What changed in this filing

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Item 1A. Risk Factors

2025-02-27 compared with 2024-02-23 · 197 added, 207 removed, 447 unchanged (47% of the section changed)

11 unchanged sentences

• The insurance and reinsurance industry is highly cyclical, and we may at times experience periods characterized by excess underwriting capacity and unfavorable premium rates.

• The effects of inflation and global recessionary conditions impact the insurance and reinsurance industry in ways which may negatively impact our business, financial condition and results of operations.

• Claims for natural and man-made catastrophic events could cause large losses and substantial volatility in our results of operations and could have a material adverse effect on our financial position and results of operations.

• The impact of climate change will affect our loss limitation methods, such as the purchase of third party reinsurance and catastrophe risk modeling and risk selection in ways which may adversely impact our business, financial condition and results of operations.

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• The effects of inflation, trade and tariff disputes and global recessionary and other economic conditions impact the insurance and reinsurance industry in ways which may negatively impact our business, financial condition and results of operations.

• Our insurance and reinsurance subsidiaries are subject to supervision and regulation.

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• We are subject to ongoing legal and policy actions around climate change which may result in additional requirements that could prompt us to shift our risk selection and business strategy in ways which may adversely impact our results of operations.

• The Russian invasion of Ukraine and the resulting imposition of sanctions by the U.S., U.K.

and EU on Russia and Russia-related businesses created global instability.

• The imposition of sanctions by the U.S., U.K.

and EU on Russia and Russia-related businesses has impacted certain sectors in which we write business.

• Our customers and policyholders may also be impacted by regulatory, technological, market or other risks relating to climate change in ways which we cannot predict with certainty and adversely impact our results of operations.

• As we continue to incorporate climate change and other ESG factors in our business strategy, we cannot be certain that shareholders, investors and other influential environmental and social-focused groups will agree with our approach, which may adversely impact our ability to raise funds in the capital markets, our share price and our results of operations.

• We are subject to changes in governmental, investor and societal responses to climate change and sustainability-related issues, which may result in scrutiny of our business, litigation or adverse impacts to our share price and our results of operations.

• We could face unanticipated losses from increased geopolitical tensions, hostilities, war, terrorism, cyber attacks and general political instability, and these or other unanticipated losses could have a material adverse effect on our financial condition and results of operations.

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• The failure of any of the loss limitation methods we employ could have a material adverse effect on our financial condition or results of operations.

• The availability of reinsurance, retrocessional coverage and capital market transactions to limit our exposure to risks may be limited, and counterparty credit and other risks associated with our reinsurance arrangements may result in losses which could adversely affect our financial condition and results of operations.

and results of operations.

• We could be materially adversely affected to the extent that important third parties with whom we do business do not adequately or appropriately manage their risks, commit fraud or otherwise breach obligations owed to us.

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• Acquisitions, the addition of new lines of insurance or reinsurance business, expansion into new geographic regions and/or entering into joint ventures or partnerships expose us to risks.

• Our information technology systems may be unable to meet the demands of customers and our workforce.

• Technology failures and cyber attacks, including, but not limited to, ransomware, exploitation in software or code with malicious intent, state-sponsored cyber attacks, as well as vulnerabilities relating to new technologies, such as generative AI, may impact us or our business partners and service providers, causing a disruption in service and operations which could materially and negatively impact our business and/or expose us to litigation.

• Cyber incidents or data breaches caused by bad actors or unintentional human error impacting data, including personal data, we maintain or use during our business operations may result in regulatory fines or action, reputation damage and a disruption in our business operations.

• Our information technology systems and our pace of adoption of new technologies, such as generative AI, may not be adequate to meet the demands of our customers or impact negatively our ability to compete with our peers.

• Technology failures caused by intentional and unintentional human and non-human actions may cause material disruption in the availability of the information technology systems we use in our business.

• We could be materially impacted by a cyber attack, data breach, ransomware, phishing, social engineering or other cybersecurity incident resulting in loss of business data, personal data and other confidential or secret information, a disruption in our business operations, regulatory or other legal action, and fines.

• Changes in criteria used by rating agencies which may result in a downgrade in our ratings, our inability to obtain a rating or a change in capital allocation or requirements for our operating insurance and reinsurance subsidiaries may adversely affect our relationships with clients and brokers and negatively impact sales of our products.

• Our ability to execute our business strategy successfully, continue to grow and innovate and offer our employees a dynamic and supportive workplace depends on the recruitment, retention and promotion of talented, agile, diverse and resilient employees at all levels of our organization.

• Our ability to execute our business strategy successfully, continue to grow and innovate and offer our employees a dynamic and supportive workplace depends on the recruitment, retention and promotion of talented, agile, and resilient employees at all levels of our organization.

• Our success will depend on our ability to maintain and enhance effective operating procedures and internal controls and our ERM program.

• We are exposed to credit risk in certain of our business operations.

• Our business is subject to applicable laws and regulations relating to economic trade sanctions and foreign bribery laws, the violation of which could adversely affect our operations.

• New legislation or regulations relating to the U.K.’s withdrawal from the EU could adversely affect us.

• Our business is subject to laws and regulations relating to economic trade sanctions and foreign bribery laws, the violation of which could adversely affect our operations.

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Risks Relating to Financial Markets and Investment s

1 unchanged sentence

our policyholders, reinsurers and retrocessionaires may also be affected by such developments, which could adversely affect their ability to meet their obligations to us.

• Disruption to the financial markets and weak economic conditions resulting from situations such as post pandemic imbalances, inflation and geopolitical conflict may

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adversely and materially impact our investments, financial condition and results of operation.

• Disruption to the financial markets and weak economic conditions resulting from situations such as supply/demand imbalances, inflation and political unrest may adversely and materially impact our investments, financial condition and results of operation.

• Foreign currency exchange rate fluctuation may adversely affect our financial results.

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• If the volume of low down payment mortgage originations declines, or if other government housing policies, practices or regulations change, the amount of mortgage insurance we write in the U.S.

could decline, which would reduce our mortgage insurance revenues.

or Australia could decline, which would reduce our mortgage insurance revenues.

• Changes to the role of the GSEs in the U.S.

housing market or to GSE eligibility requirements for mortgage insurers or to the GSEs’ use of CRT could negatively impact our results of operations and financial condition or reduce our operating flexibility.

