020, totaled $43,000 and $24,000 respectively. Compensation expense is included in general and administrative expenses. At September 30, 2021 and 2020, there was approximately $125,000 and $62,000, respectively, of total unrecognized compensation expense related to non-vested stock options granted under the Plans. The Company expects to recognize the remaining compensation expense over a weighted-average period of twenty-eight (28) months.

 

During the nine-month period ended September 30, 2021 the Company granted 400,000 options (of which 43,750 options were forfeited) with fair value estimated on the date of grant using the following assumptions and the Black-Scholes option pricing model:

 

 

 

2021

 

 

 

 

 

Expected dividend yield

 

 

0 %

Expected volatility

 

 

31 %

Risk-free interest rate

 

 

0.92 %

Expected life (in years)

 

 

6.25

 

Per share grant date fair value of options issued

 

$ 0.32

 

 

 
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OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021 

 

11. SHARE-BASED COMPENSATION (continued)

 

At the time of the grant, the dividend yield was based on the Company’s history and expectation of dividend payouts at the time of the grant; expected volatility was based on volatility of similar companies’ common stock; the risk-free rate was based on the U.S. Treasury yield curve in effect.

 

The Company examined its historical pattern of option exercises in an effort to determine if there were any pattern based on certain employee populations. From this analysis, the Company could not identify any patterns in the exercise of options. As such, the Company used the guidance in the SEC’s Staff Accounting Bulletin No. 107 to determine the estimated life of options issued.

 

12. NET WORTH FOR REGULATORY PURPOSES

 

The subsidiaries are subject to a minimum and prescribed capital requirement as established by CIMA. Under the terms of their respective licenses, Oxbridge Reinsurance Limited and Oxbridge Re NS are required to maintain a minimum and prescribed capital requirement of $500 in accordance with the relevant subsidiary’s approved business plan filed with CIMA.

 

At September 30, 2021, the Oxbridge Reinsurance Limited’s net worth of $9 million exceeded the minimum and prescribed capital requirement. For the three and nine-month periods ended September 30, 2021, the Subsidiary’s net income was approximately $6.9 million and $6.5 million, respectively.

 

At September 30, 2021, the Oxbridge Re NS’ net worth of $169 thousand exceeded the minimum and prescribed capital requirement. For the three and nine-month periods ended September 30, 2021, the Subsidiary’s net income was approximately $6 thousand and $17 thousand, respectively.

 

The Subsidiaries are not required to prepare separate statutory financial statements for filing with CIMA, and there were no material differences between the Subsidiaries’ GAAP capital, surplus and net income, and its statutory capital, surplus and net income as of September 30, 2021 or for the period 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 assets, notes payable and accounts payable and other liabilities, approximate their fair values due to their short-term nature.

 

 
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OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021

 

13. FAIR VALUE AND CERTAIN RISKS AND UNCERTAINTIES (continued)

 

Concentration of underwriting risk

 

A substantial portion of the Company’s current reinsurance business ultimately relates to the risks of a limited number of entities; accordingly, the Company’s underwriting risks are not significantly diversified.

 

Concentrations of Credit and Counterparty Risk

 

The Company markets retrocessional and reinsurance policies worldwide through its brokers. Credit risk exists to the extent that any of these brokers may be unable to fulfill 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, in the Company. 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 Company remains liable for losses it incurs to the extent that any third-party reinsurer is unable or unwilling to make timely payments under reinsurance 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 concentrations of credit and counterparty risk by using reputable and several counterparties which decreases the likelihood of any significant concentration of credit risk with any one counterparty.

 

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.

 

 
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OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021

 

14. LEASES

 

Operating lease right-of-use assets and operating lease liabilities are disclosed as line in the consolidated balance sheet. 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 two operating lease obligations namely for the Company’s office facilities located at Suite 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 approximately twenty-nine (29) months and includes an option to extend the lease. Under the terms of the lease, the Company also has the right to terminate the lease after thirty-six (36) months upon giving appropriate notice in writing to the Lessor. The residential lease has a remaining lease term of approximately fifteen (15) months.

 

The components of lease expense and other lease information as of and during the nine-month periods ended September 30, 2021 and 2020 are as follows:

 

(in thousands)

 

For the Nine-Month Period

Ended September 30, 2021

 

 

For the Nine-Month Period

Ended September 30, 2020

 

Operating Lease Cost (1)

 

$ 72

 

 

$ 70

 

 

 

 

 

 

 

 

 

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

 

 

 

 

Operating cash flows from operating leases

 

$ 72

 

 

$ 72

 

 

(1) Includes short-term leases

 

(in thousands)

 

At September 30,

2021

 

 

At December 31,

2020

 

Operating lease right-of-use assets

 

$ 157

 

 

$ 222

 

 

 

 

 

 

 

 

 

 

Operating lease liabilities

 

$ 158

 

 

$ 222

 

 

 

 

 

 

 

 

 

 

Weighted-average remaining lease term - operating leases

 

1.91 years

 

 

2.58 years

 

 

 

 

 

 

 

 

 

 

Weighted-average discount rate - operating leases

 

 

5.46 %

 

 

5.29 %

 

 
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OXBRIDGE RE HOLDINGS LIMITED AND SUBSIDIARIES

Notes to Consolidated Financial Statements (unaudited)

September 30, 2021

 

14. LEASES (continued)

 

Future minimum lease payments under non-cancellable leases as of September 30, 2021 and December 31, 2020, reconciled to our discounted operating lease liability presented on the consolidated balance sheet are as follows:

 

(in thousands)

 

At September 30,

2021

 

 

At December 31,

2020

 

Remainder of 2021

 

$ 24

 

 

$ 96

 

2022

 

 

97

 

 

 

97

 

2023

 

 

40

 

 

 

40

 

Thereafter

 

 

6

 

 

 

6

 

Total future minimum lease payments

 

$ 167

 

 

$ 239

 

 

 

 

 

 

 

 

 

 

Less imputed interest

 

 

(9 )

 

 

(17 )

Total operating lease liability

 

$ 158

 

 

 

222

 

  

15. RELATED PARTY TRANSACTIONS

 

Promissory Note Agreement

   

During the three and nine-month period ended September 30, 2021, Oxbridge Reinsurance Limited entered into a Promissory Note Agreement (the “Note”) with OAC Sponsor Ltd. (the “Sponsor”). The Sponsor is a Cayman Islands exempted company that was the sole parent of Oxbridge Acquisition Corp., a special purpose acquisition company (the “SPAC”) prior to the SPAC initial public offering on August 11, 2021. The Company’s executive officers serve as directors and executive officers of the Sponsor and the SPAC, and Oxbridge Reinsurance Limited is the lead investor in the Sponsor. Under the terms of the promissory note, Oxbridge Reinsurance Limited was able to lend up to $300,000 to the Sponsor interest-free for the purposes of covering the initial public offering costs of the SPAC. The entire unpaid principal balance of Note was payable on the earlier of: (i) September 30, 2021, or (ii) the date on which the SPAC consummates an initial public offering of its securities (such earlier date, the “Maturity Date”). The Sponsor drew down approximately $177,000 under the Note and repaid the Note in full out of the proceeds of the initial public offering.

