Markel reveals Lodgepine Capital Management, its new retro ILS platform

Markel Corporation has revealed its awaited new retrocessional reinsurance ILS fund management unit, which is based in Bermuda and called Lodgepine Capital Management Limited.

The new Markel insurance-linked securities (ILS) fund manager will focus on retrocession and has launched today along with a reinsurance company, Lodgepine Re.

Markel said that Lodgepine Capital’s initial product offering will be a property catastrophe retrocessional investment fund, called the Lodgepine Fund, which is being launched ahead of the 2020 reinsurance renewal season.

“Lodgepine will expand Markel’s current range of ILS capabilities and provide institutional investors access to more opportunities in insurance risk, complementing our existing Nephila and State National operations,” explained Richard R. Whitt, Co-Chief Executive Officer at Markel. “Lodgepine further strengthens our position as an industry leader in the increasingly important ILS market.”

Markel’s Andrew “Barney” Barnard will take on the chief executive officer role at Lodgepine, while drawing on Markel’s deep talent pool James “Jamie” Welsby has been named as its chief investment officer and John Duda will lead the retrocessional portfolio management team.

“We have been thoughtful both in the name of the company and the composition of the executive team,” Jed Rhoads, president and chief underwriting officer at Markel Global Reinsurance and now chairman of Lodgepine Capital explained. “The Lodgepole pine is renowned for its durability and the name Lodgepine reflects Markel’s long-term commitment to provide insurance and reinsurance coverage to its insureds and attractive return opportunities to investors.”

The Lodgepine Fund aims to offer its investors a route to access property catastrophe retrocessional reinsurance exposures, through a single-entry point and platform.

Cedants will benefit from a suite of property retrocession products, the company said, with the ability to have coverage either on a fully collateralized basis, underwritten by Lodgepine Re, or on a rated paper basis underwritten by Markel Bermuda Limited, or even a combination of the two.

The Bermuda Monetary Authority (BMA) has approved the licensing of Lodgepine Re, the reinsurance company, in principal. Once all necessary approvals of the other Lodgepine entities have been obtained, the company expects to have them organised, operational and capitalised in the coming weeks.

So Lodgepine Capital Management and Lodgepine Re will be Markel’s new retro play, as it at the same time allows its CATCo product to wind down and run-off.

Markel had previously said that it would launch a new retrocessional ILS offering, as CATCo wound down.

The company also explained that it had no intention of emulating the well-known CATCo retrocession products within its new retro insurance-linked securities (ILS) platform, so it will be interesting to see how the Lodgepine retro product set develops.

The ability to have rated or collateralized and a mix of the two should broaden the range of cedants attracted to Lodgepine’s retro ILS offering as well.

Of course this also suggests additional capital flowing back into the retrocession market in time for the January 2020 renewals, so it will be interesting to see how market dynamics react at that time.