• The implementation of the Basel III Capital Accord and FHFA’s Enterprise Regulator Capital Framework may adversely affect the use of mortgage insurance and CRT opportunities.

• The implementation of the Basel III Capital Accord and Federal Housing Finance Agency (“FHFA”)’s Enterprise Regulator Capital Framework may adversely affect the use of mortgage insurance and CRT opportunities.

Risk Relating to Our Company

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• Application of the EU Anti-Tax Avoidance Directives.

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Risks Relating to Our Industry, Business and Operations

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See “Competition” in Item 1 for details on our competitors in each of the major segments we operate in.

There has been significant consolidation in the insurance and reinsurance sector in recent years and we may experience increased competition as a result of that consolidation, with consolidated entities having enhanced market power.

These consolidated entities may use their enhanced market power and broader capital base to negotiate price reductions for products and services that compete with ours, and we may experience rate declines and possibly write less business.

We also compete on the basis of product offerings and other factors, such as our approach to ESG and our use of technologies, and customers may be drawn to our competitors based on these factors.

We compete on the basis of product offerings, pricing, terms and conditions, claims servicing and customer relationships.

Other factors, such as our proven cycle management skills, our expertise in specialty lines of business and our use of technologies and data analytics are other factors, may differentiate us from our competitors.

Any failure by us to effectively compete could adversely affect our financial condition and results of operations.

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The insurance and reinsurance industry is highly cyclical, and we may at times experience periods characterized by excess underwriting capacity and unfavorable premium rates.

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As a result, the insurance and reinsurance business historically has been a cyclical industry characterized by periods of intense price competition due to excessive underwriting capacity as well as periods when shortages of capacity permitted favorable premium levels and changes in terms and conditions.

Until recently, the supply of insurance and reinsurance had increased over the past several years, and may again in the future, either as a result of capital provided by new entrants or by the commitment of additional capital by existing insurers or reinsurers.

The supply of insurance and reinsurance is increasing, either as a result of capital provided by new entrants or by the commitment of additional capital by existing insurers or reinsurers.

Continued increases in the supply of insurance and reinsurance may have consequences for us, including fewer contracts written, lower premium rates, increased expenses for customer acquisition and retention, and less favorable policy terms and conditions.

The effects of inflation and global recessionary conditions impact the insurance and reinsurance industry in ways which may negatively impact our business, financial condition and results of operations.

The effects of inflation, trade and tariff disputes and global recessionary and other economic conditions impact the insurance and reinsurance industry in ways which may negatively impact our business, financial condition and results of operations.

While general economic inflation has eased in recent quarters, higher inflationary conditions may continue to remain in place.

The potential also exists, after a catastrophe loss or pandemic events like COVID-19, or geopolitical tensions and hostilities for the development of inflationary pressures in a local or regional economy.

The potential also exists, after a catastrophe loss or geopolitical hostilities for the development of inflationary pressures in a local or regional economy.

This may have a material effect on the adequacy of our reserves for losses and loss adjustment expenses, especially in longer-tailed lines of business.

In addition, governmental actions in response to inflationary pressures, such as increasing interest rates, may have a material impact on the market value of our investment portfolio.

In addition, governmental actions in response to inflationary pressures, such as increasing interest rates, may have a material impact, such as on the market value of our investment portfolio, or on the size of the mortgage origination market available to be insured by our mortgage business.

While we consider the anticipated effects of inflation in our pricing models, reserving processes and exposure management across all lines of business and types of loss including natural catastrophe events, the actual effects of inflation on our results cannot be accurately known until claims are settled.

In addition, there are different types of

inflation relevant to certain lines of business, the impact of which is difficult to accurately assess at this time.

In addition, there are different types of inflation relevant to certain lines of business, the impact of which is difficult to accurately assess at this time.

For example, in our mortgage business, the failure of general wages to keep pace with economic inflation, or increases in unemployment due to prolonged recessionary conditions, could prevent borrowers from being able to afford their mortgage payments and thereby increase the frequency of claims beyond our modeled results.

Global recessionary conditions, including inflation, the slow recovery of certain sectors from the pandemic, predicted slow growth rates across key markets and other factors, will impact the insurance and reinsurance industry.

There is great uncertainty around how severe and how long a recession will last on a global and local basis.

While our risk management and business strategy take recessionary conditions into account, we cannot accurately predict the full impact of a recession on our results of business operations.

While our business has not been directly impacted by the proposed Trump administration tariffs on imported goods, there may be a ripple effect on how these impact certain industries where we provide insurance or reinsurance.

It is too early to determine the long-term effect, if any, of the Trump administration tariff policy, but sustained escalation of tariffs and trade disputes may result in a global economic slowdown which impacts our clients.

In addition, it is anticipated that the Trump administration will promulgate a number of executive orders or propose legislation that could impact our industry.

We cannot predict with certainty the impact of these actions on our business and results of operations.

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Claims for natural and man-made catastrophic events could cause large losses and substantial volatility in our results of operations and could have a material adverse effect on our financial position and results of operations.

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In estimating our losses from catastrophic events our considerations can include factors such as overall market losses, additional claims information from our clients, multiple model views and proprietary scenario testing.

All of the catastrophe modeling tools that we use or rely on to evaluate our catastrophe exposures are therefore based on significant assumptions and judgments and are subject to

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error and misestimation.

All of the catastrophe modeling tools that we use or rely on to evaluate our catastrophe exposures are therefore based on significant assumptions and judgments and are subject to error and misestimation.

As a result, our estimated exposures could be materially different than our actual results.

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(ii) advances in low-carbon technology and renewable energy development;

and (iii) effects of extreme weather events on the physical and operational exposure of industries and issuers, and the

transition that these companies make towards addressing climate risk in their own businesses.

and (iii) effects of extreme weather events on the physical and operational exposure of industries and issuers, and the transition that these companies make towards addressing climate risk in their own businesses.

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We attempt to manage our exposure to these risks relating to climate change through the use of underwriting controls, proprietary and third party risk models, and the purchase of third party reinsurance.

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Our insurance and reinsurance subsidiaries conduct business globally and are subject to varying degrees of regulation in the various jurisdictions in which they conduct business, including by state, federal and national insurance regulators.

In August 2024, we were added to the list of IAIGs, subjecting our global operations to additional regulation and scrutiny.