 

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 up to 15 months, 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 quarter and nine-month period ended September 30, 2021, the Company received $20,000 from the Sponsor under the Administrative Services Agreement, which is included in “net investment and other income” in the consolidated statements of operations, and within “due from related party” on the consolidated balance sheets.

 

Participating Notes

  

During the year ending December 31, 2020, Mr. Jay Madhu, a director and officer of the Company and its subsidiaries, invested a principal amount of $68 thousand in Series 2020-1 participating notes. During the three months ended September 30, 2021, Jay Madhu received $12 thousand return on the investment. The principal balance is included in notes payable at September 30, 2021 and December 31, 2020.

        

16. SUBSEQUENT EVENTS

 

We evaluate all subsequent events and transactions for potential recognition or disclosure in our Except as disclosed in Note 4 above, there were no other events subsequent to September 30, 2021 for which disclosure was required.

 

 
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

 

Certain statements in this Quarterly Report on Form 10-Q, including in this Management’s Discussion and Analysis, other than purely historical information, 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 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 “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 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” contained in our Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 30, 2021 and on pages 41 through 42 of this Form 10-Q. We undertake no obligation 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.

 

GENERAL

 

The following is a discussion and analysis of our results of operations for the three and nine-month periods ended September 30, 2021 and 2020 and our financial condition as of September 30, 2021 and December 31, 2020. The following discussion should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and in our Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 30, 2021. 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, unless the context dictates otherwise.

 

Overview

 

We are a Cayman Islands specialty property and casualty reinsurer that provides reinsurance solutions through our reinsurance subsidiaries, Oxbridge Reinsurance Limited and Oxbridge Re NS. 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. We focus on underwriting fully-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 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, we intend to complement our underwriting profits with investment profits on an opportunistic basis. Our primary 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.

 

 
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Our level of profitability 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.

 

Recent Developments

 

Oxbridge Acquisition Corp.

 

On August 16, 2021, Oxbridge Acquisition Corp. (“Oxbridge Acquisition” or “the SPAC”), a Cayman Islands special purpose acquisition company in which the Company has an indirect investment through its wholly-owned licensed reinsurance subsidiary Oxbridge Reinsurance Limited (“OXRE”), announced the closing of an initial public offering of units (“Units”).  In the initial public offering, Oxbridge Acquisition sold an aggregate of 11,500,000 Units at a price of $10.00 per unit, resulting in total gross proceeds of $115,000,000.  Each Unit consisted of one Class A ordinary share and one redeemable warrant, with each warrant entitling the holder thereof to purchase one Class A ordinary share of Oxbridge Acquisition at a price of $11.50 per share.

 

The initial public offering of Oxbridge Acquisition was sponsored by OAC Sponsor Ltd. (“Sponsor”). In connection with Oxbridge Acquisition’s initial public offering, Sponsor purchased from Oxbridge Acquisition, simultaneous with the closing of the initial public offering, an aggregate of 4,897,500 warrants at a price of $1.00 per warrant ($4,897,500 in the aggregate) in a private placement (the “Private Placement Warrants”). Each Private Placement Warrant is exercisable to purchase one Class A ordinary share of Oxbridge Acquisition at $11.50 per share. In addition, Sponsor holds 2,875,000 shares of the Class B ordinary shares of Oxbridge Acquisition, representing 20% of the outstanding shares of Oxbridge Acquisition (the “Class B Shares”).

 

In connection with the organization of Sponsor, OXRE placed approximately 34.7% of the risk capital and owns approximately 49.6% and 63.1% of the ordinary shares and preferred shares, respectively, of the Sponsor (the “Sponsor Equity Interest”).  The preferred shares of Sponsor are nonvoting shares and entitle the holders thereof to receive the net proceeds, if any, received by Sponsor from the sale, exchange, or disposition of the Private Placement Warrants or the shares issuable upon the exercise thereof, and the ordinary shares of Sponsor (which are voting shares in Sponsor) are equivalent to the value of the Class B Shares of Oxbridge Acquisition held by Sponsor.  

 

 
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On August 11, 2021, OXRE entered into a Share Purchase Agreement with Sponsor (the “Share Purchase Agreement”) under which OXRE purchased the Sponsor Equity Interest for an aggregate purchase price of $2,000,000 (the “Share Purchase Agreement”). Under the Share Purchase Agreement, OXRE acquired an aggregate of 1,500,000 ordinary shares and 3,094,999 preferred shares of Sponsor. The preferred shares of Sponsor entitle the holders thereof to receive the net proceeds, if any, received by Sponsor from the sale, exchange, or disposition of the Private Placement Warrants or the shares issuable upon the exercise thereof, and the ordinary shares of Sponsor are equivalent to the value of the Class B Shares of Oxbridge Acquisition held by Sponsor. In addition to the foregoing, the Share Purchase Agreement contains customary representations, warranties, and covenants.

 

Business outlook

 

The novel coronavirus (“COVID-19”) pandemic has had and is expected to continue to have a significant effect on the reinsurance industry. The industry is currently being impacted by a number of factors including: uncertainties with respect to current and future losses, reduction in interest rates, equity market volatility and ongoing business and financial market impacts of an economic downturn. The insurance industry is likely to experience material losses resulting from COVID-19, which will reduce available capital and we expect will help to sustain the upward pricing trend for reinsurers that we were seeing across many lines of business before COVID-19. However, the ultimate impact on current business in force as well as risks and potential opportunities on future business remains highly uncertain.

 

Impact of COVID-19 on Business Operations

 

We reacted quickly and decisively to the COVID-19 crisis when we became aware of the potential impact on our business operations. We have continued to monitor and adjust our operations as the global pandemic unfolds. As local directives had required us to transition our operations to remote working arrangements, all functions remained fully operational with all employees having remote access to the Company’s network and IT systems. Each employee was equipped with a computer and related equipment at their home to ensure access to our network and efficiency. Prior to the COVID-19 crisis we had general remote, work-from-home capabilities and had previously tested those systems. We have experienced no material disruption in our business operations. As of September 30, 2021, our operations are back to normal. However, should the situation change for the worse, we will revert to working remotely.

