Commitments and Contingencies

a)The Company leases substantially all of its facilities and certain furniture and equipment under noncancelable operating leases with remaining terms up to 16 years.

The following table summarizes the Company's minimum annual rental commitments, excluding taxes, insurance and other operating costs payable directly by the Company, for noncancelable operating leases at December 31, 2018.



Years Ending December 31,	(dollars in thousands)
2019	$	48,853
2020	41,630
2021	37,602
2022	31,898
2023	28,261
2024 and thereafter	117,663
Total	$	305,907

Rental expense was $52.9 million, $44.6 million and $40.2 million for the years ended December 31, 2018, 2017 and 2016, respectively.

b)Late in the fourth quarter of 2018, the Company was contacted by and received inquiries from the U.S. Department of Justice, U.S. Securities and Exchange Commission and Bermuda Monetary Authority (BMA) into loss reserves recorded in late 2017 and early 2018 at Markel CATCo Re (the Markel CATCo Inquiries), an unconsolidated subsidiary managed by MCIM. As a result, the Company engaged outside counsel to conduct an internal review, through which the Company discovered violations of Markel policies by two senior executives of MCIM that existed as of December 31, 2018. As a result, these two executives are no longer with the Company (the MCIM Executive Departures).

As of December 31, 2017, the Company had accrued incentive and retention compensation for the two executives totaling $34.9 million which remained unpaid as of December 31, 2018. This amount was reversed in the fourth quarter of 2018 and reflected as a reduction to services and other expenses. All accruals for retention and incentive compensation recorded earlier in 2018 for the two executives were also reversed in the fourth quarter of 2018. In conjunction with the Markel CATCo acquisition in December 2015, certain incentive and retention compensation arrangements were established for employees of MCIM, a portion of which was based on expected management fees over the three year period following the acquisition. The Company’s initial estimate of the amounts payable under the incentive and retention compensation arrangements totaled $100 million, portions of which were paid in 2016, 2017 and 2018. After considering the reversal of accruals described above, the Company’s total expected payments under these arrangements across all years is $52.9 million. As of December 31, 2018, accrued and unpaid incentive and retention expense for other employees of MCIM totaled $19.2 million, of which $12.3 million was expensed during the year ended December 31, 2018. Compensation expense for the years ended December 31, 2017 and 2016 included $38.1 million and $33.2 million, respectively, for these incentive and retention compensation arrangements.

In light of the governmental inquiries into loss reserves at Markel CATCo Re, and taking into consideration the departure of two senior MCIM executives and special redemption rights that are now being offered to investors in the Markel CATCo Funds, as described below, management concluded MCIM’s ability to maintain or raise capital has been adversely impacted. Following an assessment of the recoverability of goodwill and intangible assets at the MCIM reporting unit as of December 31, 2018, the Company reduced the carrying value of the goodwill and intangible assets of the MCIM reporting unit to zero, which resulted in a goodwill impairment charge of $91.9 million and an intangible asset impairment charge of $87.1 million. See note 7 for further details around these impairment charges.

In December 2018, investors in the Markel CATCo Funds were offered an additional redemption opportunity (the Special Redemption). Under the Special Redemption, investors in the Markel CATCo Funds may elect to redeem any or all shares held as of June 30, 2019, with the exception of (1) shares that have been restricted following the occurrence of catastrophic loss events for which uncertainty still exists around the ultimate incurred losses on the underlying reinsurance contracts at Markel CATCo Re and (2) shares that support insurance contracts that are still exposed to future underwriting risk. Investors may elect to redeem these restricted shares, however, such amounts will not be paid until all remaining exposures are fully settled or released by cedents, which could take up to four years. Payment for the redemptions of shares is an obligation of the Markel CATCo Funds, not Markel Corporation or its subsidiaries.