The purpose of insurance laws and regulations generally is to protect policyholders and ceding insurance companies, not our shareholders.

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Regulatory authorities also may seek to exercise their supervisory or enforcement authority in new or more extensive ways, such as imposing increased capital requirements.

These actions, if they occur, could affect the competitive market and the way we conduct our business and manage our capital and could result in lower revenues and higher costs.

It is possible that requirements or guidance under one jurisdiction, such as the U.S., may be contradictory or divergent from requirements or guidance in other jurisdictions where we operate such as the EU.

Examples may be climate change disclosures and goals and diversity, equity and inclusion programs.

Any of these actions, if they occur, could affect the competitive market, how we are regulated and the way we conduct our business and manage our capital and could result in lower revenues and higher costs.

As a result, such actions could have a material effect on our results of operations and financial condition.

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We are subject to ongoing legal and policy actions around climate change which may result in additional requirements which could prompt us to shift our risk selection and business strategy in ways which may adversely impact our results of operations.

Governments, regulators, legislators and influential non-governmental organizations continue to focus on enacting laws, regulations and other requirements relating to climate change.

Regulator and shareholder focus on “greenwashing” also continues.

We are subject to some of these changing laws, regulations and public policy debates, which are difficult to predict and quantify and may have an adverse impact on our business.

1 unchanged sentence

Additionally, changes in regulations or policies relating to climate change or our own leadership decisions implemented as a result of assessing the impact of climate change on our business may result in an increase in the cost of doing business, or a decrease in premiums in certain lines of business.

We are subject to CSRD and other EU and U.K.

regulations relating to climate disclosures and goals.

These regulations require extensive reporting on climate and other social factors beyond current U.S.

requirements.

The European Commission recently proposed changes to sustainability reporting requirements which may impact our reporting obligations.

We cannot predict how these proposals or other changes in sustainability requirements in any of the jurisdictions in which we operate will impact our operations, customers and shareholders.

Our efforts to address these exposures are based in part on the outcomes of our loss mitigation measures and risk modeling, our financial results of operations and our communications with our customers and shareholders.

1 unchanged sentence

We may make strategic business decisions to address or respond to some of the legal and policy changes relating to climate change, but there is no assurance that these decisions will adequately address these exposures or that they will not result in a material adverse effect on our results of operations, financial condition or share price.

The Russian invasion of Ukraine and the resulting imposition of sanctions by the U.S., U.K.

and EU on Russia and Russia-related businesses created global instability.

The Russian invasion of Ukraine and ongoing hostilities have created a high level of uncertainty as well as disruption in certain sectors of the global economy.

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The imposition of sanctions by the U.S., U.K.

and EU on Russia and Russia-related businesses has impacted certain sectors in which we write business.

The ongoing Russia-Ukraine hostilities have created a high level of uncertainty as well as disruption in certain sectors of the global economy.

It is impossible to predict whether Russia will expand hostilities to other countries in Europe or elsewhere.

A further prolonged war may also create uncertainty in the global economy in the form of oil shortages, inflationary pressures, loss of confidence and general increase in risks worldwide.

A further prolonged war may also create continued uncertainty in the global economy in the form of oil shortages, inflationary pressures, loss of confidence and general increase in risks worldwide.

In response to this aggression, the governments of the U.S., U.K., EU and other countries implemented several sanctions programs relating to, among other things, the import and transportation of Russian oil and gas and other goods originating in Russia.

Sanctions imposed also target entities, individuals and financial institutions which support Russia’s military and defense systems.

Certain lines of business we write have been impacted by the sanctions, such as the marine and energy lines of business, although the extent of

the impact will depend on the outcome of the war in Ukraine and the nature of future sanctions packages.

Certain lines of business we write have been impacted by the sanctions, such as the marine and energy lines of business, although the extent of the impact will depend on the outcome of the war in Ukraine and the nature of future sanctions packages or potential rescindment of some or all of the Russia sanctions currently in place.

It is possible that the U.S.

approach to Russian sanctions may diverge from that of the U.K.

and EU in the future, which may cause uncertainty in certain lines of business such as marine and energy.

Our customers and policyholders may also be impacted by regulatory, technological, market or other risks relating to climate change in ways which we cannot predict with certainty and adversely impact our results of operations.

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As a result of these factors, our results of operations may be impacted by the loss of those customers or a shift in their patterns or levels of insurance coverage in ways we cannot predict.

As we continue to incorporate climate change and other ESG factors in our business strategy, we cannot be certain that shareholders, investors and other influential environmental and social-focused groups will agree with our approach, which may adversely impact our ability to raise funds in the capital markets, our share price and our results of operations.

Shareholders and investors have placed increased importance on how we are addressing ESG issues.

ESG encompass a wide range of issues, including climate change and other environmental risks.

ESG also includes social factors, such as how we manage our suppliers, the way we interact with our employees and communities and our diversity and inclusion efforts.

Our leadership and Board are actively engaged in understanding the ever-changing ESG landscape and assessing our business operations to ensure that our business strategy reflects our values.

We believe that our success depends on our commitment to a diverse workforce, an informed and active dialogue about ESG issues with our customers and shareholders and the strength of our ERM framework.

We cannot predict whether our business decisions, business strategy and disclosures relating to climate change and other ESG issues will meet the expectations or particular requirements of certain key institutional shareholders in particular.

We may be adversely impacted if shareholders or investors do not agree with, or are not satisfied with, our business strategy and approach to climate change or social concerns and decide to sell or not purchase our equity or debt instruments or to publicize their

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dissatisfaction.

In addition, we cannot predict how legal challenges to diversity and inclusion recruitment programs may impact our efforts in this area.

We are subject to changes in governmental, investor and societal responses to climate change and sustainability-related issues, which may result in scrutiny of our business, litigation or adverse impacts to our share price and our results of operations.

Shareholders, investors and regulators have placed increased attention on climate change and sustainability-related issues, leading to evolving and sometimes conflicting expectations and standards.

We are committed to evaluating and, where appropriate, incorporating sustainability practices in our business.

Our leadership and Board are actively engaged in understanding prevailing views on these issues and assessing our business operations to ensure that our business strategy reflects our values.

Changes to governmental, investor and societal priorities on climate change and sustainability-related practices could adversely impact our reputation, share price and results of operation or result in litigation.

