What is trapped collateral, or trapped ILS capital? When an insurance-linked securities (ILS) contract is seen to be at-risk of facing losses, sometimes the cedent can call for the collateral (or capital backing the ILS deal) to be trapped or frozen, so it remains available while loss development continues.
The collateral is trapped and unavailable for reinvesting into new ILS contracts, which can create a drag on ILS investment portfolios. The ILS capital can remain trapped for months or years until the ultimate loss associated with the contract is clear and a payout is deemed due or otherwise.
As the proposal of a process to buyout investors in the Markel CATCo Investment Management retrocessional reinsurance investment funds has been drawn out by legal appearances and is now waiting for a court decision to proceed, the investment manager has extended the expiry date of the support undertakings it received from investors.
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Optimism over reinsurance renewal rate increases is said to be rising, as the market deals with a significantly delayed renewal timeline, for which a lack of aggregate retrocession capacity and trapped insurance-linked securities (ILS) capital are two of the drivers.
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Progress in the buyout of investors in the Markel CATCo Investment Management retrocessional reinsurance investment funds is unlikely to be made until next year now, as the investment manager said a court decision is unlikely to come until January 22nd 2022.
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Attitudes on pricing are generally seen as “bullish” as the January reinsurance renewals approach, with capacity availability and risk appetite seen as key factors, according to Head of Analytics at Howden unit HX, David Flandro.
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Markel CATCo Investment Management acknowledged the delay to the buyout process for its retrocessional reinsurance investment funds this morning, but said that any challenges from investors would be vigorously defended against.
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Activity surrounding the buyout terms proposed to investors in the Markel CATCo Investment Management retrocessional reinsurance investment funds looks set to drag on, after a court appearance in Bermuda ended with Markel agreeing to provide additional information to creditors, we understand.
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Yesterday, a judge in the United States Bankruptcy Court for the Southern District of New York granted Markel CATCo’s petition for Chapter 15 bankruptcy recognition and relief for the proposed buyout process for the final winding down of the CATCo retrocessional reinsurance funds.
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Pension Insurance Corporation plc (PIC) has explained that it won’t accept the updated and improved buyout terms proposed to investors in the Markel CATCo Investment Management retrocessional reinsurance investment funds, calling the proposal “fundamentally flawed”.
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Investors in the Markel CATCo Investment Management retrocessional reinsurance investment funds now stand to receive as much as 18.5% more in capital return, on the back of the updated and improved buyout terms.
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Markel CATCo Investment Management said this morning that it has received a “substantial level of investor support” for its proposed buyout transaction to speed the winding up of its retrocessional reinsurance investment funds and has updated the terms to be more favourable, in response to investor feedback it seems.
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