Markel is set to control around a fifth of the global ILS space after a shock deal to acquire alternative capital giant Nephila, the carrier announced today.
Nephila has more than $12bn in assets under management. Twinned with Markel’s existing ILS vehicle CatCo, that will bring total assets controlled by the Richmond, Virginia-headquared firm to $19bn.
“With this transaction, Markel is set to become the largest manager of funds in this sector,” said Markel’s co-CEO Richie Whitt.
Markel said that Nephila would act as a separate business unit once the deal completes, which is expected in the fourth quarter. It added that the management team, led by Greg Hagood and Frank Majors would remain in place and continue to be based in San Francisco, Tennessee and London, where the ILS giant has a LLoyd’s syndicate.
Hagood said: “As the industry continues to evolve, we believe the resources and expertise from both platforms will provide meaningful benefits to our investor base, as it combines the investment independence of a 20 year, stand-alone insurance-linked securities manager with the additional resources of a well-respected and strongly rated insurer.”
“We are excited about leveraging these joint resources on behalf of our investors in the years ahead.”
In the same statement, whitt said: “We are excited to welcome Nephila to the Markel team. Frank Majors and Greg Hagood have built the industry’s pre-eminent and longest-tenured insurance-linked securities manager.”
“The addition of Nephila to Markel’s insurance, reinsurance, insurtech, fronting, and existing insurance-linked securities capabilities will enhance and strengthen the breadth and depth of Markel’s offerings to policyholders, producers and investors.”
Nephila’s co-CEO Majors said: “Markel shares our strategic vision for the future of the insurance markets; this transaction will allow us to accelerate our delivery of that strategy, creating additional value for our investors and our trading partners.”
Markel’s CatCo has had a difficult start to the year after suffering devastating losses in 2017 that have crept in the first half of 2018.
In April, CatCo again upped its loss reserves against 2017’s catastrophes, which - as it stands - are expected to cost the firm 41.4 percent of net asset value. The ILS carrier’s assets under management were $6.8bn at the end of June.
Earlier this month, the firm warned of uncertainty around the $140bn industry loss bill for the events which included a trio of Atlantic hurricanes as well as wildfires that scorched swathes of California.