CATCo listed retrocession investment fund NAV gained 61% in 2023

The net asset value of the two share classes of the CATCo Reinsurance Opportunities Fund rose by over 61% across the course of 2023, as the investment manager Markel CATCo continued to unlock more value from the fund’s run-off for its investors.

The net asset value of the shares in the fund rose from $9 million to $14.5 million over the course of last year.

By the end of 2023, Markel CATCo had been able to return $413.9m of capital to shareholders in the London and Bermuda exchange listed retrocessional reinsurance investment fund strategy, over the period it has been running-off since March 2019.

That’s a significant proportion of the assets of the investment fund, which at its largest had been around $970 million in size, but had shrunk considerably by the end of 2018 to just $479.81 million in assets.

So, for those running off the CATCo strategy to have recovered so much of that value back for investors is testament to the effort put into agreeing on commutations for exposed contracts, but also to the loss picks that had been set for many of the catastrophe events the retro investment fund had been challenged by.

It’s worth considering what this meant for the larger Markel CATCo strategy, as the manager had as much as $6.8 billion in assets at its peak, which had dropped significantly to around $3 billion in late 2019.

With the listed CATCo Reinsurance Opportunities fund exposed to many of the same contracts and loss events, it seems reasonably safe to assume that at a meaningful portion of the $3 billion may have been recovered for investors.

The CATCo Reinsurance Opportunities fund still has nine outstanding contracts for which Markel CATCo is still working to pursue their run-off.

These remaining side-pocketed investments are all exposed to the 2018 and 2019 underwriting years, with 2018 events including Hurricanes Michael and Florence, Typhoon Jebi and the 2018 California Wildfires, and 2019 being Hurricane Dorian, Typhoons Faxai and Hagibis and the Australian bushfires.

$10.1 million of the remaining net asset value is exposed to the 2018 events and their side-pocketed investments, the remaining $3.7 million to 2019 events. The remainder of the $14.5 million NAV is held in cash currently.

The Board of the listed retro fund continues to work with Markel CATCo to “evaluate the future potential for further upside from the underlying portfolio which may arise from (i) commutations and (ii) interest earned on the underlying collateral,” the company reported.

Chairman of the listed fund James Keyes said, “While a number of contracts remain open and the possibility for valuation upside remains, the Board has determined, once again, that it is appropriate to remain listed at this point in time.”