Markel Group Profile
Markel Group Inc. engages in marketing and underwriting specialty insurance products.
Insurance -Markets and underwrites specialty insurance products using the company's underwriting, fronting and insurance-linked securities platforms that enable it to best match risk and capital.
Investments - Invests premiums received by the company's underwriting operations and any available earnings provided by its operating businesses in fixed maturity and equity securities.
Markel Ventures - Owns controlling interests in a diverse portfolio of businesses that operate in a variety of industries.
The company's three interdependent engines form a system that provides diverse income streams, access to a wide range of investment opportunities and the ability to efficiently move capital to the best ideas across its three engines.
Insurance
The company's insurance engine consists of the following types of operations:
Underwriting - its risk-bearing insurance and reinsurance operations.
Program services and other fronting - fronting platform that provides other insurance entities and capacity providers access to the United States (U.S.) property and casualty insurance market.
Insurance-linked securities (ILS) - provides investment management services to third-party capital providers for a variety of insurance-related investment products.
Through its underwriting, program services and other fronting and ILS operations, the company has a suite of capabilities through which it can access capital to support its customers' risks, which includes its own capital through its underwriting operations, as well as third-party capital through its program services and other fronting and ILS operations. Within each of these insurance platforms, the company's specialty product focus enables it to develop expertise and specialized market knowledge. For example, through its program services and other fronting platform, the company has programs through which it writes insurance policies on behalf of its ILS operations that are supported by third-party capital.
Markets and Distribution
The company's underwriting operations write business on a global basis and utilize multiple distribution channels to access its targeted risks.
In the U.S., the company writes business in the excess and surplus lines (E&S) and admitted insurance markets, as well as the reinsurance market. The primary distribution channels through which the company's the U.S. business is placed are wholesale insurance and reinsurance brokers, retail insurance agents and alternative channels, including third-party managing general agents.
The E&S, or non-admitted, market focuses on hard-to-place risks and loss exposures that generally are not written in the standard market. E&S eligibility allows the company's insurance subsidiaries to underwrite unique loss exposures with more flexible policy forms and unregulated premium rates. This typically results in coverages that are more restrictive and more expensive than coverages in the standard market. The E&S market is accessed primarily through wholesale insurance and reinsurance brokers, which have limited quoting and binding authority.
The company's U.S. business written in the admitted market focuses on unique and hard-to-place risks in the standard market, some of which must remain with an admitted insurance company for marketing and regulatory reasons. The company's admitted business is also placed through managing general agents, which have broader underwriting authority than retail agents. These agents are carefully selected based on a track record of proficiency with their selected products, and the business written is controlled through regular audits and pre-approvals. In addition, certain products and programs written on an admitted basis are marketed directly to consumers.
The company's U.S. reinsurance operations are conducted through MGRC. Reinsurance business is placed primarily through wholesale reinsurance brokers.
In Bermuda, which is known for its significant concentration of insurance and reinsurance businesses, the company participates in the worldwide insurance and reinsurance markets. The Bermuda property and casualty market is a significant source of capital for the U.S. market and the leading location for cessions by U.S. insurers.3 Business written in the Bermuda market is typically placed by a Bermuda-based wholesale broker. The company conducts its Bermuda underwriting operations through MBL, which is registered as a Class 4 insurer and Class C long-term insurer under the insurance laws of Bermuda.
The company also participates in the London insurance and reinsurance market, which is known for its ability to provide innovative, tailored coverage and capacity for unique and hard-to-place risks, many of which have significantly higher limits than risks placed through the standard market. Insurance brokers place most of the business in the London market. The company participates in the London insurance and reinsurance market primarily through Markel Capital Limited (Markel Capital) and MIICL. Markel Capital is the corporate capital provider for Syndicate 3000, through which the company's Lloyd's operations are conducted. In addition to their headquarters in London, Markel Capital and MIICL maintain branch offices across the United Kingdom (U.K.), Europe, Canada, Asia, Australia and the Middle East through which the company is able to offer insurance and reinsurance.
