To hear about Bermuda-based Markel CATCo Investment Management, Finance Monthly reached out to the company’s founder and CEO – Tony Belisle. Markel CATCo builds and manages concentrated, diversified and fully collateralised portfolios designed to deliver meaningful market outperformance for their clients and investors. The company was launched in 2011 and today manages over $4 billion in assets under management (AuM), which are deployed into catastrophic risk protections written to reinsurers around the globe. The protections cover properties exposed to hurricanes, earthquakes and other natural and man-made disasters.
As a professional with over 30 years of insurance and investment experience – how has the sector evolved in the past few decades?
My career includes work in the fields of pensions, life insurance and investments, but the last 17 years have been focused on the property catastrophe reinsurance space. Back in 2001, following the World Trade Centre attacks, I began offering cash collateralized protections to reinsurers, as I saw the need for certainty of claims payment after large catastrophes. There simply was not enough capital residing in traditional (rated-paper) reinsurers to ensure payment following one or more super catastrophes. Today, in addition to the vital role played by traditional reinsurers, there are more than 50 reinsurance funds with over $75 billion in capital. This makes it far more likely that a region struck by disaster will be able to rebuild, which is, obviously, good for society. Of course, pension funds around the globe are the largest source of this new capital base.
You founded (Markel) CATCo Investment Management in 2011 – what were the key challenges that you were faced with? How did you overcome them?
The biggest challenge was not only in raising the capital, but, also, in finding enough reinsurance buyers to purchase our unique global protections. We launched in January 2011 and, in the first quarter of that year, there were large earthquakes in New Zealand and Japan. This was followed by the largest recorded insured flooding loss in Thailand. We were then flooded by interest from reinsurance buyers who did not want to be exposed to these events to the same extent going forward. As our pricing increased as a result of these events, this attracted significantly more investor capital. The toughest challenge was then to travel the globe incessantly to educate potential investors, so that we could meet the dramatic increase in client demand for our unique product.
What were the goals that you arrived with when founding the company. 6 years later, would you say that you have managed to accomplish them?
Our goal has always been to offer unique protections that are capital-efficient for the buyer, but that also represent efficient use of our investors’ capital. This is a delicate balancing act, but one which we have been able to manage over the years through continued product innovation. We also hoped to become a meaningful provider of capital within the industry and reach $1 billion of AuM by our 5th year. Unbelievable to us, we grew to over $1 billion in our first year and are now well over $4 billion of AuM. However, we only raise capital just to meet buyer demand, as opposed to raising capital and then hoping to deploy it. We also make a commitment to investors that their capital will always be 100% deployed. If it is not, we will return the excess capital.
What further goals are you currently working towards with the company?
In the past few years, we have launched several new funds to address different appetites for risk amongst our investors and different product demand from certain buyers. As these funds have continued to grow beyond our expectations, we are quite busy managing the current funds. However, we continually consider potential new fund offerings.
What would you say are the company’s top three priorities towards its clients? How has this evolved over the years?
Our priorities, with respect to our clients, have never and will never change. Our focus continues to be to provide the most capital-efficient product offerings, to operate as strategic partners with our clients (we are truly in this together) and to provide responsiveness that is second to none. We have heard repeatedly from our clients and brokers that we are the most responsive reinsurer in the world. We take great pride in this.
What do you anticipate for the company in 2017 and beyond?
Number one is to continue to work closely with our clients as strategic partners. Our fortunes and misfortunes should be aligned. At the same time, we must ensure that we are providing adequate returns to our investors and, most importantly, that we are managing our exposures carefully. We have also grown from a staff of three at launch in 2011 to over 20 employees today. Ensuring that all staff are properly trained is an on-going effort and one that we take very seriously.
What was the rationale for the sale to Markel Corporation in late 2015?
