Markel sees growing interest in CATCo product since acquisition

by Artemis on February 15, 2016

Markel’s recent acquisition of insurance-linked securities (ILS) and asset manager, CATCo Investment Management has created opportunities in both its reinsurance and ILS operations, and the firm continues to see a growing interest in its product set, says Markel.

During the firm’s recent fourth quarter 2015 earnings call executives commented on the recent acquisition of CATCo, underlining the opportunities it creates for the company and its clients.

CATCo managed roughly $2.7 billion of retrocession and traditional reinsurance capacity during 2015, and under the Markel CATCo brand, in 2016, President and Co-Chief Executive Officer (CEO), Richard R. Whitt expects its AuM to exceed $3 billion.

Alan I. Kirshner, Executive Chairman said; “We are excited about the recent Markel CATCo transaction, which expands our presence in the insurance-linked securities space and provides us with a platform to bring new insurance and investment products to the market.”

The acquisition only closed in December of last year, but Markel has already seen interest for its products on both its traditional reinsurance and CATCo segments increase.

Whitt explained that its reinsurance business and CATCo share many of the same clients, and that clear synergies between the operations would benefit both the re/insurer and its customers.

Being able to utilise an experienced capital markets player such as CATCo enables Markel to efficiently leverage the wealth of third-party capital in the ILS space to supplement its reinsurance operations, while offering clients a broader set of solutions, that are hopefully more efficient.

“Actually, since the acquisition or after the announcement of the acquisition, we’ve seen interests from people who were not previously clients of CATCo. So, there’s going to be opportunities for our guys on the reinsurance side and CATCo guys to work together to make sure we’re serving those client needs,” said Whitt.

2015 was another successful year for the CATCo Reinsurance Opportunities Fund, a fund operated by Markel CATCo, which continued to produce attractive returns despite some catastrophe events resulting in the need for sensible reserving and side-pockets.

And following the positive feedback and increased interest in the venture Markel has received since its takeover, and the expectation of growing its AuM by more than $300 million throughout 2016, it will be interesting to see what benefits it brings to the company with the market remaining pressured and competitive.

Ongoing challenges throughout the insurance and reinsurance landscape created a wave of merger and acquisition (M&A) activity in 2015, with more expected in the coming months as companies continue to search for scale and relevance.

Markel’s acquisition of CATCo was notable owing to an ILS fund being subject to a takeover from a global re/insurer, when many deals were just re/insurers consolidating amongst themselves.

With more and more re/insurers establishing ILS ventures in order to access the capital markets and bring on board some of the alternative reinsurance capital continuing to enter the space, it will be interesting to see if any other ILS focused funds or managers are subject to any M&A activity from the more traditional players.

“Having the ability to write both traditional products, as well as the capital market-backed products, especially CATCo, it has a rather unique product structure. I think that just helps us better serve the clients that are out there,” said Whitt.

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