 

PRINCIPAL REVENUE AND EXPENSE ITEMS

 

Revenues

 

We derive our most significant revenues from three principal sources:

 

 

·

premiums assumed from reinsurance on property and casualty business;

 

 

 

 

·

income from investments; and

 

  

 

 

· 

income under Administrative Services Agreement

 

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, 2021, typically one-half of the premiums will be earned in 2021 and the other half will be earned during 2022. However, in the event of limit losses on our policies, premium recognition will be accelerated to match losses incurred in the period, when there is no possibility of any future treaty-year losses under the contracts.

 

 
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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 interest income, dividends and net realized and unrealized gains (losses) on investment securities. Such income is primarily from the Company’s investments, which includes other investments in Oxbridge Acquisition Corp. 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 up to 15 months, 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 quarter and nine-month period ended September 30, 2021, the Company received $20,000 from the Sponsor under the Administrative Services Agreement, which is included in “net investment and other income” in the consolidated statements of operations, and within “due from related party” on the consolidated balance sheets.

 

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 is our consolidated statement of operations and performance ratios for the three and nine-month periods ended September 30, 2021 and 2020 (dollars in thousands, except per share amounts):

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Assumed premiums

 

$ -

 

 

 

-

 

 

 

904

 

 

 

864

 

Change in unearned premiums reserve

 

 

370

 

 

 

247

 

 

 

(149 )

 

 

(218 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net premiums earned

 

 

370

 

 

 

247

 

 

 

755

 

 

 

646

 

Net investment and other income

 

 

25

 

 

 

32

 

 

 

64

 

 

 

90

 

Net realized investment gains

 

 

-

 

 

 

(2 )

 

 

755

 

 

 

325

 

Unrealized gain on other investments

 

 

7,146

 

 

 

-

 

 

 

7,146

 

 

 

-

 

Change in fair value of equity securities

 

 

(512 )

 

 

(18 )

 

 

(566 )

 

 

(343 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

 

7,029

 

 

 

259

 

 

 

8,154

 

 

 

718

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Losses and loss adjustment expenses

 

 

158

 

 

 

-

 

 

 

158

 

 

 

-

 

Policy acquisition costs and underwriting expenses

 

 

41

 

 

 

27

 

 

 

83

 

 

 

71

 

General and administrative expenses

 

 

280

 

 

 

239

 

 

 

845

 

 

 

767

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total expenses

 

 

479

 

 

 

266

 

 

 

1,086

 

 

 

838

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) before income attributable to noteholders

 

 

6,550

 

 

 

(7 )

 

 

7,068

 

 

 

(120 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income attributable to noteholders

 

 

(24 )

 

 

(26 )

 

 

(66 )

 

 

(112 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$ 6,526

 

 

 

(33 )

 

 

7,002

 

 

 

(232 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (Loss) per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

$ 1.14

 

 

 

(0.01 )

 

 

1.22

 

 

 

(0.04 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

 

5,733,587

 

 

 

5,733,587

 

 

 

5,733,587

 

 

 

5,733,587

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performance ratios to net premiums earned:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss ratio

 

 

42.7 %

 

 

0.0 %

 

 

20.9 %

 

 

0.0 %
Acquisition cost ratio

 

 

11.1 %

 

 

10.9 %

 

 

11.0 %

 

 

11.0 %
Expense ratio

 

 

86.8 %

 

 

107.7 %

 

 

122.9 %

 

 

129.7 %
Combined ratio

 

 

129.5 %

 

 

107.7 %

 

 

143.8 %

 

 

129.7 %

   

General. Net income for the quarter ended September 30, 2021 was $6.5 million, or $1.14 per basic and diluted earnings per share compared to a net loss of $33 thousand, or $0.01 per basic and diluted loss per share, for the quarter ended September 30, 2020. The increase is mainly due to significant unrealized gains on the Company’s investment in Oxbridge Acquisition Corp. during the quarter ended September 30, 2021 when compared with prior period quarter.

 

 
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Net income for the nine months ended September 30, 2021 was $7 million, or $1.22 per basic and diluted earnings per share compared to a net loss of $232 thousand, or ($0.04) per basic and diluted loss per share, for the nine months ended September 30, 2020. The increase is mainly due to significant unrealized gains on the Company’s investment in Oxbridge Acquisition Corp. during the quarter ended September 30, 2021 when compared with prior period.

 

Premium Income. Net premiums earned typically reflects the pro rata inclusion into income of premiums assumed (net of loss experience refund) over the life of the reinsurance contracts.

 

Net premiums earned for the quarter ended September 30, 2021 increased to $370 thousand from $247 thousand for the quarter ended September 30, 2020. The increase is due to the acceleration of premium recognition on one of the Company’s reinsurance contract due to a limit loss suffered during the quarter, as well as higher rates on reinsurance contracts during the quarter ended September 30, 2021, when compared to the prior period.

 

Net premiums earned for the nine ended September 30, 2021 increased to $755 thousand from $646 thousand for the nine months ended September 30, 2020. The increase is due to the acceleration of premium recognition on one of the Company’s reinsurance contract due to a limit loss suffered during the quarter, as well as higher rates on reinsurance contracts during the nine-month period ended September 30, 2021, when compared to the prior period.

 

Losses Incurred. Losses incurred for the quarter ended September 30, 2021 increased to $158 thousand from $0, for the quarter ended September 30, 2020. The increase during the quarter is wholly due to the triggering of a limit loss on one of the Company’s reinsurance contracts, due to the impact of Hurricane Ida on our book of business.

 

Losses incurred for the nine-month period ended September 30, 2021 increased to $158 thousand from $0, for the nine-month period ended September 30, 2020. The increase during nine month period ended September 30, 2020 is wholly due to the triggering of a limit loss on one of the Company’s reinsurance contracts, due to the impact of Hurricane Ida on our book of business.

 

Policy Acquisition Costs. Acquisition costs represent the amortization of the brokerage fees and federal excise taxes incurred on reinsurance contracts placed. Policy acquisition costs for the quarter ended September 30, 2021 increased to $41 thousand from $27 thousand for the quarter ended September 30, 2020. The increase is due wholly due to the acceleration of premium recognition as mentioned above, and the resulting acceleration of policy acquisition costs, as well as higher rates on reinsurance contracts during the quarter ended September 30, 2021, when compared to the prior quarter.

 

Policy acquisition costs and underwriting expenses for the nine months ended September 30, 2021 increased to $83 thousand from $71 thousand for the nine months ended September 30, 2020. The increase is due wholly due to the acceleration of premium recognition as mentioned above, and the resulting acceleration of policy acquisition costs, as well as higher rates on reinsurance contracts during the nine-month period ended September 30, 2021, when compared to the prior period.

