Statement of Corporate Governance

The Company is domiciled in Bermuda which has no corporate governance regime equivalent to the UK Corporate Governance Code published by the Financial Reporting Council. However, since launch the Company has become a member of the Association of Investment Companies (“AIC”) and is classified within the Specialist: Reinsurance Sector.

The UK Listing Authority requires all listed companies to describe how they have complied with the principles of the UK Corporate Governance Code published in May 2010 (or September 2012 for accounting periods beginning on or after 1 October 2012) (the “Governance Code”), which is available on the Financial Reporting Council’s website: The AIC has also published a Code of Corporate Governance ("AIC Code") and a Corporate Governance Guide for Investment Companies (“AIC Guide”) which are available on the AIC’s website: This is a comprehensive guide on corporate governance which describes the relevance and applicability of each recommendation of the UK Corporate Governance Code to investment companies and documents how the AIC Code translates the UK Corporate Governance Code into a framework suitable for the industry’s unique structure. The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide will provide better information to shareholders.

Application of the Principles of the Codes

The Company has complied with the recommendations of the AIC Code and the relevant provisions of Section 1 of the Governance Code, except the Governance Code provisions relating to:

  • The role of the Chief Executive (A.1.2)
  • Executive Directors’ remuneration (B.2.1 and B.2.2)
  • The need for an internal audit function (C.3.5)

For the reasons set out in the AIC Guide, and as explained in the UK Corporate Governance Code, the Board considers these provisions are not relevant to the position of CATCo Reinsurance Opportunities Fund Ltd., being an externally managed investment company.

The Company has therefore not reported further in respect of these provisions.

The Board

The Board sets the Company’s values and objectives, and ensures that its obligations to its shareholders are met. It has formally adopted a schedule of matters which are required to be brought to it for decision, thus ensuring that it maintains full and effective control over appropriate strategic, financial, operational and compliance issues.

These matters include:

  • the maintenance of clear investment objectives and risk management policies;
  • the exercise of the Company’s voting rights in relation to its interest in the CATCo Reinsurance Fund Ltd.;
  • the monitoring of the business activities of the Company, ranging from analysis of investment performance to annual budgeting and quarterly forecasting and variance analysis;
  • Companies Act requirements, such as the approval of the interim and annual Financial Statements, and approval and recommendation of the dividend;
  • setting the parameters for any borrowing by the Company (noting that the Company will not borrow for investment purposes);
  • major changes relating to the Company’s structure, including share issues;
  • Board appointments and removals and the related terms;
  • appointment and removal of the Investment Manager and the terms and conditions of the management and administration agreements;
  • terms of reference and membership of Board Committees; and
  • Stock Exchange/UK Listing Authority/Financial Services Authority – approval of all circulars and listing particulars, and approval of all releases concerning matters decided by the Board of Directors.

The Board currently consists of four non-executive Directors. The names and biographies of those Directors who held office at the date of this Annual Report appear on pages 15, and indicate their range of investment, industrial, commercial and professional experience.

The Board has assessed the independence of the Directors against the criteria set out in the Codes, and has concluded that they are all independent of the investment manager ("CATCo Investment Management Ltd." or the “Investment Manager”), and free of any relationship which could materially interfere with the exercise of their independent judgement on issues of strategy, performance, resources and standards of conduct. The Chairman was considered to be independent on his appointment.

Between meetings, the Board of Directors maintains regular contact with the Investment Manager. The primary focus at regular Board meetings is the review of investment performance and associated matters, including gearing, asset allocation, marketing and investor relations, peer group information and industry issues. In order to enable the Board of Directors to function effectively and allow Directors to discharge their responsibilities, full and timely access is given to all relevant information. In the case of Board meetings, this consists of a comprehensive set of papers, including the Investment Manager’s review and discussion documents regarding specific matters. Directors have made further enquiries where necessary.

The AIC Code states that the test of independence continues to be appropriate and, consequently, the Board of Directors will follow the AIC Code. The Board of Directors are satisfied that Mr. Barton continues to have the appropriate independence to remain in this role.