We could face unanticipated losses from increased geopolitical tensions, hostilities, war, terrorism, cyber attacks, and general political instability, and these or other unanticipated losses could have a material adverse effect on our financial condition and results of operations.

We have substantial exposure to unexpected, large losses resulting from future man-made catastrophic events, such as acts of war, regional hostilities, acts of terrorism, political instability, social unrest and pandemics similar to the COVID-19 pandemic.

We have substantial exposure to unexpected, large losses resulting from man-made catastrophic events, such as acts of war, regional hostilities, acts of terrorism, political instability, social unrest and pandemics similar to the COVID-19 pandemic.

These risks are inherently unpredictable.

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To the extent that an act of terrorism is certified by the Secretary of the Treasury and aggregate industry insured losses resulting from the act of terrorism exceeds the prescribed program trigger, our U.S.

insurance operations may be covered under TRIP for up to 80% subject to (i) a mandatory deductible of 20% of our prior year’s direct earned premium for covered property and liability coverages, and (ii) an industry aggregate retention of $37.5 billion.

insurance operations may be covered under TRIP for up to

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80% subject to (i) a mandatory deductible of 20% of our prior year’s direct earned premium for covered property and liability coverages, and (ii) an industry aggregate retention of $37.5 billion.

The program trigger for calendar year 2024 and any program year thereafter through 2027 is $200 million.

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If our loss reserves are determined to be inadequate, we will be required to increase loss reserves at the time of such determination with a corresponding reduction in our net income in the period when the deficiency becomes known.

It is possible that claims in respect of events that have occurred could exceed our claim reserves and have a material adverse effect on our results of operations, in a particular period, or our financial condition in general.

It is possible that claims in respect of events that have occurred could exceed our claim reserves and have a material adverse effect on our results of operations, in a particular period, or

our financial condition in general.

As a compounding factor, although most insurance contracts have policy limits, the nature of property and casualty insurance and reinsurance is such that losses and the associated expenses can exceed policy limits for a variety of reasons and could significantly exceed the premiums received on the underlying policies, thereby further adversely affecting our financial condition.

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As of December 31, 2024, our consolidated reserves for unpaid losses and loss adjustment expenses, net of unpaid losses and loss adjustment expenses recoverable, were approximately $21.5 billion.

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In our insurance operations, we seek to limit our exposure through the purchase of reinsurance.

mortgage insurance business, in addition to utilizing reinsurance, we have developed a proprietary risk model that simulates the maximum probable loss resulting from a severe economic event impacting the housing market.

insurance business, in addition to utilizing reinsurance, we have developed a proprietary risk model that simulates the maximum probable loss resulting from a severe economic event impacting the housing market.

We also seek to limit our loss exposure by geographic diversification, including by pricing adjustments in our U.S.

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Disputes relating to coverage and choice of legal forum may also arise.

Underwriting is inherently a matter of judgment, involving important assumptions about matters that are inherently unpredictable and beyond our control, and for which historical experience and probability analysis may not provide sufficient guidance.

adverse effect on our financial condition or our results of operations, possibly to the extent of eliminating our shareholders’ equity.

Underwriting is inherently a matter of

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judgment, involving important assumptions about matters that are inherently unpredictable and beyond our control, and for which historical experience and probability analysis may not provide sufficient guidance.

One or more catastrophic events or severe economic events could result in claims that substantially exceed our expectations, or the protections set forth in our policies could be voided, which, in either case, could have a material adverse effect on our financial condition or our results of operations, possibly to the extent of eliminating our shareholders’ equity.

In addition, factors such as global climate change limit the value of historical experience and therefore further limit the effectiveness of our loss limitation methods.

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An inability of our reinsurers or retrocessionaires to meet their obligations to us could have a material adverse effect on our financial condition and results of operations.

Our losses for a given event or occurrence may increase if our reinsurers or retrocessionaires dispute or fail

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to meet their obligations to us or the reinsurance or retrocessional protections purchased by us are exhausted or are otherwise unavailable for any reason.

Our losses for a given event or occurrence may increase if our reinsurers or retrocessionaires dispute or fail to meet their obligations to us or the reinsurance or retrocessional protections purchased by us are exhausted or are otherwise unavailable for any reason.

In certain instances, we also require collateral to mitigate our credit risk to our reinsurers or retrocessionaires.

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Our financial condition and results of operations could be materially adversely affected by any one of these issues.

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While we conduct underwriting, financial, claims and information technology due diligence reviews and apply rigorous standards in the selection of these counterparties, there is no assurance they have provided us accurate or complete information to assess their risk or that they can manage effectively their own risks.

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Emerging claim and coverage issues may adversely affect our business.

As industry practices and legal, social and other environmental conditions change, unexpected and unintended issues related to claims and coverage may emerge, including new or expanded theories of liability.

As industry practices and legal, social and new coverage issues change, unexpected and unintended issues related to claims and coverage may emerge, including new or expanded theories of liability.

These or other changes could impose new financial obligations on us by extending coverage beyond our underwriting intent or otherwise require us to make unplanned modifications to the products and services that we provide, or cause the delay or cancellation of products and services that we provide.

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The effects of unforeseen developments or substantial government intervention could adversely impact us.

While we had exposure to a number of lines of business, such as trade credit, travel, workers compensation and property where business interruption coverage under a pandemic such as COVID-19 was at issue, the number of claims in this area has decreased greatly in 2022.

and into 2023.

We continue to monitor the impact of COVID-19 on our claims process in the U.S and U.K.

in particular, although we do not expect the impact to be significant.

Acquisitions, the addition of new lines of insurance or reinsurance business, expansion into new geographic regions and/or entering into joint ventures or partnerships expose us to risks.

We have acquired other companies and selected blocks of business and also expanded our business lines and geographies and/or entered into joint ventures or partnerships as part of our strategy.

The MCE Acquisition is an example of such expansion.

We may seek, from time to time, to acquire other companies, acquire selected blocks of business, expand our business lines, expand into new geographic regions and/or enter into joint ventures or partnerships.

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obtaining management personnel required for expanded operations;

obtaining necessary regulatory permissions;

obtaining necessary regulatory

and establishing adequate reserves for any acquired book of business.

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and assets and liabilities acquired may be subject to foreign currency exchange rate fluctuation.

