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Variable Interest Entities | 9 Months Ended
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Sep. 30, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Variable Interest Entities | Variable Interest Entities MCIM, a wholly-owned consolidated subsidiary of the Company, is an insurance-linked securities investment fund manager and reinsurance manager headquartered in Bermuda. Results attributable to MCIM are not included in a reportable segment. MCIM serves as the insurance manager for Markel CATCo Re Ltd. (Markel CATCo Re), a Bermuda Class 3 reinsurance company, and as the investment manager for Markel CATCo Reinsurance Fund Ltd., a Bermuda exempted mutual fund company comprised of multiple segregated accounts (Markel CATCo Funds). Voting shares in Markel CATCo Reinsurance Fund Ltd. and Markel CATCo Re are held by MCIM, which has the power to direct the activities that most significantly impact the economic performance of these entities. The Markel CATCo Funds issued multiple classes of nonvoting, redeemable preference shares to investors, and the Markel CATCo Funds are primarily invested in nonvoting preference shares of Markel CATCo Re. The underwriting results of Markel CATCo Re are attributed to investors through its nonvoting preference shares. Both Markel CATCo Re and the Markel CATCo Funds were placed into run-off in July 2019. In March 2022, the Company completed a buy-out transaction with Markel CATCo Re and the Markel CATCo Funds that provided for an accelerated return of all remaining capital to investors in the Markel CATCo Funds. Under the terms of the transaction, the Company provided cash funding of $45.1 million to purchase substantially all of the Markel CATCo Funds' interests in Markel CATCo Re and substantially all of the preference shares held by investors in the Markel CATCo Funds were redeemed, including preference shares previously held by the Company. See note 4 for details regarding the Company's investment in the Markel CATCo Funds. In order to complete the transaction, the Company also made $101.9 million in additional payments, net of insurance proceeds, to or for the benefit of investors, which were recognized as an expense to the Company and included in services and other expenses for the first quarter of 2022. In June 2022, the Company received a return of $24.9 million of the capital it provided in March 2022 and the related preference shares were redeemed. As of September 30, 2023 and December 31, 2022, the Company's investment in the remaining preference shares of Markel CATCo Re totaled $20.1 million, which comprised 25% and 23% of the equity of Markel CATCo Re, respectively. Through that investment, the Company has exposure to adverse loss development on reinsurance contracts previously written by Markel CATCo Re for loss events that occurred from 2014 to 2020. If loss reserves held by Markel CATCo Re are sufficient to settle claims on the remaining open contracts, the Company will receive a full return of the remaining $20.1 million in capital provided in March 2022. Favorable development on loss reserves held by Markel CATCo Re, less operating expenses, will be distributed to the Markel CATCo Funds, and ultimately to investors in the Markel CATCo Funds. Markel CATCo Re is considered a VIE, as the equity at risk does not have the right to receive residual returns that exceed the capital provided by the Company in the buy-out transaction. As a result of the preference shares acquired by the Company in the buy-out transaction, and the voting shares held by its consolidated subsidiary, MCIM, the Company consolidates Markel CATCo Re as its primary beneficiary. Results attributed to the run-off of Markel CATCo Re are reported with the Company's other ILS operations, within services and other revenues and expenses, and are not included in a reportable segment. Favorable loss reserve development on the run-off of reinsurance contracts written by Markel CATCo Re was $2.2 million and $55.7 million for the quarter and nine months ended September 30, 2023, respectively, and $53.4 million and $81.6 million for the quarter and nine months ended September 30, 2022, respectively. For all periods, the favorable development was included in services and other expenses and attributable to noncontrolling interests. During the nine months ended September 30, 2023 and 2022, $62.6 million and $22.3 million, respectively, of preference shares of Markel CATCo Re held by noncontrolling interests were redeemed. The Company's consolidated balance sheets include the following amounts attributable to Markel CATCo Re.
(dollars in thousands) | September 30, 2023 |  | December 31, 2022
Assets |  |  |
Cash and cash equivalents | $ | 70,852 |  |  | $ | 104,443 |
Restricted cash and cash equivalents | 193,778 |  |  | 317,577 |
Other assets and receivables due from cedents | 19,416 |  |  | 41,357 |
Total Assets | $ | 284,046 |  |  | $ | 463,377 |
Liabilities and Equity |  |  |
Unpaid losses and loss adjustment expenses | $ | 201,026 |  |  | $ | 347,921 |
Other liabilities | 1,232 |  |  | 26,717 |
Total Liabilities | 202,258 |  |  | 374,638 |
Shareholders' equity | 21,139 |  |  | 21,139 |
Noncontrolling interests | 60,649 |  |  | 67,600 |
Total Equity | 81,788 |  |  | 88,739 |
Total Liabilities and Equity | $ | 284,046 |  |  | $ | 463,377 |
In connection with the buy-out transaction, the Company also entered into a tail risk cover with Markel CATCo Re. Through this contract, the Company has $142.7 million of uncollateralized exposure to adverse development on loss reserves held by Markel CATCo Re for loss exposures in excess of limits that the Company believes are unlikely to be exceeded.

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- Definition The entire disclosure for a variable interest entity (VIE), including but not limited to, judgments and assumptions in determining whether to consolidate and in identifying the primary beneficiary, gain (loss) recognized on the initial consolidation of the VIE, terms of arrangements, amounts and classification of the VIE's assets and liabilities, and the entity's maximum exposure to loss. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 810 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//810/tableOfContent + Details
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