Markel Corp. announced it is putting its Bermuda insurance linked securities unit, Markel CATCo, into run-off at the same time it announced it is launching a new retrocessional ILS fund platform, which will be ready to write business for the 2020 renewal season.
Markel CATCo Investment Management Ltd. said it will cease accepting new investments in the Markel CATCo Reinsurance Fund Ltd. and will not write any new business going forward through Markel CATCo Re. (MCRe). The run-off of MCRe is expected to take three years. “As part of this run-off, MCRF will return capital to its investors, including the CATCo Reinsurance Opportunities Fund…,” the company confirmed.
Markel’s new retrocessional ILS will be comprised of a reinsurance company, fund entity and investment manager, similar to what existed for Markel CATCo.
The company would not comment on the reasons for the decision to put Markel CATCo into run-off and whether the move was connected to inquiries being conducted by U.S. and Bermudan governmental authorities into the loss reserves recorded in late 2017 and early 2018. The U.S. Department of Justice, the U.S. Securities and Exchange Commission and Bermuda Monetary Authority are currently investigating.
While Markel engaged outside counsel to conduct an internal review, which found “no evidence that personnel of its CATCo unit acted in bad faith” in setting the loss reserves, it is facing a class action shareholder lawsuit that alleges reserves may need to be restated.
New ILS Platform
Markel said its new ILS platform will help expand “its current range of ILS capabilities…” It will be managed by Markel Global Reinsurance executives Jed Rhoads and Andrew “Barney” Barnard.
Initial product offerings are expected to include a property catastrophe retrocessional investment ahead of the 2020 renewal period. The fund is expected to offer cedents a suite of property retrocession products with the ability to have coverage provided either on a collateralized basis, written by the new reinsurance company, or on a rated paper basis written by Markel Corp.’s existing Class 4 Bermuda-based licensed insurance company, Markel Bermuda Ltd., or a combination of both.
“Markel is tremendously optimistic about the future of the ILS market. Over time we expect this new platform to broaden Markel’s capabilities and provide institutional investors access to further opportunities in insurance risk, complementing our existing Nephila and State National operations,” said Richard R. Whitt, co-chief executive officer at Markel.
“The 2020 Retro Fund is expected to provide investors with access to property catastrophe retrocession exposure via a single-entry point and platform, and we expect it will additionally present a convenient and compelling offering to both our cedents and brokers,” he added.
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