Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Investor terms improved in Markel CATCo buyout


Markel CATCo Investment Management said this morning that it has received a “substantial level of investor support” for its proposed buyout transaction to speed the winding up of its retrocessional reinsurance investment funds and has updated the terms to be more favourable, in response to investor feedback it seems.

Markel CATCo logoIn fact, the reinsurance investment manager said that investors representing more than 90% of the Markel CATCo Reinsurance Fund Ltd., the private fund startegy and investors representing over 95% of CATCo Reinsurance Opportunities Fund Ltd., the public and listed fund strategy, have either said they will support or indicated they will support the buyout transaction.

This comes after one investor, Pension Insurance Corporation plc (PIC), said it intends to try and put together an investor group to challenge Markel CATCo’s proposed buyout scheme, saying it believes it will “drastically undervalue the interests of investors.”

Perhaps in response to this, the terms of the buyout proposed by Markel and Markel CATCo have been updated, which should increase the return to investors.

The details include an accelerated return of 100% of the net asset value of the retro reinsurance funds on the closing date, with investors retaining the right to any additional upside generated when the risks are run-off, if reserves exceed what is needed to pay the ultimate claims.

Originally the buyout terms included a return of capital based on 100% of the 2016 and 2017 side pockets, but 90% of the 2018 side pocket and 80% of the 2019 side pocket.

Markel Corporation is also set to provide an additional cash contribution of $54 million, that seems to be on top of the original $150 million offered, which will help to offset transaction costs and make some additional pro-rata distributions to investors.

On top of this, an early consent fee for investors that agreed swiftly to the buyout deal will also be increased from 1% to 2% of net asset value.

Finally, Markel will also pay an additional “work fee” to two investors, one in the public fund and one in the private fund, effectively paying for their time spent negotiating this now revealed improvement to the buyout deal.

The deadline to qualify for the early consent fee has now been extended to November 9th and the improved terms are certain to garner additional support for the deal and accelerate the process of running-off the CATCo funds, as Markel desires.

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