CATCo’s Belisle and investor vehicle Eugenia II reach lawsuit settlement

A lawsuit that has been going on since last year in the Florida court system between former CATCo CEO Tony Belisle and an investor vehicle Eugenia II Investment Holdings (BVI) has now been settled in principle.

British Virgin Islands investment vehicle Eugenia II Investment Holdings had raised a complaint and lawsuit in October 2020, alleging “fraud and negligent misrepresentation” related to its investment in one of the Markel CATCo investment funds and seeking to recover damages for losses of more than $7.5 million suffered.

According to court documents seen by Artemis, the case, which was heard in the Florida court, Middle District, Fort Myers Division, saw it alleged that Belisle had “lied to investors (or, at best, recklessly misled them)” over the Markel CATCo retrocessional reinsurance investment fund’s exposure to hurricane losses in 2017.

The investor (Eugenia II) said it was led to believe that risk mitigation procedures advertised by the CATCo fund (effectively how it was hedged and how its pillars attached for different catastrophe events) were working as designed, which led to Eugenia II Investment Holdings allowing the balance of its 2017 investments to be rolled-over into 2018 and also to make an additional $10 million commitment to the fund on top of this for the 2018 underwriting year.

The complaint went on to explain that it was only after this reinvestment and re-upping of capital allocated to Markel CATCo’s Limited Diversified Arbitrage Fund, one of the managers’ retro reinsurance strategies, that more details on the full exposure CATCo faced to 2017’s major hurricanes and California wildfires emerged.

What followed in 2018 was another year when the Markel CATCo fund strategy was hit by the significant number of major catastrophes, which Eugenia II said eventually led its investment to suffer severe losses, of at least $7.5 million.

The investor withdrew its remaining capital after that year, but said that it was suing to “recover its losses, which it would not have sustained had Belisle and his subordinates been truthful about the LDAF’s structure and its losses in 2017.”

Following a number of virtual trips to the court and deadlines for additional parties to be added to the litigation being extended twice, the case has now been settled without any further participants being added, court documents show.

It had been thought that Markel itself may have been pulled into this suit. But it seems the parties involved have opted for a settlement, rather than prolonging the case at potentially much higher cost to all involved.

As a result, the court filed notice of a settlement in principle, as well as a request for suspension of the remaining deadlines and a stay by Eugenia II Investment Holdings Limited (BVI).

We understand from sources that it is likely that, even though the legal case had been directly aimed at Tony Belisle, his indemnification as a fund manager for Markel CATCo may have covered any settlement costs.

However, the size of any payout, likely to cover the $7.5 million claimed as lost, plus costs, would probably fall below the levels required for any kind of disclosure to be made.

Markel had itself already reached a settlement with Belisle in July 2020 over a complaint the former employee made related to his departure and certain compensation considered due.

So, the settlement of this case closes another chapter in the winding down of Markel CATCo’s operations and legacy.