In Europe, the company also writes business through Syndicate 3000 and MISE, a regulated insurance carrier located in Munich, Germany. From its offices in Germany, MISE transacts business in European Union (E.U.) member states and throughout the European Economic Area. MISE has established branches in Ireland, the Netherlands, Spain, Switzerland, France and the U.K. Syndicate 3000 supplements, or serves as an alternative to, MISE for access to the E.U. markets.
While the company operates in various other markets, substantially all of its gross written premiums in 2023 were written from its platforms in the United States, the United Kingdom, Bermuda and Germany. In 2023, 80% of gross premium writings from the company's global underwriting operations were attributed to risks or cedents located in the United States.
Underwriting segments
The company monitors and assesses the performance of its ongoing underwriting operations on a global basis in the following two segments: Insurance and Reinsurance.
Insurance segment
The Markel Specialty division consists of the company's the U.S. and Bermuda based insurance underwriting operations and writes business for insureds ranging from individuals and small businesses to Fortune 1000 companies in the U.S., the U.K., the E.U., Asia and Australia. The Markel Specialty platform provides easy access to the company's diverse portfolio of products and capabilities. The Markel International division writes business worldwide from the company's London and Munich-based platforms, which include branch offices in Canada, Asia, Australia and across the E.U. The State National division writes collateral protection insurance for automobile and other vehicle loans in the U.S.
The company focuses on businesses in the construction, life sciences, energy, medical, healthcare, pharmaceutical, professional services, social welfare, recreational, transportation, heavy industrial and hospitality industries. Specific products include primary general liability, excess and umbrella products, products liability products, environmental liability products and casualty facultative reinsurance written for individual casualty risks.
The company's professional liability product lines provide insurance solutions for small, middle market and risk management accounts with coverage that is tailored to their exposures and needs. Professional liability coverages include errors and omissions, directors and officers, cyber, employment practices liability, professional indemnity, transaction liability, intellectual property and union liability. Errors and omissions coverage provides solutions for specialized professions, including lawyers, accountants, agents and brokers, service technicians and consultants, as well as other less-specialized professionals. Directors and officers coverage is provided for publicly-traded, private and non-profit companies, including financial institutions and Fortune 1000 companies. The company also offers claims-made professional liability coverage for individual healthcare providers and coverages for medical facilities.
Personal lines products provide first and third-party coverages in the U.S. for classic cars, motorcycles and a variety of personal watercraft, including vintage boats, high-performance boats and yachts and recreational vehicles, such as motorcycles, snowmobiles and ATVs. Additionally, property coverages are offered for homeowners that do not qualify for standard homeowner's coverage, as well as personal umbrella coverage.
Marine and energy products include a portfolio of coverages for cargo, energy, hull, liability, war and terrorism risks worldwide. The cargo product line is an international transit-based book providing coverage for many types of cargo. Energy coverage includes all aspects of oil, gas and renewable energy activities. The company's renewable energy activities include coverages for onshore and offshore wind farms, as well as alternative energy generation and storage technology projects. Hull coverages consist of coverage for physical damage to ocean-going tonnage, yachts and mortgagees' interests. Liability coverage provides coverage for a broad range of energy liabilities, as well as traditional marine exposures including charterers, terminal operators and ship repairers. Marine war coverage includes protections for the hulls of ships, and other related interests, against war and associated perils. Terrorism coverage includes coverage for property damage and business interruption related to political and civil violence and war on land.
Property coverages consist principally of fire, allied lines (including windstorm, hail and water damage) and other specialized property coverages, including catastrophe-exposed property risks, such as earthquake and wind on both a primary and excess basis. Catastrophe-exposed property risks can present higher severity than more standard property risks due to the impacts from earthquakes and severe weather events such as hurricanes, convective storms and wildfires. The company's property coverages are exposed to windstorm losses that, based on the seasonal nature of those events, are more likely to occur in the third and fourth quarters of the year. The company's property risks range from small, single-location accounts to large, multi-state, multi-location, multi-national accounts on a worldwide basis. Other types of property products include inland marine products, railroad-related products and specie coverage for fine art on exhibition and in private collections.
Specialty programs business is offered in the U.S. on a standalone or package basis and generally targets specialized commercial markets and various customer groups, such as amateur sports and fitness clubs. Certain specialty programs written in this segment use managing general agents to offer single source admitted and non-admitted programs for a specific industry, class or line of business.