 

General and Administrative Expenses. General and administrative expenses for the quarter ended September 30, 2021 increased to $280 thousand, from $239 thousand for the quarter ended September 30, 2020. The increase is due to expense fluctuations during the quarter.

 

General and administrative expenses for the nine months ended September 30, 2021 increased to $845 thousand, from $767 thousand for the quarter ended September 30, 2020. The increase is due to expense fluctuations during the nine-month period ending September 30, 2021.

 

 
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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.

 

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 ratio increased from 0% for the quarter ended September 30, 2020 to 42.7% for the quarter ended September 30, 2021. The increase during the quarter ended September 30, 2021 is wholly due to the limit losses suffered on one of our reinsurance contract as a result of Hurricane Ida, partially offset by a higher denominator in net premiums earned, compared with the previous quarter.

 

The loss ratio increased from 0% for the nine-month period ended September 30, 2020 to 20.9% for the nine-month period ended September 30, 2021. The increase during the nine-month period ended September 30, 2021 is wholly due to the limit losses suffered on one of our reinsurance contract as a result of Hurricane Ida, partially offset by a higher denominator in net premiums earned, compared with the previous period.

 

Acquisition 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 increased marginally from 10.9% for the quarter ended September 30, 2020 to 11.1% for the quarter ended September 30, 2021. The increase is not considered material.

 

The acquisition cost ratio for the nine-month period ended September 30, 2021 and 2020 were both 11%.

 

Expense Ratio. The expense ratio is the ratio of policy acquisition cost and general and administrative expenses to net premiums earned. We use the expense ratio to measure our operating performance. The expense ratio decreased from 107.7% for the three-month period ended September 30, 2020 to 86.8% for the three-month period ended September 30, 2021. The decrease is due to a higher denominator in net premiums earned due to premium acceleration, partially offset by increased policy acquisition costs and general and administrative expenses as recorded during the three-month period ended September 30, 2021, when compared with the three-month period ended September 30, 2020.

 

The expense ratio decreased from 129.7% for the nine-month period ended September 30, 2020 to 122.9% for the nine-month period ended September 30, 2021. The decrease is due to a higher denominator in net premiums earned due to premium acceleration, partially offset by increased policy acquisition costs and general and administrative expenses as recorded during the nine-month period ended September 30, 2021, when compared with the nine-month period ended September 30, 2020.

 

Combined 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. The combined ratio increased from 107.7% for the three-month period ended September 30, 2020 to 129.5% for the three-month period ended September 30, 2021. The increase is primarily due to the increase in loss ratio during the quarter ending September 30, 2021 as a result of limit loss suffered under one of our reinsurance contracts, when compared with the prior quarter.

 

 
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The combined ratio increased from 129.7% for the nine-month period ended September 30, 2020 to 143.8% for the nine-month period ended September 30, 2021. The increase is primarily due to the increase in loss ratio during the nine-month period ending September 30, 2021 as a result of limit loss suffered under one of our reinsurance contracts, when compared with the prior period.

 

FINANCIAL CONDITION – SEPTEMBER 30, 2021 COMPARED TO DECEMBER 31, 2020

 

Restricted Cash and Cash Equivalents. As of September 30, 2021, our restricted cash and cash equivalents decreased by $98 thousand, to $1.8 million from $1.9 million as of December 31, 2020. The decrease is the net result of the withdrawal of collateral on expiry of contract, and the deposit of collateral for new treaty period during the nine months ended September 30, 2021.

 

Investments. As of September 30, 2021, our investments decreased marginally by $9 thousand or to $778 thousand, from $787 thousand as of December 31, 2020. The decrease is primarily a result of the net sales of equity securities and the fluctuation in the prices of equity securities during the nine-month period ended September 30, 2021.

 

Other investments As of September 30, 2021, our other investments increased to $9.1 million from $0 at December 31, 2020. The increase is due to the successful launch of Oxbridge Acquisition Corp., a special purpose acquisition company in which the Company has an equity investment measured at fair value.

 

Losses payable. As of September 30, 2021, our losses payable increased to $158 thousand from $0 at December 31, 2020. The increase is due to the limit loss on one of our reinsurance contracts impacting our book of business as a result of Hurricane Ida.

 

Notes Payable to Noteholders. As of September 30, 2021, our notes payable remained the same at $216 thousand. These notes relate to Series 2020-1 participating notes issued by our reinsurance sidecar subsidiary, Oxbridge Re NS during the quarter ending September 30, 2020.

 

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. Our operations are conducted through our reinsurance subsidiaries, Oxbridge Reinsurance Limited and Oxbridge Re NS, which underwrites risks associated with our property and casualty reinsurance programs. We have minimal continuing cash needs at the holding company level, with such needs principally being related to the payment of administrative expenses and shareholder dividends, 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, and administrative services income from OAC Sponsor Ltd. 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 is primarily comprised of cash and highly liquid securities, which can be liquidated, if necessary, to meet current liabilities. We believe that we have sufficient flexibility to liquidate any securities that we own to generate liquidity.

      

 
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As of September 30, 2021, 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 further debt, other than through additional participating notes and we 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 and 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 each subsidiary is $500. As of September 30, 2021, each subsidiary exceeded the minimum required. By law, each subsidiary is restricted from paying a dividend if such a dividend would cause its net worth to drop to less than the required minimum.

 

Cash Flows

 

Our cash flows from operating, investing and financing activities for the nine-month periods ended September 30, 2021 and 2020 are summarized below.

 

Cash Flows for the Nine months ended September 30, 2021 (in thousands)

 

Net cash used in operating activities for the nine months ended September 30, 2021 totaled $110, which consisted primarily of cash received from net written premiums less cash disbursed for operating expenses. Net cash used in investing activities of $1,802 was primarily due to other investments and the net purchase of equity securities. There was no cash used in or provided by financing activities.

 

Cash Flows for the Nine months ended September 30, 2020 (in thousands)

 

Net cash used in operating activities for the nine months ended September 30, 2020 totaled $278, which consisted primarily of cash received from investments and net written premiums less cash disbursed for operating expenses. Net cash provided by investing activities of $25 was primarily due to the net proceeds from sale of equity securities. Net cash used in financing activities totaled $384, which is the net result of redemption of Series 2019-1 participating notes and proceeds on issuance of Series 2020-1 participating notes.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

As of September 30, 2021, 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. 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 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.

 

 
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CRITICAL ACCOUNTING POLICIES

 

We are required to make estimates and assumptions in certain circumstances that affect amounts reported in our consolidated financial statements and related 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 beneficial interest in Oxbridge Acquisition Corp., premium revenues and risk transfer, reserve for loss and loss adjustment expenses, deferred acquisition costs and stock-based compensation.

 

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 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. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument, as well as the marketability of the instrument and the risk of forfeiture of such instrument.

