CATCo portfolio continues to develop favourably, recoups 3% on 2017 losses

The retrocessional reinsurance investment portfolio constructed by Markel’s CATCo Investment Management is continuing to develop more favourably than had originally been expected, with the firm reporting a reduction of claims in relation to catastrophe events from 2017.

The CATCo Reinsurance Opportunities Fund Ltd., the exchange listed, retrocession focused insurance-linked securities (ILS) fund strategy managed by Markel CATCo, saw the net asset value (NAV) of its Ordinary share class increase by 3% in August thanks to an improving loss picture on major events from 2017.

Those major events will include the significant hurricanes Harvey, Irma and Maria, as well as California wildfires.

It’s not clear which catastrophe events have seen the improved loss prognosis, but there is a strong chance this could be wildfire subrogation related.

The Markel CATCo retrocessional reinsurance investment fund has been in run-off for some time now, returning capital to its investors when it can and winding down positions and exposure to prior year loss events.

This has been a relatively successful process, it seems, with a significant amount of value recovered for investors, as losses proved to be less than the Markel CATCo team had reserved for, in a number of cases.

The wildfire subrogation has been another factor, which has driven an ability to return even more capital to investors in the CATCo funds.

In June, Markel CATCo’s listed retrocession fund benefited from an 8% gain thanks to a further reduction in claims from 2017 and 2018 wildfire loss events.

Back in April more capital was released, with additional NAV increases seen in January 2021, and more trapped capital released in November, September and August 2020 as well.

The realised loss picture for investors in CATCo’s listed retro reinsurance fund has been much better than initially thought. This will also have read across to the much larger retrocession funds CATCo managed on a private basis as well.

For investors, this all means that more of their invested funds have been recovered than would have been imagined possible when the running-off of the CATCo strategy was first reported.