Markel CATCo Investment Management, the in run-off retrocessional reinsurance manager of insurance-linked securities (ILS) funds, is to be the subject of Chapter 15 bankruptcy proceedings, with filings made in the United States that have also disclosed Danish pension fund investor PKA A/S as a major holder.
Chapter 15 bankruptcy proceedings are typically for a foreign entity that touches on US financial interests, or has assets or businesses in the US.
Bankruptcy filings afford an element of protection for those involved in a winding down of an entity, such as Markel CATCo and its retrocessional reinsurance investment funds and reduces the risk for creditors, which is the likely cause of the filing as the manager wants to return capital in as smooth a manner to its remaining investors as it can.
The filing details the process that Markel CATCo and its funds are set to go through under the proposed 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 investors, while avoiding 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.
Bankruptcy protection will play a role in helping to secure the process and ultimately the assets of the funds for investors, if the buy-out process is approved.
The filing in the New York Southern Bankruptcy Court also provides some very interesting information on the major holders of the CATCo retro reinsurance investment funds at this time.
The filing has to include an example of the corporate structure of the debtors, in this case Markel CATCo and its fund structures, as well as a list of any creditors that own 10% or more of the interests in one of the entities.
Markel CATCo Reinsurance Fund Ltd., the private and master fund piece of the CATCo structure, is listed as having one particularly significant owner, the Danish pension fund manager PKA A/S.
PKA A/S (or Pensionskassernes Administration A/S) is the Danish pension fund manager for labour market pension funds in the country, so manages investments for four largely health sector related pensions.
PKA has been an investor in the CATCo strategies since at least 2015, but certain pension funds it manages are now listed as a 40% owner of the Markel CATCo Reinsurance Fund Ltd. which is a particularly significant holding.
It’s not clear from the bankruptcy filing how big a holding PKA’s 40% equates to, but with the listed CATCo Reinsurance Opportunities Fund listed as just a 12% owner of the private/master CATCo fund, it seems likely PKA’s stake is still a relatively significant figure.
The Danish pension had its own mandate under the CATCo strategy we believe, the CATCo PKA Fund, which must have been of reasonable size for the pension to now be listed as a 40% holder in the main investment structure of the CATCo strategy.
Major holders of the listed strategy, the CATCo Reinsurance Opportunities Fund, are also detailed, with investment managers Weiss Asset Management having 33.79% of the C-Shares and Almitas Capital owning 24.90% of the C-Shares.
Both also own Ordinary shares in the listed CATCo investment fund, with Almitas Capital owning 20.65%, Weiss Asset Management owning 18.96%, Baillie Gifford owning 10.89%, and Aberdeen Standard Investments owning 10.48%.
Only holders with ownerships of 10% or more have to be disclosed in the bankruptcy filing.
Winding up proceedings have been filed in Bermuda and will run in tandem with the bankruptcy arrangements, while support is sought from investors for the proposed buy-out transaction.
The bankruptcy proceedings play an important part of the process, in protecting investor interests in the United States and providing a formal backdrop for the winding-down of the offshore entities.