Markel books a further $8.4m of CATCo portfolio favourable development in Q2

Markel Group continued to benefit from returns of value due to favourable loss development on the CATCo retrocessional reinsurance portfolio in the second-quarter of 2024, taking the total for the first-half to $24.1 million.

As we’d reported earlier this year, Markel had booked $15.7 million from the favourable development of the CATCo retro reinsurance contracts in the first-quarter of 2024.

Now, the company has added a further $8.4 million in the second-quarter, as the running off of the retrocession contracts again proved more favourable and allowed the company to recover additional value from them.

Taking the total CATCo portfolio favourable development experience to $24.1 million for the first-half of this year.

We’ve documented the developments reported through the running off of Markel CATCo’s retrocessional reinsurance portfolios over recent years, with significant value recovered for investors, and the ILS manager’s owner Markel, as loss reserves have proved more than adequate in many cases.

Markel bought-out the remaining investors in the CATCo funds and mandates, so any favourable, or otherwise, development on the portfolio at Markel CATCo Re, the investment manager’s reinsurance vehicle, flows back to the parent now (aside from anything related to the CATCo listed fund, as its shareholders remain beneficiaries of any positive development moves).

As the remaining Markel CATCo portfolio shrinks, the amount of favourable development does so as well. For the first six months of 2023 Markel had reported CATCo portfolio favourable development had amounted to $53.5 million.

Recall that Markel had reported that of the buy-out of investors shares in CATCo, the firm had received a return of $24.9 million of that initial cash funding it provided.

The company continues to have an investment in Markel CATCo Re of $20.1 million after the buy-out transaction, but reiterated that all of this could also flow back and be recovered, if the current loss reserves set for CATCo contracts prove sufficient to cover obligations.

Related to the buy-out transaction, Markel still has $95 million of uncollateralized exposure to adverse development on loss reserves held by Markel CATCo Re through the tail-risk cover it had provided to unlock collateral for investors, but continues to say these limits are “unlikely to be exceeded”.

There could be more value to recoup for Markel, but as the running-off nears completion it could be that the amounts become much smaller, although given the general trend for favourable development some additional recovery of value still seems likely.