Swiss Re Insurance-Linked Fund Management

Xactanalysis Insights and PCS

Markel CATCo aims to recapitalise to take advantage of pricing


Reinsurance and retrocessional reinsurance investment manager Markel CATCo Investment Management has announced this morning its intention to raise funds, to take advantage of pricing opportunities being seen in the retrocessional reinsurance market and its requirement for new capital.

Markel CATCo proposed this morning that it raise additional capital through the Markel CATCo Diversified Fund, which is a segregated account of the Markel CATCo Reinsurance Fund Ltd, which is where its listed CATCo Reinsurance Opportunities Fund Ltd. invests the majority of its assets.

The impacts of recent hurricane events in the U.S. and the Caribbean have created some pricing opportunities, particularly in the market Markel CATCo specialises in of retrocessional reinsurance.

The ILS fund manager said that it is already seeing increased pricing in retrocession, but also explained that it has a requirement for new capital as well.

Markel CATCo will have been particularly impacted by recent catastrophe events, with its retrocessional reinsurance products widely used by the leading reinsurers that underwrite property catastrophe risks.

The aggregation of a number of severe events in quick succession could have resulted in a significant amount of trapped collateral for the manager as well, given the complexity of assessing the impacts of multiple loss events on reinsurance and ILS positions.

Hence raising more capital is expected of the majority of collateralized retrocession players, and some ILS fund managers who only allocate to reinsurance lines as well.

We’ve heard of a number of ILS players that are launching capital raises, which are designed to recapitalise some trapped collateral while offering investors a chance to access better priced opportunities in the marketplace.

The manager said it was felt appropriate to offer the capital raise opportunity to investors in its listed CATCo Reinsurance Opportunities Fund, as a response to demand seen from both its current shareholders and for any new investors.

Markel CATCo said that it would publish a prospectus for the capital raise opportunity in early November and that it hopes to complete the capital raise by the end of that month, through the placement of new C-Shares in its fund.

Additionally, Markel CATCo has provided a further warning on its performance for the year, saying that based on current loss estimates and as long as no other major losses occur over the remainder of the year, it expects the listed retrocessional reinsurance fund will provide a full-year net asset value return somewhere in a range from -15% to +5%.

The breadth of that range demonstrates the uncertainty in the quantum of recent loss events due to their complexity. It could be some weeks before the full impact to portfolios as large as Markel CATCo’s are completely understood.

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