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Catco Reinsurance Opportunities to return cash

Catco Reinsurance Opportunities (CAT) has announced proposals to return cash to shareholders. This follows the publication of a press release by its investment manager, Markel CATCo Investment Management Ltd., saying that it:

  • will stop accepting new investments in Markel CATCo Reinsurance Fund Ltd. (MCRF)
  • will not write any new business going forward through Markel CATCo Re Ltd. (“MCRe”).
  • will commence the orderly run-off of MCRe’s existing portfolio, which is expected to take approximately three years.

CAT’s board says that, as part of this run-off, MCRF will return capital to investors, including CAT, as such capital become available. In turn, CAT has announced separate proposals for returning such capital to its own Shareholders. These include share buybacks and a reverse tender offer (see below).

CAT sticking with the existing investment manager during the run-off

CAT’s board says that it “considers that Markel CATCo’s arrangements for providing continuing support during the run-off the Company’s portfolios are appropriate for the effective operation of the Company and that the Company is, accordingly, best served by retaining the services of the Investment Manager during the run-off period”.

Potential new retrocessional ILS fund for the 2020 renewal period

Markel Corporation, the investment manager’s parent, has issued a press release saying that it will launch a new retrocessional Insurance Linked Securities (ILS) fund platform ahead of the 2020 renewal period.

CATCo Reinsurance Opportunities is returning cash to its shareholders too

At class meetings of the Ordinary and C shareholders on 26 March 2019, shareholders approved approved proposals concerning the implementation of the orderly run-off of the Company’s portfolios. Specifically, a change to the Company’s investment policy to enable the Company to redeem all of the Company’s Master Fund Shares attributable to the Ordinary or C Shares, as the case may be, and distributing the net proceeds thereof to the relevant class of Shareholders.

CAT’s board now says that, having consulted with its advisers, it has concluded that the most appropriate method by which to return the net proceeds of the Company’s exercise of the Special Redemption Right in the underlying master fund, is to conduct a reverse tender offer in relation to the Company’s Ordinary and C Shares. As a consequence, the Company will, as soon as practicable, publish a circular to Shareholders setting out its specific proposals for conducting the reverse tender offer.

Additionally, CAT’s board says that, in order to be able to deal efficiently with subsequent distributions, the Company is proposing to seek the approval of the Ordinary and C Shareholders to conduct share buybacks at separate class meetings. It says that notices convening the necessary meetings will be set out in the Reverse Tender Offer Circular.

About CATCo Reinsurance Opportunities

CATCo Reinsurance Opportunities aims to give its shareholders the opportunity to participate in the returns from investments linked to catastrophe reinsurance risks, principally by investing in fully collateralised reinsurance contracts but also via a variety of insurance-based investments, including insurance-linked swaps and industry loss warranties, insurance-linked securities as well as other financial instruments.

The fund will target an internal rate of return in excess of LIBOR plus 12 percent to 15 percent per annum including a distribution by way of dividend in respect of each Fiscal Year, of an amount equal to LIBOR plus 5 percent of the Net Asset Value at the end of each Fiscal Year.

CATCo Reinsurance Opportunities intends to spread investment risk by seeking exposure to several non-correlated risk categories which limits the amount of capital at risk with respect to a single catastrophic event.

About Markel Corporation

Markel Corporation is a diverse financial holding company serving a variety of niche markets. The Company’s principal business markets and underwrites specialty insurance products. In each of the Company’s businesses, it seeks to provide quality products and excellent customer service so that it can be a market leader. The financial goals of the Company are to earn consistent underwriting and operating profits and superior investment returns to build shareholder value. Visit Markel Corporation on the web at www.markelcorp.com.

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