We may also be subject to financial exposures in the event that the sellers of the entities or business we acquire are unable or unwilling to meet their indemnification, reinsurance and other contractual

Our failure to manage successfully any of the foregoing challenges and risks may adversely impact our results of operations.

Our information technology systems and our pace of adoption of new technologies, such as generative AI, may not be adequate to meet the demands of our customers or impact negatively our ability to compete with our peers.

We are dependent on our information technology systems to conduct our business and drive strategic decisions based on data analytics.

Our information technology systems also support areas of our business, such as mortgage servicing or underwriting pricing portals where we connect with third-party information technology systems.

Accordingly, we are highly dependent on the effective operation, availability and integrity of these systems.

While we believe that the systems are adequate to service our business, there can be no assurance that they will operate in all manners in which we intend, possess all of the functionality required by customers currently or in the future or continuously operate without significant disruption.

Our customers and regulators require that our information technology systems perform as intended, whether they are hosted by us, managed by a third-party on our behalf or rely on seamless electronic integrations with customer systems.

Regulators and customers regularly request information about our cybersecurity program and disaster recovery plans.

We use AI in areas of our business and, to a much more limited extent, carefully vetted generative AI capabilities.

We must continually invest significant resources in maintaining, monitoring and enhancing our information technology systems’ capabilities to meet customer needs and business strategy.

Our business, financial condition and operating results may be adversely affected if we do not adequately maintain our information technology systems, both internal and third-party, and continuously test and upgrade them.

We continuously evaluate the adequacy of our information technology systems in order to ensure that we are utilizing the most appropriate technologies and innovating or adopting new technologies to support our underwriting business.

With new technologies emerging at a rapid pace, there is no assurance that we will be able to evaluate and integrate new

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obligations to us.

Our failure to manage successfully any of the foregoing challenges and risks may adversely impact our results of operations.

Our information technology systems and our pace of adoption of new technologies, such as AI, may not be adequate to meet the demands of our customers or impact negatively our ability to compete with our peers.

We are dependent on our information technology systems to conduct our business.

Specifically, our information technology systems service our insurance portfolios.

Accordingly, we are highly dependent on the effective operation of these systems.

While we believe that the systems are adequate to service our insurance portfolios, there can be no assurance that they will operate in all manners in which we intend or possess all of the functionality required by customers currently or in the future.

Our customers, require that we conduct our business in a secure manner, electronically via the Internet or via electronic data transmission.

We must continually invest significant resources in establishing and maintaining electronic connectivity with customers.

In order to integrate electronically with customers in the mortgage insurance industry, we require electronic connections between our systems and those of the industry's largest mortgage servicing systems and leading pricing and loan origination systems.

Our mortgage group currently possesses connectivity with certain of these external systems, but there is no assurance that such connectivity is sufficient, and we are continually undertaking new electronic integration efforts with third party loan servicing, pricing and origination systems.

We also rely on electronic integrations in our insurance operations with third parties and customers.

Inflation and supply chain issues for components to support our informational technology systems or those of our vendors pose risks which are beyond our control and may be difficult to manage.

Our business, financial condition and operating results may be adversely affected if we do not possess or timely acquire the requisite set of electronic integrations necessary to keep pace with the technological demands of customers.

We continuously evaluate the security and adequacy of our information technology systems in order to ensure that we are utilizing the most appropriate technologies.

With new technologies, such as AI, emerging at a rapid pace, there is no assurance that we will be able to evaluate and integrate new technologies or update our existing systems.

Technology failures and cyber attacks, including, but not limited to, ransomware, exploitation in software or code with malicious intent, state-sponsored cyber attacks, as well as vulnerabilities relating to new technologies, such as generative AI, may impact us or our business partners and service providers, causing a disruption in service and operations which could materially and negatively impact our business and/or expose us to litigation.

technologies or update our existing systems to keep pace with our competitors and customer needs.

Technology failures caused by intentional and unintentional human and non-human actions may cause material disruption in the availability of the information technology systems we use in our business.

We rely on information technology systems to securely process, transmit, store and protect the confidential and electronic information, financial data and proprietary models that are critical to our business.

Furthermore, a significant portion of the communications between our employees and our business partners and service providers depends on information technology and electronic information exchange.

Like all companies, our information technology systems and the systems of third parties we do business with are vulnerable to data breaches, interruptions or failures due to events that may be beyond our control, including, but not limited to, natural disasters, power outages, theft, terrorist attacks, computer viruses, hackers, employee or vendor error or misconduct, malicious actors, errors in usage or deepfake or social engineering or schemes, phishing attacks, other external hazards and general technology failures.

Security breaches by third parties could expose us to the loss or misuse of our information, financial losses, reputational damage and potential liability and litigation.

In addition, cyber incidents and other disruptions that impact the availability, reliability, speed, accuracy or other proper functioning of these systems could have a significant negative impact on our operations and results.

While we and third parties with which we do business have experienced cybersecurity incidents, to date, the Company does not believe that any previous cybersecurity incidents have materially affected the Company.

The sophistication of cybersecurity threats, including through the use of AI, continues to increase, and the controls and preventative actions that we take to reduce the risk of cybersecurity incidents and protect these systems, including the regular testing of our cybersecurity incident response plan, may be insufficient.

Although our use of generative AI in business tools is limited and we continue to evaluate how to integrate this new technology into our business operations, recent developments in AI, including generative AI, may accelerate or exacerbate potential risks related to technological developments, and we cannot predict how such risks may impact our strategy, productivity, market competition and growth.

Like all companies, our information technology systems and the systems of third-parties that we do business with are vulnerable to data breaches, interruptions or failures due to events that may be beyond our control, including, but not limited to, natural disasters, power outages, theft, terrorist attacks, computer viruses, hackers, employee or vendor error or misconduct, malicious actors, errors in usage or deepfake or social engineering or schemes, phishing attacks, other external hazards and general technology failures.

In 2024, our operations, like many others, were affected by a significant incident relating to a third-party vendor’s faulty software update.

While the impact of this event was not material to our business and operations, we are vulnerable to such incidents that are beyond our control.

We rely on certain third-party technology service providers and other service providers, notably major cloud providers, Software-as-a-Service (or “SaaS”) solutions, and on-premise software, including proprietary and open source solutions.

We also outsource certain business processes to third parties and may continue do so in the future.

