Markel Corp. disclosed that U.S. and Bermuda regulators are inquiring about loss reserves from one of its divisions.

The Virginia-based specialty insurer said that it was initially contacted on Nov. 30 regarding loss reserves recorded in late 2017 and early 2018 at Markel CATCo Investment Management Ltd. and its subsidiaries.

Markel said the inquiries cover only this division “and do not involve other Markel Corp. companies.”

The company said it is fully cooperating and has also hired outside counsel to conduct an internal review of the matter.

A.M. Best said that the ratings for Markel and its insurance operating subsidiaries remain unchanged, with no rating actions “being taken at this time as the information available does not warrant any such actions.”

A.M. Best did say, however, that it would continue to monitor the situation.

Markel’s CATCo Investment Management Ltd. has been dealing with reserve issues for a while now, stemming from catastrophe costs over the last two years.

In November 2018, Markel disclosed that the division was beefing up loss reserves due to potential losses connected to this year’s Hurricane Michael and Typhoon Jebi. Markel CATCo also warned it was monitoring the California wildfires, including the Camp and Woolsey fires, noting that “it appears a material loss to the portfolio is likely” and that it could exceed the impact of the 2017 California wildfires (c.17 percent for 2017). Markel warned in its regulatory filing that it would likely need further reserve strengthening due to rising 2017 loss estimates.

Markel issued another regulatory update on Dec. 7, announcing that Markel CATCo would boost loss reserves again, regarding the 2017 catastrophe loss events stated in November. Markel said that the impact reflected a 15.7 percent deterioration in the ordinary share 2017 annual performance. Markel noted that industry loss estimate trends have been similarly increasing, with others reporting loss deterioration through the 2018 third quarter. Markel said the reserve strengthening is in response to this as well, and that it and Markel CATCo would continue to assess impacts to the portfolio regarding the 2018 California wildfires. What’s more, Markel said it would expect a material impact from the loss deterioration.

Source: Markel