Markel CATCo listed fund shares fall -18% in May on loss creep

The continued loss creep that has affected reinsurance markets this year has hit the listed retrocessional reinsurance investment fund operated by Markel CATCo Investment Management, resulting in a decline of -18% in both share classes of the ILS fund in May.

The latest net asset value (NAV) figures show that both the Ordinary and C Share classes of the listed CATCo Reinsurance Opportunities Fund fell by roughly -18%, as the previously announced loss creep from typhoon Jebi and hurricane Michael were factored into returns.

Markel CATCo announced at the start of June that the ongoing loss creep affecting its funds, which has also more widely impacted almost the entire ILS and reinsurance market, would cause a dent in the May returns.

Interestingly, Markel CATCo said at the time that it expected the result of its reserve hardening exercise would be a roughly 18% hit to the NAV of the C Shares of the listed retro reinsurance fund, which turns out to be almost precisely the decline seen in the NAV’s reported today.

For the Ordinary Shares, Markel CATCo had been expecting a larger hit to NAV though, having suggested the end of May NAV could have been as much as -21% down on the end of April, so the roughly -18% decline seen was actually a little better than anticipated.

Sitting at the end of the chain of risk transfer, from primary insurance, through reinsurance, to the retrocession that Markel CATCo specialised in underwriting, the company has been hurt by the market’s lack of reporting consistence and also the lag between reporting losses in the different tiers in the market.

Also exacerbating loss reporting issues is the fact that Japanese insurance majors only true-up their losses towards the end of the year before their reinsurance renewals, so by the time these loss increases filtered into reinsurers and then to Markel CATCo it was always going to be May before they could have been accounted for.

Markel CATCo will be hoping to have captured all of the loss creep in these latest reserve strengthening measures and will be hoping for no further degrading of the share values of its retro ILS fund, as it seeks to return capital to investors through the soon to begin running-off of the fund’s portfolios.

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