 

Premium Revenue and Risk Transfer. We record premium revenue as earned pro-rata over the terms of the reinsurance agreements, or period of risk, where applicable, 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 losses incurred but not reported, we utilize the assistance of an independent actuary. The reserves for losses and loss adjustment expenses represent management’s best estimate of the ultimate settlement costs of all losses and loss adjustment expenses.

 

We 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 operations in the period in which they are determined.

 

Under 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.

 

 
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As of September 30, 2021, we had no reserves for loss and loss adjustment expenses. See Note 7 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 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.

 

Stock-Based Compensation: The Company accounts for stock-based compensation under the fair value recognition provisions of GAAP which requires the measurement and recognition of compensation for all stock-based awards made to employees and directors, including stock options and restricted stock issuances based on estimated fair values. The Company measures compensation for restricted stock based on the price of the Company’s ordinary shares at the grant date. Determining the fair value of share purchase options at the grant date requires significant estimation and judgment. The Company uses an option-pricing model (Black-Scholes option pricing model) to assist in the calculation of fair value for share purchase options. The Company’s shares have not been publicly traded for a sufficient length of time to solely use the Company’s performance to reasonably estimate the expected volatility.

 

Therefore, when estimating the expected volatility, the Company takes into consideration the historical volatility of similar entities. The Company considers factors such as an entity’s industry, stage of life cycle, size and financial leverage when selecting similar entities. The Company uses a sample peer group of companies in the reinsurance industry as well as the Company’s own historical volatility in determining the expected volatility. Additionally, the Company uses the full life of the options, ten years, as the estimated term of the options, 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.

 

 
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Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Because we are a smaller reporting company, we are not required to provide this information.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), we have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
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PART II – OTHER INFORMATION

 

Item 1. 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.

 

Item 1A. Risk Factors

 

With the exception of the items described below, there have been no material changes from the risk factors previously disclosed in the section entitled “Risk Factors” in our Form 10-K, which was filed with the SEC on March 30, 2021.

 

We have made a significant investment in the sponsor of a blank check company commonly referred to as a special purpose acquisition company (“SPAC”), and will suffer the loss of all of our investment if the SPAC does not complete an acquisition within 15 months (subject to an extension of up to 21 months).

 

In August 2021, we made an investment of $2,000,000 in OAC Sponsor Ltd (“Sponsor”), that served as the sponsor of Oxbridge Acquisition Corp., a special purpose acquisition company (“Oxbridge Acquisition”). The investment was made to fund, in part, Sponsor’s purchase of private placement warrants of Oxbridge Acquisition as a part of the sponsorship of Oxbridge Acquisition. Prior to a business combination by Oxbridge Acquisition, Sponsor holds 100% of the shares of Class B ordinary shares and 4,897,500 Private Placement Warrants of Oxbridge Acquisition. The Class B shares equal approximately 20% of the outstanding common stock of Oxbridge Acquisition.

 

The Company owns approximately 49.6% and 63.1% of the ordinary shares and preferred shares, respectively, of the Sponsor (the “Sponsor Equity Interest”). The preferred shares of Sponsor are nonvoting shares and entitle the holders thereof to receive the net proceeds, if any, received by Sponsor from the sale, exchange, or disposition of the Private Placement Warrants or the shares issuable upon the exercise thereof, and the ordinary shares of Sponsor (which are voting shares in Sponsor) are equivalent to the value of the Class B Shares of Oxbridge Acquisition held by Sponsor. Upon the successful completion of a business combination by Oxbridge Acquisition, the proforma ownership of the new company will vary depending on the business combination terms.

 

There is no assurance that Oxbridge Acquisition will be successful in completing a business combination or that any business combination will be successful. The Company can lose its entire investment in Sponsor if a business combination is not completed within 15 months (subject to potential extension to up to 21 months) or if the business combination is not successful, which may materially adversely impact our shareholder value.

 

Our use of fair value accounting of our indirect investment in Oxbridge Acquisition could result in income statement volatility, which in turn, could cause significant market price and trading volume fluctuations for our securities.

 

Our beneficial interests in Oxbridge Acquisition’s Class B shares and Private Placement Warrants are recorded at fair value with changes in fair value being recorded in the consolidated statement of operations during the period of change. The Company’s management makes a significant judgment and assumption that a business combination is more than likely to occur, on the premise that historical statistical data indicates approximately 98% of special purpose acquisition companies accomplishes a business combination.  The fair value calculation of the Company’s beneficial interest in OXAC’s Class B shares and Private Placement Warrants is dependent on company-specific adjustments applied to the observable trading prices of OXAC Class A shares and public warrants. The Company estimates that a specific discount range of 20% to 40% sufficiently captures the risk or profit that a market participant would require as compensation for assuming the inherent risk of forfeiture if a business combination doesn’t occur and the lack of marketability of the Company’s beneficial interests in the OXAC. The Company classifies the investment in Oxbridge Acquisition as Level 3 in the fair value hierarchy due to the unobservable input of the company-specific adjustment. However, the Company can lose its entire investment if a business combination is not completed within 15 months (subject to potential extension to up to 21 months) or if the business combination is not successful. Additionally, the fair value of the investment must be remeasured quarterly. Because of this, our earnings may experience greater volatility in the future as a decline in the fair value of our investment in Oxbridge Acquisition could significantly reduce both our earnings and shareholders’ equity, which in turn, could cause significant market price and trading volume fluctuations for our securities.

 

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.

 

 
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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.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

(a) Sales of Unregistered Securities

 

None.

 

(b) Repurchases of Equity Securities

 

None.

 

(c) Use of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

None.

 

 
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Item 6. Exhibits

 

The following exhibits are filed herewith:

 

Exhibit No.

 

Document

 

 

 

10.7

 

Share Purchase Agreement, dated August 11, 2021, by and between Oxbridge Reinsurance Limited and OAC Sponsor Ltd.

 

 

 

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.

 

 

 

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.

 

 

 

32

 

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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 are filed herewith, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Changes in Shareholders’ Equity and (vi) the Notes to Consolidated Financial Statements.

 

 
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SIGNATURES

 

Pursuant to the requirements 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

 

 

 

 

 

Date: November 12, 2021

By:

/s/ JAY MADHU

 

 

 

 

Jay Madhu
Chief Executive Officer and President
(Principal Executive Officer)

 

 

 

 

 

Date: November 12, 2021

By:

/s/ WRENDON TIMOTHY

 

 

 

 

Wrendon Timothy
Chief Financial Officer and Secretary
(Principal Financial Officer and Principal
Accounting Officer)

 

 

 
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EXHIBIT 10.7

  

SHARE PURCHASE AGREEMENT

 

This SHARE PURCHASE AGREEMENT (the “Agreement”) is dated August 11, 2021 and is by and among OAC Sponsor Ltd., a Cayman Islands exempted company (the “Company” or “Sponsor”), and Oxbridge Reinsurance Limited (the “Buyer”). This Share Purchase Agreement amends, restates, and supersedes in its entirety any prior Share Purchase Agreement (if any) previously entered into between the Company and Buyer.

