CATCo Investment Management acquired by Markel

Bermuda-located CATCo Investment Management, the reinsurance and retrocessional reinsurance linked investment and fund manager, has announced this morning that it has been acquired by insurance, reinsurance and financial services group Markel Corporation.

An agreement has been reached between the two which will see Markel acquiring substantially all of CATCo’s assets. The deal is subject to customary closing conditions and is expected to close in the fourth quarter of 2015. Terms of the transaction have not been disclosed.

The businesses name will change to operate as Markel CATCo Investment Management Ltd. (“Markel CATCo”). The existing CATCo management team, led by Chief Executive Officer Tony Belisle, will continue to operate the now Markel CATCo range of funds and reinsurance linked investment opportunities, operating from its Hamilton, Bermuda headquarters under Markel’s ownership.

Richard R. Whitt, President and Co-Chief Operating Officer of Markel, commented on the announcement; “We are very pleased for Tony Belisle and the entire CATCo team to join Markel. The addition of CATCo’s insurance linked investment management capabilities alongside Markel’s traditional reinsurance capabilities makes for a powerful combination.

“While Markel has a long and successful track record in the insurance linked securities space, the addition of the CATCo team takes our capabilities to an entirely new level. The current challenges in the reinsurance and retrocessional markets are well documented. Despite these short-term challenges, we believe that with innovative products and services the long-term future is bright.”

Tony Belisle, Chief Executive Officer of CATCo Investment Management Ltd., added; “We are excited to join forces with Markel, a leading global specialty insurer and reinsurer which operates with a strong commitment to its core values and distinguished corporate culture. We felt this partnership offered a rare opportunity for CATCo to combine with a culturally similar organization which shares our results-oriented commitment to success and market leadership.

“We are confident that uniting the strength of the Markel brand and its global reach with CATCo’s differentiated product innovation capabilities will serve to improve our value proposition for investors and cedants. CATCo has grown significantly since its launch in 2010, and the agreement with Markel will allow the same management team to maintain its commitment to both client service and continual product innovation.”

The acquisition is expected to complete in the fourth-quarter of 2015, after which funds such as the London and Bermuda stock exchange listed retrocession fund, the CATCo Reinsurance Opportunities Fund Ltd., will transition to be managed by Markel CATCo.

The existing CATCo management team and staff will maintain responsibility for existing and potential reinsurance market customer relationships, transitioning to Markel CATCo with the reinsurance business conducted as it was prior to the acquisition.

The senior management team of CATCo has been incentivised to stay with the business for a minimum of three to five years after the acquisition completes, providing continuity for investors and reinsurance market clients or partners.

Nigel Barton, Chairman of the CATCo Reinsurance Opportunities Fund Ltd., commented; “The Board sees this as a very positive development for investors and reinsurance market clients alike. In bringing together the strengths of CATCo IM and Markel, the Board expects this transaction to generate future benefits for the Company’s investors.”

CATCo sees the acquisition as a “progressive transaction for all stakeholders,” believing that the combined strengths of CATCo and Markel will enable the firm to continue its development of innovative reinsurance structures and new reinsurane products for clients, while providing best-of-breed reinsurance-linked investment opportunities to investors.

The combination of CATCo, a reinsurance and retrocession linked investment manager with around $2.8 billion+ under management and is among the largest retrocessionaires in the market, with Markel, an $11.5 billion insurance, reinsurance and financial services business, is compelling.

Markel has experience in the third-party capital and insurance-linked securities (ILS) space, not least since its acquisition of Alterra. It also has re/insurance market scale and reach which will support the CATCo teams growth ambitions.

Meanwhile the CATCO product set will be an attractive addition to Markel and it’s third-party capital opportunities will grow as a result of the acquisition.

The market had been aware that CATCo was open to a potential transaction, with the right partner, as it considered approaches that had reportedly been made. It’s likely the manager will have been looking for the right blend of culture, scale, reach and a deal that would create a compelling platform for the future.

This will be an interesting pairing to watch develop once the transaction is completed.