This practice exposes us to increased risks if those third-party systems are not maintained and monitored in accordance with contractual terms or due to human error.

There is no assurance that we will not be materially adversely affected by such incidents impacting our critical and important functions.

See Item 1C, “ Cybersecurity ” for additional information.

We could be materially impacted by a cyber attack, data breach, ransomware, phishing, social engineering or other cybersecurity incident resulting in loss of business data, personal data and other confidential or secret information, a disruption in our business operations, regulatory or other legal action, and fines.

Cybersecurity incidents and attacks resulting in unauthorized access to our systems and those of third parties we use in our business could have a material impact on our business operations as a result of loss or misuse of our information, including personal data and sensitive data, and disruption to normal business operations.

Specifically, these incidents, and the disruptions resulting therefrom, may impact the availability, reliability, speed, accuracy or other proper functioning of these systems.

The sophistication of cybersecurity threats, AI-powered cyber attacks such as deep fakes and brute force attacks, continues to increase.

We and/or our SaaS or other third-party providers are exposed to these risks and other cybersecurity risks which may arise in the future.

While we believe we have effective technical and organizational measures in place to prevent, detect, manage and mitigate the impact of data breaches and cybersecurity incidents caused by malicious actors, systemic failures or human error, we cannot offer complete assurances that significant data breaches on our systems and those of third parties we use will not occur.

We are subject to many laws and regulations relating to the adequacy of cybersecurity programs and business resiliency, including the SEC Cybersecurity Rules, and comprehensive privacy, security and business resiliency laws in the EU such as GDPR and DORA.

industry regulators like the NYDFS in New York also impose comprehensive cybersecurity requirements on our U.S.

A cybersecurity incident could result in a violation of these and other applicable laws, resulting in damage to our reputation, loss of customers, decline in our stock price, litigation, remediation costs, increased insurance premiums, employee dissatisfaction and/or monetary fines, penalties or litigation, any of which could adversely affect our business.

Based on our investigations and incident management, the Company does not believe these and other cybersecurity incidents we have experienced to date have materially affected the Company’s business operations, but we cannot provide assurances that our controls will defend against all cyber attacks.

See Item 1C, “ Cybersecurity ” for additional information.

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We also outsource certain business process functions to third parties and may continue do so in the future.

This practice exposes us to increased risks related to data security, service disruptions, supply chain issues or the effectiveness of our control system, which could result in our inability to conduct business operations, monetary and reputational damage or harm to our competitive position.

There is no assurance that we will not be materially adversely affected by, or that the security measures we take will shield us from, data breaches or cyber attacks on us or on the third parties we rely on for critical business functions.

See Item 1C, “ Cybersecurity ” for additional information.

Cyber incidents or data breaches caused by bad actors or unintentional human error impacting data, including personal data, we maintain or use during our business operations may result in regulatory fines or action, reputation damage and a disruption in our business operations.

We collect, process and store data, including the personal data of our employees, customers and policyholders, as part of our business operations.

While we believe we have effective technical and organizational measures in place to prevent, detect, manage and mitigate the impact of data breaches caused by malicious actors, systemic failures or human error, we cannot offer complete assurances that significant data breaches will not occur.

We are subject to many laws and regulations relating to the adequacy of cybersecurity programs and business resiliency, including industry specific requirements under federal and state law, the new SEC Cybersecurity Rules, and comprehensive privacy or security laws in the EU, U.K.

and some U.S.

states like New York and California.

A cybersecurity incident could also result in a violation of applicable privacy, data protection or other laws, damage our reputation, cause a loss of customers, adversely affect our stock price, cause us to incur remediation costs, increased insurance premiums, and/or give rise to monetary fines, penalties, or litigation any of which could adversely affect our business.

Changes in criteria used by rating agencies which may result in a downgrade in our ratings, our inability to obtain a rating or a change in capital application or requirements for our operating insurance and reinsurance subsidiaries may adversely affect our relationships with clients and brokers and negatively impact sales of our products.

Similar to our competitors, a ratings downgrade or the potential for such a downgrade, or failure to obtain a necessary rating, could adversely affect our relationships with agents, brokers, wholesalers, intermediaries, clients and other distributors of our existing and new products and services.

Some of the reinsurance agreements assumed by our reinsurance operations include provisions that a ratings downgrade or other specified triggering event with respect to

our reinsurance operations, such as a reduction in surplus by specified amounts during specified periods, provide our ceding company clients certain rights, including, the right to terminate the subject reinsurance agreement and/or to require us to post additional collateral.

Some of the reinsurance agreements assumed by our reinsurance operations include provisions that a ratings downgrade or other specified triggering event with respect to our reinsurance operations, such as a reduction in surplus by specified amounts during specified periods, provide our ceding company clients certain rights, including, the right to terminate the subject reinsurance agreement and/or to require us to post additional collateral.

Any ratings downgrade or failure to obtain a necessary rating could adversely affect our ability to compete in our markets, could cause our premiums and earnings to decrease and could have a material adverse impact on our financial condition and results of operations.

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We can offer no assurances that our ratings will remain at their current levels or that any of our ratings which are under review or watch by ratings agencies will remain unchanged.

Changes in in the criteria used by rating agencies may impact our capital position, our capital requirements and the treatment of certain items on our balance sheet.

Changes in the criteria used by rating agencies may impact our capital position, our capital requirements and the treatment of certain items on our balance sheet.

It is possible that rating agencies may modify their evaluation criteria, heighten the level of scrutiny they apply when analyzing companies in our industry, adjust upward the capital and other requirements employed in their models and/or discontinue credit and debt instruments or other structures deployed for maintenance of certain rating levels.

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For further information on our letter of credit facilities, see the Letter of Credit and Revolving Credit Facilities section of “Contractual Obligations and Commercial Commitments” in Item 7.

Our ability to execute our business strategy successfully, continue to grow and innovate and offer our employees a dynamic and supportive workplace depends on the recruitment, retention and promotion of talented, agile, diverse and resilient employees at all levels of our organization.

Our ability to execute our business strategy successfully, continue to grow and innovate and offer our employees a dynamic and supportive workplace depends on the recruitment, retention and promotion of talented, agile, and resilient employees at all levels of our organization.

The success of our business depends on attracting and retaining a capable and talented workforce.

