Markel Corporation (NYSE: MKL) and Markel CATCo Investment Management Ltd. (“MCIM”) today announced court approval of the buy-out transaction and schemes of arrangement (the “Buy-Out Transaction”) being undertaken by Markel CATCo Reinsurance Fund Ltd. (the “Private Fund”) and the CATCo Reinsurance Opportunities Fund (the “Public Fund” and together with the Private Fund, the “Funds”). These two insurance-linked securities funds are currently in runoff and are managed by MCIM, the Funds’ Bermuda-based investment manager.
On February 16, 2022, the Bermuda Court issued an order to convene meetings of the investors in the Funds for purposes of voting on whether to proceed with the Buy-Out Transaction that would allow for the accelerated distribution of remaining capital to investors in the Funds. On March 4, 2022, meetings of investors in the Funds were held at which the investors overwhelmingly voted to proceed with the Buy-Out Transaction. On March 11, 2022, the Bermuda Court issued orders approving the Buy Out Transaction (the “Bermuda Orders”). On March 16, 2022, the United States Bankruptcy Court for the Southern District of New York entered orders approving the enforcement in the United States of the Bermuda Orders pursuant to Chapter 15 of the United States Bankruptcy Code. All material conditions for closing the Buy-Out Transaction have now been satisfied.
As previously announced, the Buy-Out Transaction will be facilitated by affiliates of Markel Corporation that will provide funding up to $50 million to buy-out substantially all of the retrocessional segregated accounts of the Funds and will provide tail risk cover that will allow for the return of trapped collateral to investors in the Aquilo Fund, a segregated account of the Private Fund. Additionally, Markel Corporation will make payments to or for the benefit of investors in the Funds, net of insurance proceeds, of approximately $100 million.
Under the terms of the Buy-Out Transaction, participants in the Buy-Out Transaction will retain the right to receive any upside at the end of the applicable run-off period if Markel CATCo Re Ltd.’s held reserves exceed the amounts necessary to pay ultimate claims. The affiliates of Markel Corporation financing the Buy-Out Transaction expect to receive a return of all their funding in relation to the full buy-out of the Funds by the end of the run-off periods.
Effective at closing, all investors in the Funds, the Markel CATCo Group Companies (MCIM, the Funds and Markel CATCo Re Ltd.), Markel Corporation and each of their related parties, among others, will grant mutual releases of all claims related to the Buy-Out Transaction, the Markel CATCo Group Companies’ businesses and the investors’ investments in the Funds. Also at closing, the two lawsuits filed by investors in the Private Fund against the former Chief Executive Officer of MCIM will be dismissed with prejudice. It is expected that the closing of the Buy-Out Transaction will occur in late March 2022.