On January 11, 2019, a putative class action lawsuit captioned Bergen v. Markel Corporation, et al., was filed naming Markel Corporation and certain present or former officers as defendants (the Bergen Suit). The lawsuit alleges violations of the federal securities laws relating to the pending governmental inquiries into Markel CATCo Re loss reserves. The plaintiff in this matter seeks to represent a class of persons or entities that purchased Markel Corporation securities between July 26, 2017 and December 6, 2018. The Company believes that the claims against it are without merit. The Company further believes any material loss resulting from the suit to be remote.

On February 21, 2019, Anthony Belisle and Alissa Fredricks, the two senior executives who are no longer with MCIM, each separately filed suit against MCIM and Markel Corporation, alleging, among other claims, breach of contract, defamation and invasion of privacy (the MCIM Executive Suits). Mr. Belisle's complaint seeks relief including payment of $66.0 million in incentive compensation and Ms. Fredricks's complaint seeks relief including payment of $7.5 million in incentive compensation. In addition, both seek consequential damages, damages for emotional distress and injury to reputation, statutory interest and attorneys’ fees. Mr. Belisle's complaint further seeks enhanced compensatory damages. The Company believes that all claims are without merit. The Company further believes any material loss resulting from the suits to be remote.

The Company’s internal review relating to the governmental inquiries is ongoing with no conclusions reached at this time. The Markel CATCo Inquiries, Bergen Suit, MCIM Executive Departures and MCIM Executive Suits, as well as other related matters of which the Company is currently unaware, could result in additional claims, litigation, investigations, enforcement actions or proceedings. For example, additional litigation may be filed by investors in the Markel CATCo Funds. The Company also could become subject to increased regulatory scrutiny, investigations or proceedings in any of the jurisdictions where it operates. If any regulatory authority takes action against the Company or the Company enters into an agreement to settle a matter, the Company may incur sanctions or be required to pay substantial fines or implement remedial measures that could prove costly or disruptive to its businesses and operations.

An unfavorable outcome in one or more of these matters, and others the Company cannot anticipate, could have a material adverse effect on the Company’s results of operations and financial condition. In addition, the Company may take further steps to support the Markel CATCo operations, including steps to mitigate potential risks or liabilities that may arise from the Markel CATCo Inquiries and related developments and some of those steps may have a material impact on the Company’s results of operations or financial condition. Even if an unfavorable outcome does not materialize, these matters, and actions the Company may take in response, could have an adverse impact on the Company’s reputation and result in substantial expense and disruption.

Additionally, revenues for MCIM for 2019 and beyond will be adversely impacted by its inability to maintain or raise new capital. Costs associated with the Company's internal review, including legal and investigation costs, as well as legal costs incurred in connection with any existing or future litigation, will be expensed as incurred.

c)The Company has reviewed events at one of its Markel Ventures products businesses. Since becoming aware of a matter in the first quarter of 2018 related to the business's manufacture of products, the Company has conducted an investigation, reviewed the business's operations and developed remediation plans. Upon completion of its review during the second quarter of 2018, the Company recorded an expense of $33.5 million in its results of operations. This amount represented management’s best estimate of amounts considered probable including: remediation costs associated with the manufacture of products, costs associated with the investigation of this matter, a write down of inventory on hand and settlement costs related to pre-existing litigation. The Company also recorded an impairment charge of $14.9 million during 2018 which reduced the carrying value of intangible assets at this reporting unit to zero.

Final resolution of this matter could ultimately result in additional remediation and other costs, the amount of which cannot be estimated at this time, but which could have a material impact on the Company’s income before income taxes. However, management does not expect this matter ultimately will have a material adverse effect on the Company’s results of operations or financial condition. If a determination is made that additional costs associated with this matter are considered probable, these additional costs will be recognized as an expense in the Company's results of operations. As of December 31, 2018, $33.5 million remained accrued for remediation efforts which are continuing into 2019.

In addition, contingencies arise in the normal course of the Company's operations and are not expected to have a material impact on the Company's financial condition or results of operations.