Markel to close embattled reinsurance unit, open alternative

Markel Corp. will shut down its troubled CATCo operations and launch another unit to provide insurance-linked securities retrocessional reinsurance coverage, the insurer announced Thursday.

In a statement, Markel said “Markel CATCo Investment Management Ltd. today announced it will cease accepting new investments in Markel CATCo Reinsurance Fund Ltd. and will not write any new business going forward through Markel CATCo Re Ltd.”

It will take about three years to run off the business, the statement said.

In a separate statement Thursday, the Richmond, Virginia-based insurer said it “intends to establish a new retrocessional insurance-linked securities fund platform in Bermuda, comprised of a reinsurance company, fund entity and investment manager.”

The coverage will be offered ahead of 2020 reinsurance renewals, the statement said.

“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 … or a combination of both,” the statement said.

The unit will be overseen by Markel executives Jed Rhoads and Andrew Barnard.

Markel bought CATCo Investment Management Ltd. in 2015. Last year, the business, which offered collateralized reinsurance coverage among other things, was the subject of “inquiries” by regulators in United States and Bermuda over its 2017 reserves.

Later, while conducting a review of the operations, Markel discovered an “undisclosed personal relationship” between two senior executives at the unit and fired them. Markel and the executives recently settled and agreed to arbitrate disputes with the executives over allegedly withheld incentive payments.