Swiss Re Insurance-Linked Fund Management

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Markel CATCo increases own retro and ILW protection for 2017


Reinsurance and retrocession linked investment manager Markel CATCo Investment Management has again taken advantage of soft market pricing to increase its own retro balance-sheet hedging, largely through the purchase of industry loss warranties (ILW’s) for 2017.

As the assets under management at Markel CATCo have steadily increased in recent years, the ILS manager has been using an increasing amount of protection. Now having reached around $4.3 billion of reinsurance and retrocessional assets under management, Markel CATCo has upped that coverage again.

Tony Belisle, CEO of Markel CATCo Investment Management Ltd., explained; “The low price environment and the continued growth of the ILS market has again enabled the Investment Manager to purchase broader balance sheet protections for 2017, mainly in the form of ILWs that were purchased at similar price levels to 2016. These protections reduce the Company’s exposure to potential losses from significant catastrophic events.”

Many of the larger ILS and reinsurance linked investment managers have been buying an increasing amount of their own reinsurance and retrocession, typically in the form of ILW’s. As pricing has declined steadily the ILW offers an efficient way for portfolio managers to address their peak exposures around the world.

Indemnity coverage is often also purchased, but for a manager like Markel CATCo offering a largely retrocessional reinsurance product on a pillared basis (by perils, regions and events) the ILW offers a hedge that can be matched relatively closely to its exposures.

It’s to be expected that the use of ILW’s and other retro protections by managers such as Markel CATCo will continue as they grow further. Belisle said that demand for Markel CATCo’s product is at an all time high which should drive continued need for more hedging.

Demand for the Group’s product is at its highest point since the Company’s inception, which has allowed the Investment Manager to deploy 100 percent of its available capital during the 2017 renewal process,” Belisle explained.

Continuing; “With a broad geographic spread, a balanced exposure to differing risk perils and with portfolio protections in place, the Investment Manager has successfully built a stronger investment portfolio for 2017 with a return and risk profile which is similar to that of the 2016 portfolio.”

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