Workers' compensation products are offered in the U.S. and provide wage replacement and medical benefits to employees injured in the course of employment and target main-street, service and artisan contractor businesses, retail stores and restaurants.
Credit and surety products consist primarily of trade credit and prepayment coverage and a range of bonds and guarantees that support contractual obligations, as well as other coverages for specific credit risks, markets and contingencies. Key credit risks covered include those of counterparty insolvency and defaults by government-owned entities. The key coverages under surety products include contractual performance and payment risks, commercial license and permit obligations and obligations related to judicial proceedings, such as court and fiduciary bonds.
Other product lines within the Insurance segment primarily include collateral protection insurance, which insures personal automobiles and other vehicles held as collateral for loans made by credit unions, banks and specialty finance companies.
Reinsurance segment
Reinsurance segment product offerings are underwritten primarily by the company's Global Reinsurance division, which operates from platforms in the U.S., Bermuda and the U.K. The company writes quota share and excess of loss reinsurance on a local, national and global basis. General liability reinsurance primarily consists of umbrella and excess casualty products, as well as environmental liability products covering pollution legal liability and contractors' pollution exposures.
The company's specialty treaty reinsurance products are written across a wide range of specialty product lines, primarily consisting of the following:
Credit and surety products, including structured and whole turnover credit, political risk and contract and commercial surety reinsurance programs covering worldwide exposures;
Workers' compensation and accident and health products covering both standard and catastrophe-exposed business in the U.S. and worldwide;
Marine and energy products covering both offshore and onshore marine, energy and renewable energy risks on a worldwide basis, including hull, cargo and liability;
Public entity reinsurance products offering casualty coverage for municipalities, schools, special districts, public housing authorities and public entity affiliated non-profits;
Mortgage default insurance offering coverage for private mortgage insurers predominantly located in the U.S. and Australia;
Aviation and space coverage, including major risk, general aviation, satellite launch and orbit;
Agriculture reinsurance covering multi-peril crop insurance, hail and related exposures for risks located in the U.S. and Canada; and
Discrete political violence and national terror pools in select jurisdictions globally.
Professional liability reinsurance primarily consists of the following:
Transaction liability, which provides representation, warranty and indemnity coverage for mergers and acquisitions, including coverage for tax and contingent liability;
Directors and officers liability for publicly-traded, private and non-profit companies;
Cyber and technology errors and omissions covering both first and third-party exposures;
Errors and omissions for lawyers, accountants, agents and brokers, services technicians and consultants; and
Healthcare liability for physicians, hospitals, long-term care and other medical facilities.
Program Services and Other Fronting
The company's program services and other fronting business generates fee income in the form of ceding fees in exchange for fronting insurance and reinsurance business for other insurance carriers (capacity providers). In general, fronting refers to business in which the company writes insurance on behalf of a general agent or capacity provider and then cede all, or substantially all, of the risk under these policies to the capacity provider in exchange for ceding fees.
The company's program services business, which is provided through its State National division, offers issuing carrier capacity to both specialty managing general agents and other producers who sell, control and administer books of insurance business that are supported by third parties that assume reinsurance risk, including the Nephila Reinsurers.
Through its program services business, the company writes a wide variety of insurance and reinsurance products, principally including general liability, commercial liability, commercial multi-peril, property and workers' compensation. Program services business written through its State National division is separately managed from its underwriting divisions, which may write similar products, in order to protect its program services customers.
Through these subsidiaries, the company's program services business is licensed or authorized to write business in all 50 states and the District of Columbia. The company's specialized business model relies on third-party producers or capacity providers to provide policy administration, claims handling, cash handling, underwriting, or other traditional insurance company services.
In its program services business, the company enters into reinsurance agreements whereby it cede to the capacity providers 100% of the premium written and substantially all of its gross liability under all policies issued by and on behalf of it by the producer. The company's contracts with capacity providers do not legally discharge it from its primary liability for the full amount of the policies.
In its other fronting business, the company leverages the strength of its underwriting platform, including its highly rated insurance subsidiaries, to write business on behalf of its Nephila ILS operations, in exchange for ceding fees, to support its business plans and assist in meeting its desired return objectives. The company's other fronting business is managed separately from its program services business.
