CATCo run-off continues apace, favourable development booked in Q1 by Markel

The running-off of the Markel CATCo Investment Management portfolios of retrocessional reinsurance continues apace, with additional favourable development booked in the first-quarter of 2023, and now just 10 open contracts said remaining at the Markel CATCo Re reinsurance vehicle.

The CATCo retro reinsurance investment funds have consistently experienced favourable loss reserve development against the majority of its side pockets over the last few years, during their winding-down.

We’ve documented the developments reported through the running off of Markel CATCo’s retrocessional reinsurance portfolios, with significant value recovered for investors, as loss reserves have proved more than adequate in many cases, as reported by the listed CATCo Reinsurance Opportunities Fund.

Now, parent Markel has reported that in Q1 2023, there was $44.8 million of favorable loss reserve development on the run-off of reinsurance contracts written by Markel CATCo Re, which flowed positively to Markel’s bottom-line.

In total though, Markel has reported a $115.14 million reduction in net reserves for losses and loss adjustment expenses of Markel CATCo Re in the first-quarter.

Also notable were $62.6 million of preference shares of Markel CATCo Re held by noncontrolling interests (third-party investors) were redeemed in Q1.

The London stock exchange listed CATCo Reinsurance Opportunities Fund reflected the continued positive development of the retro reinsurance book in its latest reporting.

But, perhaps most notable, is the fact the listed retro fund also disclosed that there are just 10 open contracts remaining at the reinsurer, Markel CATCo Re, to which that fund holds exposure.

Which suggests the run-off acceleration has continued and with the director’s of the listed CATCo investment fund saying that they anticipate further commutations to come, it is possible Markel shutters the CATCo business completely before too much longer.

Seven of the open contracts related to the 2018 underwriting year, three to the 2019 underwriting year and as of the end of 2022 all of these open contracts were subject to commutation negotiations, the director’s explained.

Additional commutations are expected to be achieved during 2023, further accelerating the running-off, while any additional recovered trapped capital will be returned as available.