 

RECITALS

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “1933 Act”), and Rule 506 of Regulation D promulgated thereunder, the Company desires to offer, issue and sell to the Buyer (the “Offering”), and the Buyer desires to purchase from the Company investment units (the “Units”), with each Unit consisting of one ordinary share of $0.0001 (USD), par value of the Company (the “Ordinary Shares”) and 2.0633327 preference share of $0.0001 (USD), par value of the Company (the “Preference Shares”), in an amount equal to the aggregate subscription price indicated on the Subscriber’s signature page hereto. This subscription is submitted to you in accordance with and subject to the terms and conditions described in this Agreement.  For purposes of this Agreement, the term “Securities” means and includes (i) the Units and (ii) the Ordinary Shares and the Preference Shares comprising the Units (the “Shares”).

 

WHEREAS, the Ordinary Shares will be entitled to the entirety of the net proceeds received by the Sponsor from the sale, exchange, or other disposition of the Class B ordinary shares of Oxbridge Acquisition Corp. (“OXAC”) held by the Sponsor and any remaining distributable proceeds of the Sponsor, except for the limited distribution preference of the Preference Shares as described below.

 

WHEREAS, the Preference Shares will be entitled to a distribution preference equal to the entirety of the net proceeds received (if any), by the Sponsor from the sale, exchange, or other disposition of the OXAC private placement warrants held by the Sponsor and any shares obtained from the exercise of such warrants (collectively, the “Sponsor Warrants”).  In calculating the “net proceeds” pursuant to the preceding sentence, transaction expenses directly relating to the sale of the Sponsor Warrants will be netted against the proceeds from the sale of the Sponsor Warrants.

 

WHEREAS, all administrative expenses of the Company, which may range from annual government and regulatory fees, audit fees, legal fees and similar fees, will be allocated 75% to the Buyer, and 25% to the Company.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which is hereby acknowledged, the Company and each of the Buyers agree as follows:

 

 
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AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Buyer hereby agree as follows:

 

1. PURCHASE AND SALE.

 

(a) Purchase and Sale. Subject to the terms and conditions set forth in this Agreement, at the Closing, the Company shall issue and sell to the Buyer, and the Buyer shall purchase from the Company, the number of Units set forth on the Buyer’s signature page to this Agreement.

 

(b) Closing. The closing of the purchase of the Units by the Buyer as contemplated by this Agreement (the “Closing”) shall occur on the date hereof by the remote exchange of such closing documents and instruments as shall be necessary under this Agreement to effectuate the Closing.

 

(c) Payment of Purchase Price; Delivery of Securities. At the Closing, (i) the Buyer shall pay its respective purchase price, consisting of USD$1.333 per Unit (the “Purchase Price”) for the number of Units set forth on the Buyer’s signature page to this Agreement, to the Company by wire transfer of immediately available funds in accordance with the Company’s written wire instructions, and (ii) the Company shall issue and deliver the Shares comprising the Units to the Buyer by means of book-entry notation of such issuance on the share ledger of the Company.

 

2.  BUYER’S REPRESENTATIONS AND WARRANTIES.

 

The Buyer represents and warrants to the Company that:

 

(a) Organization; Authority. The Buyer is an individual resident in the state and country indicated on the Buyer’s signature page hereto with the requisite power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out the Buyer’s obligations hereunder and thereunder.

 

(b) No Public Sale or Distribution. The Buyer (i) is acquiring the Securities for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the 1933 Act. The Buyer does not presently have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities to the public or otherwise in violation of applicable securities laws. “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

 

 
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(c) Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D.

 

(d) Information. The Buyer and its advisors, if any, acknowledge that they have been furnished with, or provided access to, all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer. The Buyer and its advisors, if any, have been afforded the opportunity to ask questions of, and receive answers from, the Company concerning the offer and sale of the Units and to obtain any additional information that the Buyer has requested which is necessary to verify the accuracy of the information furnished to the Buyer concerning the Company and the Offering. The Buyer acknowledges that the Buyer is basing its decision to invest in the Securities on its own due diligence and, except as specifically set forth in this Agreement, has not relied upon any representations made by any Person. The Buyer understands that its investment in the Securities involves a high degree of risk. The Buyer has sought such accounting, legal and tax advice as it has considered necessary to make an informed investment decision with respect to its acquisition of the Securities. Buyer understands that the value of the Securities is contingent on the completion of the OXAC IPO (as defined below) and that the Securities have no value unless and until the OXAC IPO is consummated. Buyer understands that there is no assurance that the OXAC IPO will be consummated, and the OXAC IPO will be depend on market conditions and other factors beyond the Company’s control.

 

(e) Tax Treatment. The Buyer is not relying on the Company (or any of its agents or representatives) for any tax advice concerning the U.S. federal, state, local, foreign or other tax consequences of the transactions contemplated by the Agreement or the Buyer’s receipt of the Securities, and the Buyer has consulted such advisors as the Buyer deems necessary or appropriate to understand the tax consequences of the investment represented by the Securities. The Buyer understands that the Company is making no representation or warranty as to the U.S. federal, state, local, foreign or other tax consequences or tax treatment to the Buyer as a result of a purchase of Securities under this Agreement.

 

(f) No Governmental Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

 

(g) Transfer or Resale. The Buyer understands that: (i) the Securities have not been and are not being registered under the 1933 Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred unless the Buyer receives prior written consent of the Board of Directors of the Company and (A) the Securities have been subsequently registered thereunder, (B) the Buyer shall have delivered to the Company (if requested by the Company) an opinion of counsel to the Buyer, in a form reasonably acceptable to the Company, to the effect that such Securities to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) the Buyer provides the Company with reasonable assurance that such Securities can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the 1933 Act (or a successor rule thereto) (collectively, “Rule 144”); (ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144, and further, if Rule 144 is not applicable, any resale of the Securities under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC promulgated thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. The Securities will contain a customary restrictive legend evidencing the foregoing transfer restrictions.

 

 
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(h) Validity; Enforcement. The execution and delivery of this Agreement by the Buyer and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary action on the part of the Buyer and no further consent or authorization of the Buyer or its members (or shareholders) is required. This Agreement has been duly executed by the Buyer and, when delivered by the Buyer in accordance with the terms hereof or thereof, will constitute the legal, valid and binding obligations of the Buyer enforceable against the Buyer in accordance with its terms, except as such enforceability may be limited by general principles of equity or to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies.

