Investors seek damages from Markel over CATCo loss reserves in lawsuit


Investors that purchased Markel Corporation securities between July 26, 2017 and December 6, 2018, have filed a class action lawsuit against the re/insurance holding company, alleging they were misled regarding the company's financial condition.

The suit alleges that Markel failed to properly account for its insurance reserves in late 2017 and early 2018 and failed to have in place proper controls to prevent the misstatements. The case is led by law firm Howard G Smith.

In November 2018, Markel CATCo raised reserves for Hurricane Michael and Typhoon Jebi and warned over a loss creep from the 2017 hurricane season. Markel CATCo implemented a specific loss reserve to cover the 2018 events Hurricane Michael and Typhoon Jebi and also warned over potential California wildfire losses and a loss creep from 2017 nat cat events.

Markel CATCo Investment Management builds and manages portfolios that provide investors with the opportunity to participate in the returns from a selected mix of investments linked to reinsurance risks accessed through its reinsurance company Markel CATCo Re.

On December 6, 2018, Markel had disclosed that “after having been contacted on November 30, 2018, it is fully cooperating with inquiries by US and Bermuda authorities into loss reserves recorded in late 2017 and early 2018 at Markel CATCo Investment Management Ltd and its subsidiaries.”

Following this development, the price of Markel's stock dropped substantially, falling $99.70 per share, more than 8 percent, to close at $1048.23 per share on December 7, 2018, on unusually high trading volume.

The complaint also alleges that during this period, Markel had made materially false and misleading statements, as well as failing to disclose information around its business, operations and prospects.

Specifically, the defendants failed to disclose to investors: (1) that Markel's subsidiaries did not appropriately record loss reserves; (2) that, as a result, the loss reserves would need to be adjusted and/or restated; (3) that these misleading accounting practices would lead to regulatory scrutiny and financial loss to investors; and (4) that, as a result of the foregoing, the defendants’ positive statements about Markel’s business, operations, and prospects, were materially misleading and/or lacked a reasonable basis.

Bermuda:Re+ILS has contacted Markel for comment. The company had not responded at the time of publication. 

Markel Corporation, Markel CATCo, Reserves, Lawsuit, Howard G Smith, Bermuda, North America

Bermuda Re