Business written on behalf of the company's Nephila ILS operations within both its program services and other fronting operations primarily consists of catastrophe-exposed property insurance and reinsurance business, as well as specialty and climate reinsurance business. The business written is ceded to the Nephila Reinsurers, whose investors ultimately assume the risk. To mitigate credit risk for this business, the company requires collateral up to a specified level of annual aggregate agreement year losses, which is held in a trust for which it is the beneficiary.
Insurance-Linked Securities
The company's insurance-linked securities operations are primarily comprised of its Nephila operations and are not included in a reportable segment. Nephila Holdings Ltd. (together with its subsidiaries, Nephila) provides investment and insurance management services through which it offers alternative capital to the insurance and reinsurance markets while providing investors with investment strategies that typically are uncorrelated with traditional asset classes. The company receives management fees for investment and insurance management services provided through these operations, and for certain funds, incentive fees based on their annual performance.
The company's fund management operations provide insurance and investment management services for a broad range of investment products for insurance and reinsurance companies, government entities, banks, hedge funds, pension funds and institutional investors, including insurance-linked securities such as catastrophe bonds, insurance swaps, traditional reinsurance contracts, industry loss warranties and other financial instruments. Nephila serves as the investment manager to several Bermuda based private funds (the Nephila Funds). To provide access for the Nephila Funds to a variety of insurance-linked securities in the property catastrophe, climate and specialty markets, Nephila acts as an insurance manager to certain Bermuda Class 3, collateralized and special purpose reinsurance companies, Lloyd's Syndicate 2357 and Lloyd's Syndicate 2358 (collectively, the Nephila Reinsurers).
The Nephila Reinsurers subscribe to various property, climate and specialty reinsurance contracts based on their investors' risk profiles, which include business ceded by the company's underwriting and program services and other fronting platforms. The company writes this business on behalf of its Nephila ILS operations to the extent it fits Nephila investors' risk profile and cede substantially all of the risk to Nephila Reinsurers.
Markel Ventures
Through its wholly owned subsidiary Markel Ventures, Inc. (Markel Ventures), the company owns controlling interests in high-quality businesses that operate in a variety of different industries with shared values and the shared goal of positively contributing to the long-term financial performance of Markel Group. The company's strategy in making these acquisitions is similar to its strategy for purchasing equity securities. The company seeks to invest in profitable companies, with honest and talented management, that exhibit reinvestment opportunities and capital discipline, at reasonable prices. The company intends to own the businesses acquired for a long period of time.
Regulatory Environment
The company is subject to extensive state, federal and international regulation and supervision in the jurisdictions in which it does business. Regulations vary from jurisdiction to jurisdiction. Additionally, as a company with publicly-traded securities, the company is subject to certain legal and regulatory requirements applicable generally to public companies, including the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and the New York Stock Exchange relating to reporting and disclosure, accounting and financial reporting, corporate governance and other matters.
The Illinois Department of Insurance is the company's lead insurance regulator for purposes of conducting its supervisory college. The company must submit an Own Risk and Solvency Assessment Summary Report (ORSA) annually to its lead insurance regulator.
The company is subject to regulation by the Prudential Regulatory Authority and Financial Conduct Authority in respect of its the U.K. insurance businesses. The company is subject to regulation by the Federal Financial Supervisory Authority, better known by its abbreviation BaFin, in respect of its German insurance carrier.
The company's the U.K. and German insurance businesses are subject to both the E.U.'s General Data Protection Regulation (GDPR) and Solvency II. The company's Nephila insurance-linked securities operations are subject to regulation and supervision by various regulatory authorities, both in the U.S. and internationally. Certain of the company's ILS subsidiaries are organized and regulated as follows: registered with the SEC as an investment adviser under the Investment Advisers Act of 1940; registered with the U.S. Commodity Futures Trading Commission as a commodity pool operator or a commodity trading advisor under the Commodity Exchange Act; and/or registered with the BMA as an insurance manager under the Bermuda Insurance Act 1978. Certain other ILS subsidiaries serve as the investment manager to one or more private funds that are registered with the BMA under the Investment Funds Act 2006, as amended, or the Segregated Accounts Companies Act 2000, as amended.