 

(i) No Conflicts. The execution, delivery and performance by the Buyer of this Agreement and the consummation by the Buyer of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of the Buyer, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Buyer is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to the Buyer, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Buyer to perform its obligations hereunder.

 

(j) Experience of the Buyer. The Buyer, either alone or together with its representatives, has such knowledge, sophistication and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Securities, and has so evaluated the merits and risks of such investment. The Buyer is able to bear the economic risk of an investment in the Securities and, at the present time, is able to afford a complete loss of such investment.

 

(k) General Solicitation. The Buyer is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Shares published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

(l) Foreign Corrupt Practices. None of the Buyer or any of its subsidiaries or, to the knowledge of the Buyer, any director, officer, agent, employee or other Person acting on behalf of the Buyer or any of its subsidiaries has, in the course of its actions for, or on behalf of, the Buyer or any of its subsidiaries or affiliates (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expenses relating to political activity; (ii) made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; (iii) violated or is in violation of any provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment to any foreign or domestic government official or employee.

 

 
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(m) Money Laundering. The Buyer and its subsidiaries are in compliance with, and have not previously violated, the USA Patriot Act of 2001 and all other applicable U.S. and non-U.S. anti-money laundering laws and regulations.

 

(n) Indemnification. The Buyer understands that the information provided herein will be relied upon by the Company for the purpose of determining the eligibility of the Buyer to purchase the Securities. The Buyer agrees to provide, if requested, any additional information that may reasonably be required to determine the eligibility of the Buyer to purchase the Securities and/or in relation to the verification of the identity of the Buyer, the source of funds and compliance with all laws and regulations, including without limitation those relating to the prevention of money laundering and other criminal activity. To the maximum extent permitted by law, the Buyer agrees to indemnify and hold harmless the Company and each officer, director, employee, agent and controlling person of the Company from and against any and all loss, damage or liability due to or arising out of a breach of any representation or warranty of the Buyer in this Agreement or in any other document provided by the Buyer to the Company in connection with the Buyer's investment in the Securities.

 

(o) Verification of Identity. The Buyer will provide the Company with such documentation and information as the Company reasonably requests from time to time with respect to the Buyer's identity, citizenship, residency, ownership, tax status, business or control so as to permit the Company to evaluate the status of the Buyer and comply with any money laundering, regulatory or tax requirements applicable to the Company, its shareholders or any proposed investments of the Company, provided that any confidential information so provided shall be kept confidential by the Company and shall not be disclosed to any third party unless required by law or by any court of law or by any regulatory authority.

 

3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company hereby makes the following representations and warranties to the Buyer:

 

(a) Organization and Qualification. The Company is a Cayman Islands exempted company duly organized and validly existing and in good standing under the laws of the Cayman Islands, and has the requisite power and authorization to own its assets and to carry on is business as now being conducted and as presently proposed to be conducted.

 

(b) Authorization; Enforcement; Validity. The Company has the requisite power and authority to enter into and perform its obligations under this Agreement and to issue the Securities in accordance with the terms hereof. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by the Company’s board of directors, and no further filing, consent or authorization is required by the Company, its board of directors or its shareholders or other governing body of the Company. This Agreement has been duly executed and delivered by the Company and constitutes the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities law.

 

 
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(c) Issuance of Shares. The issuance of the Shares comprising the Units hereunder has been duly authorized and, upon issuance in accordance with the terms of this Agreement, will be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, liens, charges and other encumbrances with respect to the issue thereof. Subject to the accuracy of the representations and warranties of the Buyer in this Agreement, the offer and issuance by the Company of the Securities is exempt from registration under the 1933 Act. Upon receipt of the Shares comprising the Units, the Buyer will have good and marketable title to the Shares.

 

(d) No Conflicts. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Shares) will not (i) result in a violation of the Memorandum and Articles of Association or other organizational documents of the Company, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any material agreement, indenture or instrument to which the Company is a party, (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including, without limitation, foreign, federal and state securities laws and regulations).

 

(e) Consents. The Company is not required to obtain any consent from, authorization or order of, or make any filing or registration with any court, governmental agency or any regulatory or self-regulatory agency or any other Person in order for it to execute, deliver or perform any of its obligations under, or contemplated by, this Agreement in accordance with the terms hereof or thereof. All consents, authorizations, orders, filings and registrations which the Company is required to obtain at or prior to the applicable Closing have been obtained or effected on or prior to Closing, and neither the Company nor any of its subsidiaries are aware of any facts or circumstances which might prevent the Company from obtaining or effecting any of the registration, application or filings contemplated by this Agreement.

 

(f) No General Solicitation. Neither the Company, nor any of its affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Shares.

 

(g) No Disqualification Events. None of the Company, nor to the knowledge of the Company, any of its predecessors, any affiliated issuer, any director, executive officer, other officer of the Company participating in the offering contemplated hereby, any beneficial owner of 20% or more of the Company’s outstanding voting equity securities, calculated on the basis of voting power, nor any promoter (as that term is defined in Rule 405 under the 1933 Act) connected with the Company in any capacity at the time of sale (each, an “Issuer Covered Person”) is subject to any of the “Bad Actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the 1933 Act (a “Disqualification Event”), except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3). The Company has exercised reasonable care to determine whether any Issuer Covered Person is subject to a Disqualification Event.

 

 
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4. COVENANTS.

 

(a) Transfer of Shares. The Buyer covenants and agrees that the Buyer may not transfer, assign, or otherwise dispose of the Securities or Shares other than with the approval by the Board of Directors of the Company, and the Company may place a restrictive legend on the Shares to evidence such restriction. This restriction is in addition to, and not in lieu of, any restriction on the transfer of the Shares under applicable securities laws.

 

(b) Use of Proceeds. The Company will use the Purchase Price for the Units only to fund the Sponsor’s investment in Oxbridge Acquisition Corp. (“OXAC”) in connection with the initial public offering by OXAC (the “OXAC IPO”) of units comprised of Class A ordinary shares and redeemable warrants (the “OXAC Units”) and to fund organizational and operating expenses of Sponsor. In the event that the OXAC IPO does not occur by September 30, 2021, then the entire Purchase Price will be returned to the Buyer, and the Buyer will transfer and assign the Shares back to Company.

