Markel’s Lodgepine launches first retro ILS fund with ~$100m

Lodgepine Capital Management Limited, the retrocessional reinsurance ILS fund management unit of Markel Corporation, launched its first insurance-linked securities (ILS) fund featuring third-party capital at July 1st 2021 with just under $100 million in assets.

Lodgepine Capital Management has been in start-up mode for more than a year, underwriting its own internal book of retrocessional reinsurance on behalf of Markel, while building out its infrastructure and having investor conversations.

In 2020, Lodgepine’s portfolio of retrocession delivered double-digit returns, largely avoiding losses throughout the period.

But with rates rising across reinsurance and retrocession, the timing has clearly been right for Lodgepine and the retro ILS unit launched its flagship Lodgepine Fund at July 1st 2021.

Markel launched Lodgepine in late 2019, bringing a new insurance-linked securities (ILS) strategy to market focused on the retro space.

During its build-out, the the Lodgepine platform had its portfolio of retro contracts warehoused under Markel Bermuda in 2020.

It then established its own reinsurer, which was the first collateralized insurer to be registered in Bermuda, Lodgepine Reinsurance Limited.

Now, Lodgepine Fund has been launched, as the companies first property catastrophe retrocessional reinsurance investment fund.

Markel said that the retro ILS manager has $98.9 million of capital allocated to the fund, of which the majority is from third-party investors, but Markel has kept true to its word and invested $18.9 million in the Lodgepine Fund as well.

Markel had always promised to invest up to $100 million in the Lodgepine Fund when it launched, so it seems this is just an initial allocation.

As of July 1st, Markel ceded some of the retrocessional reinsurance property business underwritten in its own reinsurance business to Lodgepine Re, as was expected.

This gave the company a headstart, on a book that may include risks written earlier in the year at the January renewals as well. Lodgepine Re underwrites the portfolio of risks to which Lodgepine Fund subscribes, supplying the fund’s first portfolio.

This positions Lodgepine very well as a go-forwards opportunity for investors, as the manager has a partially seasoned fund of retrocession contracts, with established relationships for renewal purposes and the all-important January 2022 renewal season ahead of it, when a significant proportion of the world’s retrocession is renewed.