The elections of Nigel Barton and Margaret Gadow respectively and the re-election of Alastair Barbour were considered and approved by the Board of Directors as a whole (the Director concerned having absented themselves from the relevant discussion). The continuing independent and objective judgement of each Director was confirmed in the annual Board performance and evaluation process. The Board evaluation process also confirmed that the performance of the Directors standing for election and re-election continued to be effective and that they continued to demonstrate commitment in their roles.

There is an agreed procedure for the Board of Directors to take independent professional advice, if necessary, at the Company’s expense. The Directors have access to the advice and services of the Company Secretary, who is responsible to the Board:

  • for ensuring that Board procedures are complied with under the direction of the Chairman, for ensuring good information flows with the Board and its committees, as well as facilitating induction and assisting with professional development as required; and
  • for advising through the Chairman on all corporate governance matters.

When a Director is appointed, an induction process is arranged by the Investment Manager. This involves an induction meeting which covers details about the Company, its Investment Manager, legal responsibilities and the investment sector within which the Company operates. Directors are provided, on a regular basis, with key information on the Company’s policies, regulatory and statutory requirements and internal controls. Changes affecting Directors’ responsibilities are advised to the Board of Directors as they arise.

The Board of Directors has a formal process for the consideration and authorisation of members actual and potential conflicts of interest, which are reviewed at each Board meeting. In accordance with the Company's Bye-Laws and relevant legislation, each Director abstains from approval of their own position.

The Board of Directors and its Committees have undertaken their annual performance evaluation, using discussion, to ensure that all members have devoted sufficient time and contributed adequately to the work of the Board of Directors and Committees, and to consider each Director’s independence. The Chairman has also been evaluated by his fellow Directors. The Board considers that none of his other commitments (set out on page 15 of this Report) interfere with the discharge of his responsibilities to the Company, and is satisfied that he makes sufficient time available to serve the Company effectively. There have been no significant changes to the Chairman’s other commitments during the period since his appointment.

External Agencies

The Board of Directors has contractually delegated to external agencies, including the Investment Manager and other service providers, certain services: the management of the investment portfolio; the Trustee services (which include the safeguarding of the assets); the registration and depository services; and the day-to-day accounting and administration functions. Each of these contracts was entered into after full and proper consideration by the Board of Directors of the quality and cost of services offered, in so far as they relate to the affairs of the Company. The Board of Directors receives and considers reports from the Investment Manager on a regular basis. In addition, ad hoc reports and information are supplied to the Board of Directors as requested.

Nomination Committee

A Nomination Committee has not been established. The Board of Directors considers its size to be such that it would be unnecessarily burdensome to establish a separate nomination committee. As the Board consists entirely of independent Directors, the function of a nomination committee is therefore carried out by the Board as a whole.

Where the Board of Directors are dealing with the appointment of a successor to the chairmanship, the meeting will be chaired by another Director. In considering the appointment of a new Director, the Board of Directors ensures that it continues to have the right balance of skills, diversity, experience, age and length of service. It may use the professional services of a search consultant to identify suitable candidates for review by the Board. The Board of Directors will consider candidates on merit and against objective criteria and with due regard for the benefits of diversity on the Board, including gender.

Audit Committee

An Audit Committee has been established and comprises all of the independent Directors including the Company Chairman. The Board considers it appropriate that the Company Chairman is a member of the Audit Committee, although he may not chair it, provided that he is considered by the Board to be independent, as is currently the case. Mr Barbour, a chartered accountant, with recent financial experience, is the Chairman of the Audit Committee. The terms of reference of the Audit Committee, which are available on request are reviewed and re-assessed for their adequacy on an annual basis. The Committee considers Ernst & Young Ltd., the Company’s auditor, to be independent of the Company. No non-audit services which might impact their independence were carried out by Ernst & Young Ltd. during the year.

