Markel CATCo gets US court approval for ILS fund buy-out

Markel and  Markel CATCo Investment Management (MCIM) has received the necessary court approval for the buy-out transaction being undertaken by two CATCo insurance-linked securities (ILS) funds that are currently in run-off.

The two ILS funds, Markel CATCo Reinsurance Fund and CATCo Reinsurance Opportunities Fund, are managed by MCIM, the Funds' Bermuda-based investment manager.

Markel said the two lawsuits filed by investors against former Markel CATCo CEO Tony Belisle will be dismissed with prejudice at the time of closing of the buy-out transaction, expected to occur in late March 2022.

The buy-out 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.

On February 16, 2022, Markel said, 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, meetings of investors in the Funds were held at which the investors overwhelmingly voted to proceed with the Buy-Out Transaction.

On March 11, the Bermuda Court issued orders approving the Buy Out Transaction. And on March 16, the US Bankruptcy Court for the Southern District of New York entered orders approving the enforcement in the US 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, Markel said.

Under the terms of the deal, participants will retain the right to receive any upside at the end of the applicable run-off period if Markel CATCo Re'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.

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