Markel’s twin track approach to the market

A combination of underwriting discipline and product diversity is the key to growth in today’s challenging market.

That’s the belief of bosses at global specialty insurer and reinsurer Markel who have just inked a deal to buy CATCo, the insurance investment management specialist.

The partnership will see Markel regain a strong foothold in the insurance-linked securities (ILS) space—and receive crucial fee income—to complement its traditional reinsurance capabilities.

Following the acquisition, the company will operate from its existing Bermuda headquarters under Markel's ownership as Markel CATCo Investment Management.

“We think it makes sense to have an offering of traditional reinsurance and ILS as we think this is a permanent feature, going forward. It will be cyclical and it makes sense to have the ability to deliver in both parts of the markets,” said Richard Whitt, Markel’s president and co-chief operating officer.

He expects this strategy will position the firm to produce strong figures in the future.

“I don’t view ILS as any different from anything else. What it gives us is a better product set where we can cover all needs of the client,” said Whitt.

“Long-term, if you have the ability to innovate and deliver service you can be optimistic about the future in reinsurance. Anybody that is willing to innovate and service the client will do well going forward.”

Whitt is hopeful the CATCo deal will be finalised by December, allowing attention then to shift to new product creation.

“It will be a process and we will learn from each other. It’s about product diversification,” he said.

However this new development will not mean neglecting the traditional underwriting side of the business, something Jed Rhoads, co-president and chief underwriting officer, believes others might be guilty of.

“Line-issue management appears to be becoming something of a lost art, with some firms not managing themselves as carefully as they could,” he said.

“It would appear to me that people have relaxed their gross and net exposure management guidelines. That is a typical thing to do in a soft market and a few will get caught out by the next major event.

“You can’t get away from the fundamentals and some people are putting out unusually large net lines relative to their capital lines.”