Markel records a $205 million loss at State National

Markel held its second-quarter 2026 earnings call on July 30. Here are the key takeaways.

Markel records a $205 million loss at State National

Markel established a $205 million reserve after determining that collateral posted by a bankrupt capacity provider was insufficient to cover expected losses tied to business written through State National. Markel described it as State National’s first substantial credit loss in four decades.

“This is the first loss of this nature in over 40 years of history, State National is operating in this business, and they have demonstrated the ability to handle those kinds of risks for multiple decades.”

The losses developed faster than the collateral

The issue was not that the collateral assets were missing or impaired. Instead, estimated claims increased beyond the amount of collateral securing the reinsurer’s obligations.

“The collateral spoke just that the losses and those are actual estimates of the losses moved to such a rate that have got ahead of the collateral.”

The business was primarily habitational casualty

The exposure came from five programs backed by the same counterparty. Most of the business was primary habitational casualty concentrated in several states, with excess casualty representing less than 10%.

“It was mostly primary habitational casualty business across these programs. There was a little bit of excess casualty in there, but that was less than 10%.”

Markel stopped writing the programs in 2021

The programs began in 2012 and Markel ceased writing them five years ago, demonstrating the long-tail nature of casualty liabilities. Claims continued developing after new business stopped.

“This particular business involved began in 2012, and we ceased writing on these programs in 2021.”

Markel is seeking additional collateral elsewhere

Following its review, State National expects to require collateral increases from other reinsurers supporting similar classes of business. Management said those reinsurers remain financially healthy.

“As a result of the work we’ve been doing, it will result in some collateral top-ups for similar lines of business with other reinsurers who are in financially healthy positions.”

Markel remains confident in State National

Markel acquired State National for approximately $900 million in 2017. Even after the second-quarter charge, the business has produced more than $1 billion in cumulative earnings since the acquisition.

“We paid roughly $900 million for that back in 2017, even including the events of this last quarter, earnings since that time, cumulatively over $1 billion.”

Markel is choosing underwriting profit over premium growth

Markel Insurance has produced a 93% combined ratio for four consecutive quarters. Management attributed the improvement to underwriting actions, expense discipline and a simplified operating structure.

“The improvement has come on the back of some tough decisions where we’ve chosen the sanity of bottom line profit over the vanity of top line growth.”

The ongoing insurance business grew 10%

Headline gross written premium declined because Markel exited global reinsurance and transitioned Hagerty to a fronting arrangement. Excluding those changes, its continuing insurance operations grew gross written premium by 10%.

Markel is in defensive mode on US casualty

Management estimates US casualty loss-cost trends at approximately 10% to 12%, compared with average rate increases of around 9%. Markel does not believe that gap supports long-term profitability and is reducing exposure.

“We are more in a defensive mode in that U.S. casualty market at the moment.”

Markel is cutting some casualty limits in half

The insurer has reduced the amount of capacity it provides on certain risks and has pulled back from construction casualty, which management said generated a disproportionate share of losses.

“What was typically a $10 million line would now be more like a $5 million line, for example.”

Property prices may keep falling until a major loss occurs

Markel expects aggressive property competition to continue during the second half. Some insurers are beginning to walk away as prices approach technically inadequate levels, but management does not expect a broad change without significant catastrophe losses.

“The competition in the property market will continue on a downward kind of trajectory up and until we get some significant losses.”

Markel launched an AI-built casualty business

Markel partnered with Bain & Company in March to design a new operation for hard-to-place US casualty risks. The resulting business unit, Cortex, launched within Markel’s Wholesale and Specialty division several months later.

“A new business unit named Cortex was launched within our Wholesale and Specialty division last week, just a few months after we started the process.”

AI reduced initial risk-assessment time by up to 90%

Markel has redesigned six classes of business representing more than $500 million in gross written premium using agentic AI. Initial risk-assessment time fell by 50% to 90%, depending on the line, while accuracy exceeded 90% in every case.

One AI-supported London portfolio grew 50%

Markel said the use of Harvey in its war and terrorism portfolio allowed underwriters to process more opportunities and focus on decisions, negotiations and quoting.

Markel put nine AI ideas into production in one month

Its AI accelerator funded nine employee-generated ideas, all of which were developed and deployed during April. Examples include instant initial quotes for equine risks and tools that prioritize marine and wind opportunities.

“In total, we chose 9 ideas all of which were developed and put into production during the single month of April.”

Markel spent $237 million repurchasing shares

Markel repurchased approximately 1% of its outstanding shares during the second quarter and has spent more than $2 billion on buybacks since the beginning of 2022. Management said the repurchases were funded through earnings rather than additional borrowing.

“We are not leveraging up or borrowing money to repurchase shares.”

The $700 million underwriting-profit target is less likely

Markel previously described $700 million in annual underwriting profit as a reasonable target. Management now expects the result to come in somewhat below that figure, though it remains encouraged by the insurance operation’s progress.

“I think that it’s probably a little lighter than that.”