Following the COVID-19 pandemic, we have adopted a hybrid work model in most of our offices with employees returning to the office

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for part of the work week.

We provide a work environment and culture which reflects our goal to “Enable Possibility”.

We offer flexible work arrangements, when possible, for our employees globally, as well as competitive compensation packages which include participation in our Employee Stock Purchase Plan and the possibility of equity awards at certain job levels.

We offer flexible and hybrid work arrangements, when possible, for our employees globally, as well as competitive compensation packages which include participation in our Employee Stock Purchase Plan and the possibility of equity awards at certain job levels.

Over the past few years, we have also implemented and expanded our learning programs, career leveling and employee networks, all of which we believe will help us retain talent.

In 2023, we launched our talent acquisitions shared services team for our North American entities.

This structure enables us to better deploy internal and external candidates across the organization while providing a cohesive candidate experience.

As the model matures and scales, we expect to see improvements in time to hire metrics.

Our leadership and Board promote the goals of building a diverse employee population and fostering an environment that allows us to fully leverage and engage that diversity as a competitive edge which benefits both our employees and our business .

While our efforts to attract, develop and retain talented employees continues to be a top priority, we may not be able to complete successfully for talented executives and employees, which may adversely impact our ability to fully realize our business strategy.

While our efforts to attract, develop and retain talented employees continues to be a top priority, we may not be able to compete successfully for talented executives and employees, which may adversely impact our ability to fully realize our business strategy.

Our success will depend on our ability to maintain and enhance effective operating procedures and internal controls and our ERM program.

We operate within an ERM framework designed to identify, assess and monitor our risks.

We consider underwriting, reserving, investment, credit and operational risk in our ERM framework.

We consider underwriting, reserving, investment, credit, group and operational risk in our ERM framework.

Losses, reputational damage, regulatory fines and litigation are among the adverse impacts which can arise if we fail to operate an effective ERM framework.

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As a result of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected.

These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake or circumvention of controls.

These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake or

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circumvention of controls.

There can be no assurance that our control system will succeed in achieving its stated goals under all potential future conditions.

Any ineffectiveness in our controls or procedures could have a material adverse effect on our

Any ineffectiveness in our controls or procedures could have a material adverse effect on our business.

For further information on our ERM framework, see “Enterprise Risk Management” in Item 1.

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Although we have not experienced any material credit losses to date, an increased inability of our policyholders to meet their obligations to us could have a material adverse effect on our financial condition and results of operations.

See note 3, “Significant Accounting Policy.”

Our business is subject to applicable laws and regulations relating to economic trade sanctions and foreign bribery laws, the violation of which could adversely affect our operations.

See note 3, “Significant Accounting Policies.”

Our business is subject to laws and regulations relating to economic trade sanctions and foreign bribery laws, the violation of which could adversely affect our operations.

We must comply with all applicable economic sanctions and anti-bribery laws and regulations of the U.S.

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Department of State.

New sanctions regimes may be initiated, or existing sanctions expanded, at any time, which can immediately impact our business activities.

New sanctions regimes may be initiated, or existing sanctions expanded or lifted, at any time, which can immediately impact our business activities.

Since the Russian invasion of Ukraine in February 2022, there have been several sanctions packages imposed by the U.S., U.K.

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In these cases, we could be exposed to fines, criminal penalties and other sanctions.

Such violations could limit our ability to conduct business and/or damage our reputation, resulting in a material adverse effect on our financial condition and results of operations.

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New legislation or regulations relating to the U.K.’s Withdrawal from the EU could adversely affect us.

ceased to be a member state of the European Union in January 2020.

Although the EU and U.K.

reached a limited agreement in relation to certain matters, U.K.

insurers and reinsurers no longer have automatic access to EU markets and vice versa.

domiciled entities and our Lloyd’s Syndicates may no longer “passport” within the EU.

We have implemented changes in our operations to accommodate Brexit;

however, we remain subject to new proposals such as third country governance guidance provided by EIOPA in 2023, and regulations which may negatively impact U.K.

underwriting activities in respect of EU risks and policyholders.

Such violations could limit our ability to conduct

business and/or damage our reputation, resulting in a material adverse effect on our financial condition and results of operations.

Risks Relating to Financial Markets and Investments

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In addition, our policyholders, reinsurers and retrocessionaires may be affected by developments in the financial markets, which could adversely affect their ability to meet their obligations to us.

Volatility in the financial markets could continue to significantly affect our investment returns, reported results and shareholders’ equity.

Volatility in the financial markets could significantly affect our investment returns, reported results and shareholders’ equity.

The capital requirements of our businesses depend on many factors, including regulatory and rating agency requirements, the performance of our investment portfolio, our ability to write new business successfully, the frequency and severity of catastrophe events and our ability to establish premium rates and reserves at levels sufficient to cover losses.

Disruption to the financial markets and weak economic conditions resulting from situations such as post pandemic imbalances, inflation and geopolitical conflict may adversely and materially impact our investments, financial condition and results of operation.

Disruption in the financial markets and the downturn in global economic activity resulting from geopolitical conflict, elevated financing rates, housing market declines or other macro-and micro-economic conditions could adversely affect the valuation of securities in our investment portfolio.

Disruption to the financial markets and weak economic conditions resulting from situations such as supply/demand imbalances, inflation and political unrest may adversely and materially impact our investments, financial condition and results of operation.

Disruption in the financial markets and the downturn in global economic activity resulting from geopolitical conflict or economic decisions/trade wars, elevated financing rates, property market declines or other macro-and micro-economic conditions could adversely affect the valuation of securities in our investment portfolio.

Credit deterioration spread widening and/or equity market volatility could result in temporary or permanent impairment.

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In addition, a lack of pricing transparency, decreased market liquidity, the strengthening or weakening of foreign currencies against the U.S.

Dollar, individually or in tandem, could have a material adverse effect on our results through realized losses, impairments and changes in unrealized positions in our investment portfolio.

Dollar, individually or in tandem, could have a material adverse effect on our results through

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realized losses, impairments and changes in unrealized positions in our investment portfolio.

Furthermore, issuers of the investments we hold under the equity method of accounting report their financial information to us one month to three months following the end of the reporting period.

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A significant portion of cash and invested assets held by Arch consists of fixed maturities ( 67.4% as of December 31, 2024).

