Markel CATCo buyout proposal challenged by Pension Insurance Corporation (PIC)

Pension Insurance Corporation plc (PIC) announced just now that it intends to try and put together an investor group to challenge retrocessional reinsurance investment manager Markel CATCo’s proposed buyout scheme, saying that it believes it will “drastically undervalue the interests of investors.”

The move could be a setback to the plans of parent Markel Corporation to accelerate the winding-down of its in-run-off retro reinsurance ILS fund management unit, as any challenge could slow down this process dramatically, or result in a lengthy legal action.

As a reminder, an accelerated winding-down and return of capital was revealed in the proposed Markel CATCo buy-out that was announced recently.

That proposal saw Markel CATCo Investment Management and Markel Corporation seeking to speed the return of capital from the CATCo retrocessional reinsurance investment funds to its investors, while attempting to avoid any complications to the ongoing running-off from legal claims made, with parent Markel set to fund a significant amount of capital to support the process.

Following that move, we revealed that Markel CATCo had also filed for bankruptcy protection in the United States.

But now, this move by PIC, a specialist insurer of defined benefit pension schemes, may threaten to derail the approach laid out by Markel CATCo.

PIC said that it has engaged legal counsel Boies Schiller Flexner (BSF) and is constituting an investor group to assess the buyout proposal.

PIC said it is “concerned that the proposed terms of the buy-out drastically undervalue the interests of investors.”

The pension insurer also has concerns because “the proposed terms of the buy-out require a full release by investors of all claims against the funds and Markel Corporation (and others) in circumstances, particularly given Markel CATCo states that the proposal has been prompted by claims by other investors.”

PIC cites that these claims include the lawsuit brought against former CEO Tony Belisle for “fraud and negligent misrepresentation”, which as we explained was settled earlier this year.

PIC noted that this suit alleged various areas of wrongdoing and said that it has filed a complaint with the SEC.

PIC said it has instructed its legal counsel BSF to “advise on the terms of the proposed buy-out and the potential claims that would be required to be released, and to liaise with Markel CATCo and the joint provisional liquidators as regards PIC’s concerns.”

The pension insurer said it anticipates taking steps ahead of the current early consent deadline, related to the proposed buyout terms, of 22 October 2021.

This challenge from PIC has the potential to create a delay to Markel CATCo’s plans for an accelerated winding-down of its retrocessional reinsurance investment funds and certainly serve to complicate matters for the company.

Should other investors join PIC the pressure will also increase, making it harder to win the support needed to push-forward with the buyout terms that have been proposed.