 

(c) Adjustment. In the event that less than $115 million of OXAC Units are sold in the OXAC IPO as a result of the non-exercise of the underwriter’s overallotment option in the OXAC IPO, the Company shall adjust downward the Buyer’s number of Ordinary Shares and Preference Shares, such that the Buyer’s balance reflect the best possible economics after all adjustments to third-party Buyers in the Company’s other Units. In the event that the size of the OXAC IPO is increased above $115 million, or the Company is required to raise additional capital for reasons other than the foregoing (such as because of an increase in the required size of the OXAC trust account above 101.5%), then the Company may need to issue additional Shares, which will have the effect of diluting pro rata the then-existing holders of Shares.

 

5. MISCELLANEOUS.

 

(a) Governing Law; Jurisdiction; Jury Trial. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York. Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall (i) limit, or be deemed to limit, in any way any right to serve process in any manner permitted by law or (ii) operate, or shall be deemed to operate, to preclude the Buyer or the Company, as applicable, from bringing suit or taking other legal action against the Buyer or the Company, as applicable, in any other jurisdiction to collect on an obligation to such other party or to enforce a judgment or other court ruling in favor of such party. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

 
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(b) Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event that any signature is delivered by facsimile transmission or by an e-mail which contains a portable document format (.pdf) file of an executed signature page, such signature page shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such signature page were an original thereof.

 

(c) Voting: The Ordinary Shares will have one vote per share and will vote together on all matters as a single class. The Preference Shares will be non-voting shares of Sponsor.

 

(d) Headings; Gender. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. Unless the context clearly indicates otherwise, each pronoun herein shall be deemed to include the masculine, feminine, neuter, singular and plural forms thereof. The terms “including,” “includes,” “include” and words of like import shall be construed broadly as if followed by the words “without limitation.” The terms “herein,” “hereunder,” “hereof” and words of like import refer to this entire Agreement instead of just the provision in which they are found.

 

(e) Severability. If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties. The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

 

 
8

 

 

(f) Entire Agreement; Amendments. This Agreement and the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein supersede all other prior oral or written agreements between the Buyers, the Company, their affiliates and Persons acting on their behalf solely with respect to the matters contained herein and therein, and this Agreement, the schedules and exhibits attached hereto and thereto and the instruments referenced herein and therein contain the entire understanding of the parties solely with respect to the matters covered herein and therein; provided, however, nothing contained in this Agreement shall (or shall be deemed to) (i) have any effect on any agreements the Buyer has entered into with, or any instruments the Buyer has received from, the Company or any of its subsidiaries prior to the date hereof with respect to any prior investment made by the Buyer in the Company or (ii) waive, alter, modify or amend in any respect any obligations of the Company or any of its subsidiaries, or any rights of or benefits to the Buyer or any other Person, in any agreement entered into prior to the date hereof between or among the Company and/or any of its subsidiaries and the Buyer, or any instruments the Buyer received from the Company and/or any of its subsidiaries prior to the date hereof, and all such agreements and instruments shall continue in full force and effect. Except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. For clarification purposes, the Recitals are part of this Agreement. Provisions of this Agreement may be amended only with the written consent of the Company and the Buyer. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.

 

(g) Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of: (a) the date of transmission, if such notice or communication is delivered via email at the email address as set forth on the signature pages attached hereto at or prior to 5:30 p.m. (New York City time) on a business day, (b) the next business day after the date of transmission, if such notice or communication is delivered via email at the email address as set forth on the signature pages attached hereto on a day that is not a business day or later than 5:30 p.m. (New York City time) on any business day, (c) the second (2nd) business day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as set forth on the signature pages attached hereto. For purposes hereof, “business day” means a day on which banks in New York, New York are open for business.

 

(h) Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective permitted successors and assigns, including, as contemplated below, any permitted assignee or transferee of any of the Shares. The Buyer shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Company (which may be granted or withheld in the Company’s sole discretion).

 

(i) No Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

(j) Survival. The representations, warranties, agreements and covenants shall survive each Closing. The Buyer shall be responsible only for its own representations, warranties, agreements and covenants hereunder.

 

(k) Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

[signature pages follow]

 

 
9

 

 

IN WITNESS WHEREOF, the Company has caused its signature page to this Agreement to be duly executed as of the date first written above.

 

 

COMPANY:

 

 

 

 

 

OAC SPONSOR LTD.

 

 

 

 

 

 

By:

/s/ WRENDON TIMOTHY

 

 

 

Name: Wrendon Timothy 

 

 

 

Title:  Director & Chief Financial Officer

 

 

 

Address for notice:

 

 

 

 

 

Suite 201, 42 Edward Street,

 

 

P.O. Box 469, George Town

 

 

Grand Cayman, KY1-9006

 

 

Cayman Islands 

 

 

 

 

 

Email: wtimothy@oxbridgere.com

 

 

 
10

 

 

[BUYER SIGNATURE PAGE TO SHARE PURCHASE AGREEMENT]

 

IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed by its respective authorized signatories as of the date first indicated above.

 

Name of Buyer: Oxbridge Reinsurance Limited

 

Signature of Authorized Signatory of Buyer: /s/ JAY MADHU

 

Name of Authorized Signatory: Jay Madhu

 

Title of Authorized Signatory: Chief Executive Officer

 

Email Address of Authorized Signatory: jmadhu@oxbridgere.com

 

Address for Notice to Buyer:

Suite 201, 42 Edward Street, P.O. Box 469    

George Town, Grand Cayman, KY1-9006     

Cayman Islands,                                             

 

Address for Delivery of Shares to Buyer (if not same as address for notice):

___ __________________

_______________________________

_______________________________

_______________________________

 

Subscription Amount: $2,000,000 ($1.333 per Unit)

 

Representing: 1,500,000 Ordinary Shares and 3,094,999 Preference Shares

 

 
11

 

EXHIBIT 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

 

I, Jay Madhu, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Oxbridge Re Holdings Limited;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 12, 2021

       
By: /s/ JAY MADHU

 

 

Jay Madhu

 
   

Chief Executive Officer and President
 (Principal Executive Officer)

 

 

 

EXHIBIT 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

 

I, Wrendon Timothy, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Oxbridge Re Holdings Limited;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 12, 2021

 

 

 

       
By: /s/ WRENDON TIMOTHY

 

 

Wrendon Timothy

Chief Financial Officer and Secretary

(Principal Financial Officer and Principal

 

EXHIBIT 32

 

Written Statement of the Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. §1350

 

Solely for the purposes of complying with 18 U.S.C. §1350, we, the undersigned Chief Executive Officer and Chief Financial Officer of Oxbridge Re Holdings Limited (the “Company”), hereby certify, based on our knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2021 (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ JAY MADHU
Jay Madhu

Chief Executive Officer and President

(Principal Executive Officer)

 

 

 

/s/ WRENDON TIMOTHY

Wrendon Timothy

 
Chief Financial Officer and Secretary
(Principal Financial Officer and Principal
Accounting Officer)
 

 

 

Date: November 12, 2021