The matters considered by the Committee during the year included:

  • the review of the effectiveness of the internal control environment of the Company – to assist in this the Committee received reports from the Investment Manager and external auditor on a regular basis;
  • the review of the interim and annual Financial Reports;
  • the review of the terms of appointment of the auditor together with their remuneration, as well as the non-audit services provided by the auditor (if applicable);
  • the review of the scope and the results of the audit, its cost effectiveness and the independence and objectivity of the auditor, with particular regard to non-audit fees (it should be noted that the auditor, Ernst & Young Ltd., rotates the partner responsible for the audit every five years);
  • the review of the auditor’s management letter and the management response; and
  • meetings with representatives of the Investment Manager.
Management Engagement Committee

As recommended by the AIC Code, a Management Engagement Committee has been established, comprising the full Board. The Chairman of the Committee is Mr Keyes. The Committee meets once annually in order to review matters concerning the management agreement which exists with CATCo Investment Management Ltd. The Master Fund will pay monthly in arrears to the Investment Manager a management fee (the "Management Fee") equal to 1/12 of 1.5% of the Net Asset Value of the Company's Master Fund Shares as of the last calendar day of each calendar month as such Net Asset Value is calculated prior to any accrual for or payment of any Management Fee or Performance Fee. There was one meeting of the Committee during the year which was attended by all the Committee members.

Performance Fee

The Master Fund will pay a fee to the Investment Manager in respect of the Company’s Master Fund Shares based on performance (the "Performance Fee") at the end of each calendar year and upon redemptions, dividends and the winding up of the Master Fund (each, a "Performance Period") equal to 10% of any New Net Income attributable to the Company’s Master Fund Shares (after reduction for the pro rata share of Management Fees, organisational expenses, transactional and other expenses allocable to the Company's Master Fund Shares), provided that no Performance Fee will be payable in a Performance Period unless the Performance Trigger of 7.5% has been reached.

Remuneration Committee and Directors’ Remuneration

Under the UK Listing Authority’s Listing Rule 15.6.6, where an investment company has only non-executive directors, the Governance Code principles relating to Directors’ remuneration do not apply. The Board of Directors, therefore, as a whole, performs the function of a Remuneration Committee.

The remuneration of the Directors has been set in order to attract individuals of a calibre appropriate to the future development of the Company. The Company’s policy on Directors’ remuneration, together with details of the remuneration of each Director, is detailed in the Directors’ Remuneration Report on pages 28.

Directors’ Terms of Appointment

All non-executive Directors are appointed subject to re-appointment in accordance with the existing Bye-Laws of the Company. The Bye-Laws provide that Directors are subject to election at the first annual general meeting following their appointment by the Board of Directors. Pursuant to a resolution of the sole shareholder on 16 December 2010, at each annual general meeting of the Company one-third of the Directors or, if their number is not a multiple of three, then the whole number nearest to but below the number that represents one-third shall retire from office. The Directors to retire by rotation each year shall be those who have been longest in office since their last appointment or reappointment but as between Directors who became or were last re-appointed on the same day, those to retire shall (unless they otherwise agree among themselves) be determined by lot. A retiring Director shall be eligible for re-appointment and shall, if he is not reappointed at such meeting, retain office until the meeting appoints someone in his place, or if it does not do so, until the dissolution of such meeting. The Board have adopted a policy that no Director may serve for more than three years without retiring and standing for re-appointment.

Policy on Tenure

The Board of Director’s policy on tenure is that Directors need not serve on the Board for a limited period of time only. The Board does not consider that the length of service of a Director is as important as the contribution he or she has to make, and therefore the length of service will be determined on a case-by-case basis.

Accountability and Audit

The Directors’ Statement of Responsibilities in respect of the Financial Statements is on page 27 and the Statement of Going Concern is included in the Directors’ Report on page 18. The Independent Auditor’s Report is on page 30.

Communication with Shareholders

The Company places a great deal of importance on communication with its shareholders. The Investment Manager, accompanied occasionally by the Chairman, has an annual programme of meetings with institutional shareholders, and reports back to the Board of Directors on these meetings.

