Markel invests $90m in CATCo fund to accelerate investor redemptions

Markel Corporation has put some of its own money behind the running-off of its retrocessional reinsurance investment manager Markel CATCo, investing $90 million in one of the CATCo funds in the first-quarter to boost capital available to fund investor redemptions.

Markel has repeatedly shown its commitment to ensuring investors in the catastrophe loss stricken Markel CATCo retro funds receive a return of the remaining available capital in as smooth and expedited a manner as possible.

Having set its own executives to take oversight of the winding-down and run-off of the Markel CATCo investment strategies, Markel has now taken the additional step of putting its own money in play, to fund a smoother exit route for investors and to accelerate the redemption process.

The company explained in its latest quarterly report that as of January 1st 2020 it has invested $90 million into one of the Markel CATCo investment funds in connection with its run-off.

The motivation is to “facilitate the return of capital to third party investors”, by replacing collateral previously provided by other investors in the fund.

This collateral that Markel’s investment has replaced in the CATCo fund is “collateral previously provided by other investors for risk exposures within the underlying reinsurance contracts in which the fund is invested related to loss events that occur after December 31, 2019 and through the expiration of the reinsurance contracts in 2020,” the company explains.

Which suggests that these are contracts still on-risk into 2020, so likely multi-year arrangements from previous years, we imagine, or written at April 1st 2019 or perhaps the mid-year.

“Underwriting results for the 2020 loss exposures on these contracts are attributed to the Company through its investment in the fund,” Markel said, suggesting that it stands to make a profit on this investment as long as the contracts remain loss free.

For the investors this was an easy way to exit the Markel CATCo fund, which will have helped them to ensure they don’t face any prolonged exposure due to an event occurring that required a side-pocket to be established or any collateral to be trapped.

That takes Markel’s investment in this specific Markel CATCo investment fund to $116.9 million as of the end of the first-quarter.

It’s encouraging for the investors backing the collateral remaining in the CATCo funds to see owner Markel stepping up to help them exit in a timely manner.

It reflects Markel’s approach to its insurance-linked securities (ILS) operations, putting investor’s needs at the fore and ensuring an equitable way for them to participate in the returns of the underwritten risks.

It’s in both sides interest to accelerate the running-off of the CATCo funds as this will allow the investors to take stock and reallocate their capital, which at this time is of particular importance, while Markel can then focus on its other ILS businesses.

Also read: Markel warns on Covid-19 hit to ILS operations, Nephila AuM down 4%.