One chief concern to some of our largest clients was that they wanted to know that CATCo would survive beyond my working career. And, one of my biggest concerns was that this company should survive, for the benefit of all of my employees, beyond my working career. The best way to address both of these concerns was to find a strategic partner who could acquire the business. This really meant that this partner should not be from the capital markets space, but, actually, an organisation that was very active in insurance and/or reinsurance, a partner who truly understood the business and could provide financial and resource support. With the help of Willis Capital Markets, we identified Markel Corporation as the most suitable partner. Both parties recognized early on that our cultures were very similar, so the integration into Markel has been rather seamless.
Tim Orme is the Managing Director at BRT SA, running the UK arm of a Swiss BPO and Wealth Management technology business. The company provides outsourced middle and back office services to investment managers, as well as the bespoke technology platforms. Tim joined the company at a nascent stage and has dedicated the past 4 and a half years to leading the strategic and operational development of the firm, alongside his three colleagues on the executive team. As the UK business expands and continues to roll out BRT SA’s award winning solutions to more clients across the globe, a combination of high customer satisfaction and the firm’s healthy pipeline gives Tim and his colleagues continued confidence.
BRT came to life as a spin-off from Swiss asset managers Bedrock in 2007. Drawing on over 60 years of experience in private banking, the company has been growing profitably from the very beginning. Today, BRT has a staff of around 50 and serves 35 major clients who oversee more than 45 billion USD in AUM. We operate out of two offices, one in Geneva and a second in central London. Here Tim tells us more about the company, trends within wealth and asset management and his views on the future.
What is driving the current outsourcing trend within wealth and asset management? Subsequently, what are the key considerations for COOs considering BPO?
As the wealth and asset management industry becomes increasingly client orientated, the issue of which functions remain part of the core internal operation are being reassessed. Once coupled with downward pressure on operating margins and the increasing burdens of regulatory and compliance requirements, firms wanting to grow must consider innovative ways to manage operational expenditure, while maximising their efficiency and scalability.
Importantly the scope and interconnection of a BPO service needs to be closely tailored to each company’s unique procedural, investment and management philosophies. Non-differentiating generic activates such as reconciliation, price sourcing, report generation and data management can be easily transferred to specialist service providers, who can enrich them with best practices and scalable security of service, for example via an SLA. In the case where a service provider can combine established working methods with client specific customisation, firms can achieve a safe and reliable handover of these tasks without compromising on client experience & operational efficiency or undertaking cumbersome business transformation projects.
What are the key benefits for investment managers utilizing BPO service providers such as BRT?
When selecting an operational service provider that will play such a vital role within the business, it is absolutely key the solutions they provide are scalable, secure, capable and cost effective. All four of these aspects are mastered once the provider has gathered working methods from collaborating closely with its client base, as well as the additional positive externalities of critical insight and specialist process engineering. By working with an expert, investment managers can be sure they are staying up to date with technology and operations, while also freeing up time and resources to focus on their core activities of client relationships, research and generating alpha.
What is unique about the BRT approach to the market?
We work with our clients in two different modes, depending on their requirements. Firstly, we offer mature and dependable outsourcing services. This means our clients relinquish the burden of their back and middle office processes, as well as their IT and technology needs if necessary. As we cover the whole operational side, our clients don’t need to employ multiple service partners for this. Secondly, we offer the state of the art technology we developed for our own use, on a licensed basis. This allows those organisations who prefer to keep operational staff and processes in house the option to improve their overall operational functionality through customised software implementations. Over the years, BRT has established operational solutions boasting a well-established fleet of tools and services, and regardless of the role we play with each client, the core values of service, skill, discretion & integrity are ubiquitous.
What do you hope to achieve in the next few years?
Our shared goals for the company will continue to focus on the development of our product and service offering, essential to solidifying our position as the preferred partner to the wealth management industry. There is evidently strongly growing appetite for outsourced operational services, and as we build on 10 years of experience in this area we are confident of staying ahead of the curve and offering best in class solutions to wealth mangers, family offices, hedge funds and more. Our mobile solution, Fortress is also set to feature as a revolutionary private banking product, offering a simple, secure and totally white-labelled online portal, anywhere, anytime and on any device.
