CATCo funds report multi-year favourable side pocket development

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The CATCo retrocessional reinsurance investment portfolio has continued to experience favourable development against prior loss year side pockets, with additional value recovered in April.

Markel CATCo logoLast time we covered the in run-off CATCo retro reinsurance investment funds, they had disclosed some favourable development against loss reserves from the 2019 underwriting year.

Now, the investment manager has been able to recover value across a broader range of underwriting years, with improvements in loss positions against numerous catastrophe events.

The Markel owned investment manager, Markel CATCo, reported improvements in net asset value across both ordinary and C Share classes of investments into its listed CATCo Reinsurance Opportunities Fund.

The reason for the improvement in net asset value was due to favourable loss reserve development on the Side Pocket Investments from the 2017-2019 underwriting years for the Ordinary shares.

For the C Shares, the improvements were slightly narrower, with the manager saying it experienced favourable loss reserve development in relation to Side Pocket Investments from the 2018-2019 underwriting years.

These underwriting years featured events from the significant 2017 hurricanes, to California wildfires, Japanese typhoons and more.

It isn’t disclosed where the improvements have all come from, but it is possible that Markel CATCo has reached commutation with one or more key buyers of its pillared retro reinsurance products, and so been able to recover some value and reduce the loss reserves that had been booked against events across the 2017 to 2019 period.

The buy-out schemes for the Markel CATCo managed retrocessional reinsurance investment funds closed at the end of March and distributions of the remaining value in the insurance-linked securities (ILS) fund strategies began, with capital returned to investors and shareholders in the listed funds getting an exit.

With some value recovered in the February NAV, when we last wrote about it, this additional favourable development was all booked in April NAV reporting.

With favourable loss reserve development across the side pockets for three underwriting years, it’s likely this recovery in value this benefited investors in the CATCo private retro reinsurance investment funds as well, with improvements in the position of the running-off of that overarching portfolio as well.

The running-off of the CATCo retro reinsurance portfolio is likely to take some time, perhaps into 2023, so there could be additional reserve developments and some may flow to investors, as any upside on the valuations given at the time of the buyout are due to the end-investors in the funds as well.

While the CATCo retro reinsurance funds had been through a buyout process, the agreement means than any additional upside secured through the portfolio running-off is returned to shareholders, so investors will be the beneficiaries of this positive development on prior year catastrophe loss reserves.

Also read:

CATCo funds report favourable development on 2019 year side pocket.

CATCo run-off process could continue into 2023 for Markel.

CATCo shares redeemed as investors get their exit.

CATCo buy-out scheme closes, distributions to investors begin.

CATCo buy-out gets US court approval, Belisle lawsuits to be dismissed.

CATCo buyout schemes sanctioned by Bermuda Court.

CATCo investors vote “overwhelmingly” in favour of buyout.

Markel CATCo funds seek US bankruptcy support for buyout.

Markel CATCo sets buy-out meeting date. End of process in sight.

Former CATCo CEO Belisle’s fraud lawsuit stayed as settlement negotiated.

Bermuda Court orders CATCo creditor meetings be held.

CATCo retro funds head back to Bermuda Court this week.

Markel CATCo gets majority investor support for improved buy-out terms.

CATCo reports favourable development on 2017 & 2018 catastrophes.

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Belisle fraud lawsuit to wait for CATCo insolvency decision in Bermuda.

CATCo retro fund gains again, NAVs now 148% & 231% higher than lows.

Markel CATCo buyout support undertakings extended to end of February 2022.

Markel CATCo says court decision on buyout hoped for in January.

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