Markel’s recent $90m CATCo investment was in the Aquilo Fund strategy

As we reported recently, Markel Corporation has invested $90 million of its own capital into an investment strategy managed by its retrocessional reinsurance focused investment manager Markel CATCo, to boost capital available to fund investor redemptions.

The investment was made at the beginning of the year and Markel explained that as of January 1st 2020 it invested $90 million into one of the Markel CATCo investment funds, in connection with its run-off.

The motivation of making the investment was to “facilitate the return of capital to third party investors”, by replacing collateral previously provided by other investors in the fund, Markel further said.

Markel also explained that this collateral is related to, “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.”

It turns out that this investment had nothing to do with the pillared retrocessional reinsurance investment strategies run by Markel CATCo, instead being related to the collateralised reinsurance focused Aquilo Fund, we now understand.

The Aquilo Fund was launched as an expansion of the CATCo product range back in 2014, as the manager sought to broaden its offering into fully-fronted traditional reinsurance investments, alongside the pillared retrocession strategy it was better known for.

As we explained last October the Aquilo Fund is being run-off and spun out of CATCo, destined to be reborn within a new ILS investing entity named Chard Re Investment Management led by the specialist reinsurance fund’s managers Rick Montgomerie and Charlie Vaughan and with an investment stake from Markel itself.

Chard Re is set to manage the Aquilo run-off, while also raising capital for a replacement strategy under the Chard Re brand and so its no surprise that Markel has made an investment to help accelerate that process and get the capital returned to investors more quickly.

The faster and smoother the running off of Aquilo, the quicker Chard Re can be up and running and raising fresh capital, which at this point in time with reinsurance rates on the rise would be advantageous to finish sooner than later.

We had it confirmed that the $90 million investment was made in Aquilo, a smaller investment strategy under the Markel CATCo banner and with fewer investors involved.

The Aquilo strategy still holds some risk that runs through 2020 in the portfolio, so by making the investment to enable a faster release of investors, Markel has taken on that remaining risk for the duration of the contracts underlying it.

As we explained in our previous article on the investment, Markel’s approach to its insurance-linked securities (ILS) operations puts investor’s needs at the fore, as evidenced by this chance for investors to exit the Aquilo strategy more easily with the re/insurers help.