Lodgepine Capital Management Limited, the retrocessional reinsurance ILS fund management unit of Markel Corporation, had a “terrific” year in 2020, delivering double-digit returns on its portfolio which largely avoided any loss impacts during the period.
Markel launched the retro reinsurance investment manager in late 2019, bringing a new insurance-linked securities (ILS) strategy to market focused on the retro space.
With its CATCo operations still in run-off, it’s been a slow build-up for the Lodgepine platform, with its portfolio of retro contracts warehoused under Markel Bermuda in 2020.
But the portfolio performed well, Markel Co-CEO Richie Whitt explained yesterday.
Speaking during the Markel earnings call, Whitt said, “In terms of results Lodgepine had a terrific year in 2020.”
He went on to explain that 2020 was characterised by a lot of small to medium sized catastrophe loss events.
“So it was really frequency in 2020, in terms of cat losses,” he commented.
Adding that, “None of that really got into the retro portfolios and so they had a terrific year, mid double-digits returns, on the portfolio.”
He acknowledged that the ramp-up for Lodgepine has been slower than perhaps originally hoped for, with capital raising seen as more challenging last year.
“The place that we have fallen short is in terms of raising capital,” Whitt said.
Adding that, “We are a little short, in terms of our capital raising and we’re hoping that now, with a year’s track record, I know a year isn’t a lot, but it is a year’s track record, we’re hoping that we can get out there and raise some capital in the first-quarter before the Japanese renewals on 4/1.”
As well as the April 1st 2021 reinsurance renewals, when some retro will likely renew, the mid-year renewals of U.S. focused retrocession programs will also be a key juncture for Lodgepine Capital Management.
If the company can successfully raise funds by those renewals, it will further improve the capacity situation in retrocession, which is becoming increasingly competitive thanks to a number of new players.
As we explained before, once Lodgepine is ready and capitalised, it should be able to collateralise an arrangement between its underwriting vehicle, the first collateralized insurer to be registered in Bermuda, Lodgepine Reinsurance Limited, and Markel Bermuda as a way to source its first ILS fund portfolio.