Pension Insurance Corporation plc (PIC) has just announced that it intends to create a group of investors to challenge the buyout scheme proposed by retrocessive reinsurance investment manager Markel CATCo, saying he believes it will “drastically undervalue investors’ interests. “.
The move could be a setback for parent Markel Corporations’ plans to accelerate the liquidation of its ILS retro reinsurance fund management unit in liquidation, as any challenge could drastically slow this process or result in lengthy legal action.
As a reminder, in the recently announced Markel CATCo purchase proposal.
That proposal prompted Markel CATCo Investment Management and Markel Corporation to seek to accelerate the return on capital of CATCo’s retrocession reinsurance investment funds to their investors, while also attempting to avoid any complications in ongoing runoff from legal claims made, with Matrix Markel prepared to fund a significant amount of capital to support the process.
Following that movement, we reveal that Markel CATCo had also filed for bankruptcy protection in the United States..
But now, this move by PIC, an insurer specializing in defined benefit pension plans, may threaten to derail the approach established by Markel CATCo.
PIC said it has retained legal counsel Boies Schiller Flexner (“BSF”) and is forming a group of investors to evaluate the purchase proposal.
PIC said it is “concerned that the proposed terms of the purchase will drastically undervalue the interests of investors.”
The pension insurer is also concerned that “the proposed terms for the purchase require a full release by investors of all claims against the funds and the Markel Corporation (and others) in circumstances, particularly since Markel CATCo claims that the proposal it has been driven by complaints from other investors. “
PIC cites that these claims include the lawsuit filed against former CEO Tony Belisle for “fraud and negligent misrepresentation,” which as we explained it was solved earlier this year.
PIC noted that this lawsuit alleges several areas of wrongdoing and said it has filed a complaint with the SEC.
PIC said it has instructed its legal counsel BSF to “advise on the terms of the proposed purchase and the possible claims that would be required to be released, and to contact Markel CATCo and the joint interim liquidators in regards to PIC concerns. “
The pension insurer said it anticipates taking action before the current advance consent deadline, related to the proposed purchase terms, of October 22, 2021.
This PIC challenge has the potential to create a delay in Markel CATCo’s plans for an accelerated liquidation of its retrograde reinsurance mutual funds and certainly complicates matters for the company.
If other investors join PIC, the pressure will also increase, making it difficult to obtain the necessary support to go ahead with the purchase terms that have been proposed.