Middle Eastern reinsurer Saudi Re has signed a memorandum of understanding (MOU) to purchase nearly a 50 percent stake in Ash Bathia’s Lloyd’s start-up Probitas as troubled backer Istmo Re sells out.

As part of the agreement, Saudi Re will acquire 49.9 percent of the ordinary shares of Probitas’ holding company, Probitas Holdings (Bermuda) Limited (PHBL), which will own 100% of Probitas Corporate Capital Limited, Probitas 1492 Services Limited and Probitas Holdings (UK) Limited after the transaction.

The news comes after Probitas’ majority Panamanian backer Istmo Re was seized in December 2016 by the Panamanian regulator due to concerns about its capitalisation.

In April 2017, Istmo Re was placed in liquidation, with Probitas at the time stating that it was having confidential discussions with a number of new investors to replace the Panamanian reinsurer, some of which were at an advanced stage.

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

The parties have entered into an exclusivity agreement to finalise the transaction documents up to 20th July 2017.

Furthermore, Probitas said that Syndicate 1492 will maintain funds at Lloyd’s of around US$135mn to support the 2017 year of account with no contribution from Istmo Re.

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

Meanwhile, Fahad Al-Hesni, MD-CEO of Saudi Re, said: “We are excited about this step which we believe will provide Saudi Re with opportunities to expand its business and investments in the global insurance and reinsurance market particularly the Lloyd’s market in the United Kingdom. This was identified as part of Saudi Re strategy to diversify its operations, and we are very pleased to join forces with the right partners at PHBL”.

Probitas was launched in October 2015 by Bathia, working in conjunction with Istmo Re and former QBE CEO Frank O'Halloran, who is chairman of the business. Capita is the syndicate's third-party managing agent.