'The rights issue has failed and this is a disappointment, because at the 4 July extraordinary shareholders meeting broad agreement had been reached over how to proceed, and the UAE Finance & Industry Ministry and the Libyans were supportive of the process and the proposed capital increase,' says an industry source. 'However, late proposals from the Libyans were not acceptable to the UAE and the process is dead.'

Although damaging to Arig, particularly as it coincides with the active renewals period in the reinsurance cycle, the failure of the rights issue is likely to have only a limited negative impact. The company remains sufficiently capitalised, it now has a loss-free balance sheet and its current book of business is profitable.

The main purpose of the proposed capital increase was to provide the balance sheet security sought by some of its clients.

'Looking forward, there is still a mandate from the extraordinary general meeting for a capital increase and one of the options available is to conduct it on a private placement basis,' says the source. 'There is a letter of commitment from the UAE shareholders and they can be expected to participate. There is also another regional government that has been very supportive and might be interested in participating. A private placement for up to $100 million might be attempted over the next two-to-three months.'