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 of the London Stock Exchange.

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 April 2016 (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: The AIC Code, as explained by the AIC Guide, addresses all of the principles set out in the Governance Code, as well as setting out additional principles and recommendations on issues that are specific to investment companies.

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.2.1)
  • Executive Directors’ remuneration (D.2.1 and D.2.2)
  • The need for an internal audit function (C.3.6)

For the reasons set out in the AIC Guide and in the preamble to the 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 of Directors are committed to high standards of corporate governance and have put in place a framework for corporate governance, which they believe is appropriate for the Company.

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 Master Fund SAC and Markel 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;
  • Bermuda 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 three non-executive Directors. The names and biographies of those Directors appear on page 13 of the 2018 Report and Accounts 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 and CATCo Investment Management Ltd. 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, James Keyes, was considered to be independent on his appointment. 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 James continues to have the appropriate independence to remain in this role.

The respective re-elections of James Keyes, Margaret Gadow and Alastair Barbour were considered and approved by the Board of Directors as a whole acting as the Nomination Committee (each of the Directors concerned having absented himself or herself from the relevant discussion).

The continuing independent and objective judgment of each Director was confirmed in the annual Board performance and evaluation process. The Board evaluation process also confirmed that the performance of the Director standing for re-election continued to be effective and that he/she continued to demonstrate commitment in his/her role. Throughout 2018, Directors have demonstrated flexibility and commitment in attending numerous Board and Committee meetings at short notice.

Directors’ Attendance at Meetings During the Year Ended 31 December 2018

Directors have attended Board meetings and Committee meetings held during the year as follows:

Director Scheduled Board Meetings Attended Special Purpose Committee/Board1 Audit Committee Meetings Attended2
J Keyes 4/4 5/7 1/1
A Barbour 4/4 4/7 1/1
M Gadow 4/4 3/7 1/1

1There were seven special purpose Board or Committee meetings held during the year. Committee meetings were attended by one, two or all Directors. This figure includes one meeting of the Management Engagement Committee, which was attended by all Directors.

2The business of the Audit Committee was also dealt with at a joint Audit Committee and Board meeting held during the year which considered as its sole agenda item the interim results to 30 June 2018 and the Interim Report to shareholders. This meeting is included in the meetings referred to in the first column of this table.

In addition to the above, the Directors meet privately at least once per year without the Investment Manager being present. 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. Between meetings, the Board of Directors maintains regular contact with the Investment Manager. This includes discussions with the Investment Manager, reviews of specific areas of interest and on-site visits. Alastair Barbour, Chairman of the Audit Committee, held regular discussions throughout the year with members of the Investment Manager’s management team, in particular, from Finance and Compliance, as well as the external auditor.

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 of documents regarding specific matters. Directors have made further enquiries where necessary.

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 has a formal process for the consideration and authorisation by the Board, at each Board meeting, of any Directors’ reported actual and potential conflicts of interest. 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 its 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 13 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 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

    No Nomination Committee has 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. The Board believes in equal opportunities and supports the principle that due regard should be had to the benefits of diversity, including gender, when seeking potential candidates. The Board recognises that diversity can bring insights that may make a valuable contribution to its effectiveness, and is committed to its diverse composition. In considering the appointment of a new Director, the Board of Directors will ensure 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.

    Audit Committee

    The Audit Committee 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. Alastair 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 main activities of the Committee during the year included:

    • the review of the effectiveness of the internal control environment of the Company – to assist with 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 before approval by the Board, focusing on compliance with accounting principles and policies, changes in accounting practice and major matters of judgment;
    • 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;
    • 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; and
    • the review of the auditor’s management letter and the management response.

    The significant issues considered by the Audit Committee during the year in relation to the annual report and financial statements were as follows:

