Markel CatCo board raises run-off as possible option

The board of Markel CatCo has announced that it has “recommend an orderly run-off” of the firm's portfolios, a move that raises a question mark over the future of the company.

In a statement the board announced that shareholders will be asked to vote on recommendations for the retrocessional reinsurance investment specialist on 26 March 2019.

The move follows a consultation made by the board in December 2018 to gauge support for proposals to restructure the company by inviting shareholders to convert their shares into redemption shares. It found that a large majority of shareholders would take up the opportunity.

According to the Markel CatCo statement: “As a consequence, the board, having consulted with its advisers, has determined to recommend an orderly run-off of the company’s portfolios in place of the restructuring.

“The separate approval of the ordinary shareholders and C shareholders is required for the implementation of the run-off in respect of that share class (which constitutes a material change to the company’s investment policy in respect of each share class).”

However, the statement added: “There can be no assurances in relation to the length of the run-offs as they are dependent on the underlying reinsurance contracts going ‘off risk’ and any related loss reserves being settled and collateral balances released (which is out of the company’s and the investment manager’s control).”

The future of the firm has been in question since an investigation into recorded loss reserves for late 2017 and early 2018 began last year.

However, the statement added that while the board has recommended the orderly run-offs, the company “may still seek to raise further capital in future, subject to demand and shareholder approval” But, it add: “If no further capital is raised, at or towards the end of the run-offs, it will become necessary to put the company into formal member’s voluntary liquidation.”