As required by the Governance Code, the Annual Report is posted to shareholders at least twenty business days before the Annual General Meeting.

The Notice of Meeting on page 48 sets out the business of the meeting and the resolutions.

Separate resolutions are proposed for each substantive issue.

The Board of Directors are very conscious that the Annual General Meeting is an event at which all shareholders are encouraged to attend and participate. The Investment Manager makes a presentation to the meeting outlining the key investment issues that affect the Company. All shareholders have the opportunity to put questions at the Annual General Meeting. The number of proxy votes is relayed to shareholders at the Annual General Meeting after each resolution has been dealt with on a show of hands, and details are available on request.

The Company’s reports and other publications can be downloaded from the Company’s website,

Internal Control

The Board of Directors of CATCo Reinsurance Opportunities Fund Ltd. has overall responsibility for the Company’s system of internal control and for reviewing its effectiveness. The Directors confirm that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company, which has been in place for the full year under review and up to the date of approval of the Financial Statements, and that this process is regularly reviewed by the Board of Directors.

The Board has reviewed the effectiveness of the system of internal control and, in particular, it has reviewed the process for identifying and evaluating the significant risks affecting the Company and the policies and procedures by which these risks are managed.

The Directors have delegated the investment management of the Company’s assets to the Investment Manager within overall guidelines, and this embraces implementation of the system of internal control, including financial, operational and compliance controls and risk management.

The Investment Manager provides regular reports to the Board on the operation of their internal control system.

Risk is considered in the context of the FRC guidance, and includes financial, operational, reputational, and market risk. Any weaknesses identified are reported to the Board of Directors, and timetables are agreed for implementing improvements to systems. The implementation of any remedial action required is monitored and feedback provided to the Board of Directors. The key components designed to provide effective internal control for the year under review and up to the date of this Annual Report are outlined below:

  • the Investment Manager prepares forecasts and management accounts which allow the Board to assess the Company’s activities and review its investment performance
  • the Board and the Investment Manager have agreed a clearly-defined investment policy, any material change to which requires the approval of the Company’s shareholders by way of Ordinary resolution. Reports on the performance of the Company and Master Fund, including risk analyses and investment valuations, are regularly submitted to the Board. The investment objectives, policies and restrictions of the Master Fund may not be amended without the prior consent of the Company.
  • written agreements are in place which specifically define the roles and responsibilities of the Investment Manager and other third party service providers
  • at its Board meetings, the Board carries out an assessment of internal controls by considering documentation, including risk and compliance reports, from the Investment Manager, taking account of events since the relevant period end.

The internal control systems are designed to meet the Company’s particular needs and the risks to which it is exposed. Accordingly, the internal control systems are designed to manage, rather than eliminate, the risk of failure to achieve business goals and, by their nature, can provide reasonable, but not absolute, assurance against material misstatement or loss.

The Board has reviewed the need for an internal audit function, and has decided that the systems and procedures employed by the Investment Manager provide sufficient assurance that a sound system of internal control, which safeguards shareholders' investment and the Company’s assets, is maintained. An internal audit function is therefore considered unnecessary.

Proxy Voting and Stewardship

The FRC published “the UK Stewardship Code” for institutional shareholders on 2 July 2010. The purpose of the UK Stewardship Code is to enhance the quality of engagement between institutional investors and companies to help improve long-term returns to shareholders and assist institutional investors with the efficient exercise of their governance responsibilities.

The FRC is encouraging institutional investors to make a statement of their commitment to the Code.

The Board of Directors has delegated responsibility for actively monitoring the activities and performance of the Company and Master Fund to the Investment Manager, on which the Investment Manager regularly reports to the Board of Directors. The Board has reserved to itself the exercise of the Company’s voting rights in relation to the Master Fund.

Socially Responsible Investment Policy

The Board of Directors considers that the Company has no direct social, environmental or community responsibilities.