    • accounting policy for valuation of investments is set out in Note 1 on pages 34 to 37. The Committee reviewed and questioned the valuation prepared by management taking account of the latest available information on the underlying business written by the Reinsurer and discussed with the auditor, the results of their audit of the businesses and their review of the valuation of investments. The Committee also questioned and discussed the basis of reserving for 2018 loss events to be satisfied that it had been appropriately updated to reflect most recent experience given the unprecedented continuing development of the losses from the hurricanes in 2017. For 2018, given the uncertainty arising from hurricane Michael and typhoon Jebi the magnitude of the California wildfires, the Committee focused on, and challenged, the Investment Manager’s modelled results, derived primarily from advices from loss reporting services and catastrophe modelling companies, and comparison to initial loss notices from ceding reinsurers to satisfy themselves that the covered event estimates were appropriate and that sufficient disclosure has been made in respect of the uncertainty as to ultimate settlement in relation to the covered events, as set out in Note 6 on pages 42 and 43. The Committee also had due regard for, and discussed the amount of, insurance-linked instruments classified as side pockets. The Committee satisfied itself that the valuation of investments at the period end was appropriate, included an appropriate margin for risk, had been properly prepared and had been applied on a consistent basis; and
    • presentation and disclosure in the Annual Report - the Committee reviewed and considered the presentation of narrative and financial information in the Annual Report against the requirements of the UK Corporate Governance Code and the UK company law’s provisions for a Strategic Report and Remuneration Report, which have been adopted on a voluntary basis and, in relation to the Financial Statements, the framework of applicable accounting standards. The Committee reviewed and discussed reports from the Investment Manager and the auditor and satisfied itself that the presentation and disclosure in the annual report is appropriate, fair balanced and understandable, and that the key areas of risk and judgement have been appropriately addressed in the Financial Statements and that significant assumptions have been properly appraised and are appropriately robust.


    The external auditor, KPMG Audit Limited, who have acted as the Company’s auditor since 2013, attend at least one meeting of the Audit Committee annually, and meet at least annually with the Audit Committee in the absence of the Investment Manager. The Audit Committee discusses and agrees the scope of the audit plan for the full year and the auditor’s report on their findings at the conclusion of the audit. Audit fees of $70,000 (2017: $70,000) were incurred for the year. The audit of the Company was last put out to tender in 2013. The Committee considers KPMG Audit Limited to be independent of the Company. Fees of $Nil (2017: $92,428) for non-audit services were paid to KPMG Audit Limited during the year, with the fees incurred in 2017 being in connection with the C Share issuance. The Audit Committee assessed the effectiveness of the audit, the quality of the team and advice received from them through review of interaction with the auditor, reports received from them and discussion with management. The Audit Committee continues to be satisfied with the effectiveness of the work provided by KPMG Audit Limited and that they continue to remain objective and independent. The Audit Committee has therefore recommended to the Board that a resolution be put to Shareholders for the re-appointment of KPMG Audit Limited, and their remuneration in terms of engagement, at the Annual General Meeting.

    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 Margaret Gadow. The Committee meets once annually in order to review matters concerning the management agreements which exist withthe Investment Manager and CATCo Investment Management Ltd.

    Management Fee

    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 per cent 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.

    As noted in the Directors’ Report, a partial waiver of 33.3334% (one-third) of the management fee is currently being applied to the management fee which the Company indirectly pays to the Investment Manager in respect of side pocket investments in the Master Fund. The reduction resulting from the waiver will have effect from 1 January 2019 until 31 December 2019, but is subject to extension by the Investment Manager and the Master Fund SAC.

    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 per cent 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 has been reached. The Performance Fee is applied on a “high water mark” basis such that in the event that the Company’s Master Fund Shares suffer a net loss in a particular Performance Period, no Performance Fee will be paid with respect to such Performance Period or any subsequent Performance Period, until such net loss is first recovered (taking into account interim Redemptions, if any). No Performance Fee was payable in relation to the period under review.

    Remuneration Committee and Directors’ Remuneration

    The Board, 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 27 and 28 of the 2018 Report and Accounts.

    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, but that all Directors will generally offer themselves for annual re-appointment.

    Policy on Tenure

    The Board’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 26 and the Statement of Going Concern is included in the Directors’ Report, on page 17 of the 2018 Report and Accounts. The Independent Auditor’s Report is on page 29 in the same report.

    Communication with Shareholders

    The Company places a great deal of importance on communication with its Shareholders. The Investment Manager 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 Annual General Meeting on page 46 of the 2018 Report and Accounts sets out the business of the meeting and the resolutions. Separate resolutions are proposed for each substantive issue.

    The Board is very conscious that the Annual General Meeting is an event at which all Shareholders are encouraged to attend and participate. 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 Shareholders who wish to communicate directly with the Board may do so by writing to the Board care of the Investment Manager’s offices at: 8th Floor, 141 Front Street, Hamilton HM19, Bermuda, or by contacting the Company’s Securities Brokers, Numis Securities Limited, whose contact details appear on page 49 of the 2018 Report and Accounts.

    Internal Control

    The Board 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, 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.
    • 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 first published “The UK Stewardship Code” for institutional Shareholders on 2 July 2010, which was revised in September 2012.

    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 UK Stewardship Code.