Insurance
Home›Insurance›Industry & Deals›Markel sets $205 million reserve after State National…
Markel sets $205 million reserve after State National credit loss
The reserve followed Markel’s finding that collateral posted by a bankrupt capacity provider was insufficient as estimated claims rose beyond the collateral securing the reinsurer’s obligations.
Markel said it established a $205 million reserve after determining that collateral posted by a bankrupt capacity provider was not sufficient to cover expected losses for business written through its State National unit, according to Coverager. Markel described the move as State National’s first substantial credit loss in four decades, explaining that the issue was not missing or impaired collateral assets. Instead, estimated claims increased beyond the collateral amount securing State National’s obligations. Coverager reports the exposure was tied to five programs backed by the same counterparty, with most of the business consisting of primary habitational casualty in several states and excess casualty representing less than 10%. Markel also noted the programs began in 2012, stopped being written five years ago, and that claims continued developing after new business ended, highlighting the long-tail nature of casualty liabilities.
After its review, Markel said State National expects other reinsurers supporting similar classes of business to increase collateral, while management added those reinsurers remain financially healthy. Markel acquired State National for about $900 million in 2017, and the company said the unit has generated more than $1 billion in cumulative earnings since the acquisition.