Markel Corporation and Markel CATCo Investment Management Ltd. (MCIM) have announced a new buy-out transaction designed to provide an accelerated return of substantially all the net asset value (NAV) in both the Markel CATCo Reinsurance Fund and CATCo Reinsurance Opportunities Fund to their respective investors.
These insurance-linked securities (ILS) funds are managed by MCIM and have been in run-off for the last two years, and a fair amount of capital has already been returned to investors in the retro reinsurance ILS fund strategies.
Under the terms of the arrangement, affiliates of Markel Corporation will be providing funding of up to approximately $150 million to facilitate the buy-out of the retrocessional segregated accounts of the funds.
At the same time, an affiliate of Markel will be providing tail risk cover that will allow for the return of roughly $100 million of trapped collateral to investors in the Private Fund’s separately structured reinsurance offering – the Aquilo Fund segregated account.
The transaction sees investors in the funds retain the right to receive any outstanding NAV plus any upside at the end of the applicable run-off period, so long as currently held reserves exceed the amounts necessary to pay ultimate claims.
The affiliates of Markel financing the transaction expect to receive a return of all their funding by the end of the run-off periods.
Bermuda-based MCIM is extending an opportunity to all investors in the Funds to provide a support undertaking with respect to the buy-out on or before October 22nd, 2021 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.
The boards of directors of each of the Private Fund and Public Fund have unanimously determined that the buy-out is in the best interests of each of their respective Funds (taking into account the interests of their respective investors) and recommend that their investors return support undertakings by the Early Consent Deadline.
According to Markel: “This buy-out transaction is 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.
“The appointment of the JPLs will enable the implementation of the Buy-Out Transaction and the approval of the Schemes to best ensure the fair, equitable and accelerated distribution of assets to all investors in the Funds.”
The JPLs, or joint provisional liquidators selected to support and facilitate the implementation of the buy-out transaction through the Schemes, are Simon Appell of AlixPartners UK LLP and John McKenna of Finance & Risk Services Ltd.
