Markel Offers Accelerated Return of Capital to Investors in 2 CATCo Funds in Runoff

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Markel Corp. and Markel CATCo Investment Management Ltd. (MCIM) announced the terms of a buy-out transaction that provides an accelerated return of substantially all the net asset value in Markel CATCo Reinsurance Fund Ltd. (the Private Fund) and CATCo Reinsurance Opportunities Fund Ltd. (the Public Fund).

These two funds, which are insurance-linked securities funds managed by Bermuda-based MCIM, have been in runoff since June 2019. Affiliates of Markel Corp. will be providing funding of up to approximately $150 million to facilitate the buy-out transaction of the retrocessional segregated accounts of the funds. In addition, an affiliate of Markel Corp. will be providing tail risk cover that will allow for the return of approximately $100 million of trapped collateral to investors in the Private Fund’s separately structured reinsurance offering, known as the Aquilo Fund segregated account.

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The buy-out transaction has been prompted as a result of threatened and asserted claims by two small investors that, although the funds believe these claims to be meritless, have disrupted the continued timely and orderly return of additional capital to investors and is being offered to prevent the potential for inequitable treatment of some investors at the expense of all other investors, said Markel in a statement.

Under the buy-out transaction, investors in the funds will retain the right to receive any outstanding net asset value plus any upside at the end of the applicable run-off period if currently held reserves exceed the amounts necessary to pay ultimate claims. The affiliates of Markel Corp. that are financing the buy-out transaction expect to receive a return of all their funding by the end of the run-off periods.

MCIM is extending an opportunity to all investors in the funds to accept the buy-out transaction on or before Oct. 22, 2021 (early consent deadline) in order to become eligible to receive at closing a fee equal to 1% of the investor’s proportional entitlement to the current NAV as at closing (early consent fee).

The boards of directors of each of the Private Fund and Public Fund have unanimously determined that the buy-out transaction is in the best interests of each of their respective funds and recommend their investors return support undertakings by the early consent deadline, explained Markel.

Assuming satisfactory investor support for the buy-out transaction is received by the early consent deadline, each of the funds will propose to their investors schemes of arrangement under Bermuda law (schemes).Pursuant to the schemes and the buy-out Transaction, all investors, the CATCo group companies (MCIM, the Public Fund, the Private Fund and Markel CATCo Re Ltd.), Markel Corp. and each of their related parties will grant customary mutual releases of all claims related to the buy-out transaction, the CATCo group companies’ businesses and the investors’ investment in the funds.

Source: Markel Corp.

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