Although our current investment guidelines and approach emphasize preservation of capital, market liquidity and diversification of risk, our investments are subject to market-wide risks and fluctuations.

In addition, we are subject to risks inherent in particular securities or types of securities, as well as sector concentrations.

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In the event that we are unsuccessful in calibrating the liquidity of our investment portfolio with our expected insurance and reinsurance liabilities, we may be forced to liquidate our investments at times and prices that are not optimal, which could have a material adverse effect on our financial results and ability to conduct our business.

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Foreign currency exchange rate fluctuation may adversely affect our financial results.

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On a quarterly basis, we review our investments by applying an approach based on the CECL and whether declines in fair value below the cost basis requires an estimate of the expected credit loss.

There can be no assurance that our management has accurately assessed the level of the credit loss allowance taken, as reflected in our financial statements.

There can be no assurance that our

management has accurately assessed the level of the credit loss allowance taken, as reflected in our financial statements.

Furthermore, additional allowance may need to be taken or allowances provided for in the future.

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Their ability to conduct business could be significantly and negatively affected if they are unable to do so.

Arch Re Bermuda is a registered Bermuda insurance company and is not licensed or admitted as an insurer in any jurisdiction in the U.S., although Arch Re Bermuda has been approved as a “certified reinsurer” in certain U.S.

states that allow reduced collateral for reinsurance ceded to such reinsurers.

states that allow for the reduction or elimination of statutory collateral for reinsurance ceded to such reinsurers.

Arch Re Bermuda's contracts generally require it to post a letter of credit or provide other security, even in U.S.

states where it has been approved for reduced collateral.

State credit for reinsurance rules also generally provide that certified reinsurers such as Arch Re Bermuda must provide 100% collateral in the event their certified status is “terminated” or upon the entry of an order of rehabilitation, liquidation or conservation against a ceding insurer.

states where it has been approved for reduced collateral, upon the happening of certain events.

State credit for reinsurance rules also generally provide that reinsurers such as Arch Re Bermuda must provide statutory collateral in the event their certified or reciprocal status is “terminated” or 100% collateral upon the entry of an order of rehabilitation, liquidation or conservation against a ceding insurer.

Although, to date, Arch Re Bermuda has not experienced any difficulties in providing collateral when required, if we are unable to post security in the form of letters of credit or trust funds when required, the operations of Arch Re Bermuda could be significantly and negatively affected.

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We cannot cancel mortgage insurance coverage or adjust renewal premiums during the life of the policy.

Thus, higher than anticipated claims generally cannot be offset by premium increases on policies in force or mitigated by our non-renewal or cancellation of insurance coverage.

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higher than anticipated claims generally cannot be offset by premium increases on policies in force or mitigated by our non-renewal or cancellation of insurance coverage.

Further, in the U.S., to the extent that the insured cancels coverage as a result of prior home price appreciation, the duration of coverage will be shorter, and we will receive less premium.

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could make a borrower’s monthly housing-related payment obligations increase and could increase the frequency of claims.

Deteriorating economic conditions, potentially due to prolonged recessionary conditions increasing levels of unemployment and inflation, could adversely affect the performance of our mortgage insurance portfolio and could

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adversely affect our results of operations and financial condition.

If the volume of low down payment mortgage originations declines, or if other government housing policies, practices or regulations change, the amount of mortgage insurance we write in the U.S.

could decline, which would reduce our mortgage insurance revenues.

or Australia could decline, which would reduce our mortgage insurance revenues.

The size of the U.S.

mortgage insurance market depends in large part upon the volume of low down payment home mortgage originations.

and Australian mortgage insurance market depends in large part upon the volume of low down payment home mortgage originations.

Factors affecting the volume of low down payment mortgage originations include, among others:

restrictions on mortgage credit due to stringent underwriting standards and liquidity issues affecting lenders;

changes in mortgage interest rates and home prices, and other economic conditions in the U.S.

and regional economies;

changes in mortgage interest rates and home prices, and other economic conditions in the U.S., Australian and regional economies;

population trends, including the rate of household formation;

government housing policy.

government housing policy, and Australian government housing policy.

Increases to mortgage interest rates have materially increased financing costs, and as a result may decrease the number of qualified borrowers and the volume of low down payment mortgage originations.

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This change, and any future changes to the FHA program may, negatively impact the amount of mortgage insurance we write in the U.S.

The Federal Housing Finance Agency (“FHFA”) as conservator of the GSEs continues to evaluate loan level price adjustments (“LLPAs”) and guarantees fees assessed by the GSEs when purchasing loans.

To reduce pressure on housing affordability in Australia, the Australian Government introduced the First Home Guarantee Scheme (“HGS”) in 2020, designed to support eligible first home buyers by allowing them to purchase a home with a deposit of as little as 5%.

Under HGS, Housing Australia provides a free guarantee to the lender of up to 15% of the value of the property for first home buyers, negating the requirement to pay for mortgage insurance.

Since inception through 2024, the HGS was substantially expanded, negatively impacting the amount of mortgage insurance we write in Australia.

The FHFA as conservator of the GSEs continues to evaluate loan level price adjustments (“LLPAs”) and guarantees fees assessed by the GSEs when purchasing loans.

During 2022 and 2023, the FHFA implemented a series of changes to update the GSEs’ single-family guarantee fee pricing framework to increase support for creditworthy borrowers limited by income or by wealth, while also increasing pricing to other categories of loans (such as high balance mortgages and mortgages on second homes) to foster capital accumulation.

On May 15, 2023, FHFA issued a Request for Input (“RFI”) on the process used for implementing guarantee fee pricing changes, and on the goals and priorities that FHFA, as both conservator and regulator, should pursue in its oversight of the pricing framework.

These, and future actions taken as a result of the RFI could cause a decline in the volume of low-down payment home mortgage purchases by the GSEs, could decrease demand for mortgage insurance, and could decrease our U.S.

Future pricing changes, which may include increasing LLPAs and guarantee fees, limiting the purchase of certain categories of loans, or restricting loan limits could cause a decline in the volume of low-down payment home mortgage purchases by the GSEs, could decrease demand for mortgage insurance, and could decrease our U.S.

new insurance written and reduce mortgage insurance revenues.

On June 8, 2022, the FHFA announced the GSEs release of Fannie Mae's and Freddie Mac's Equitable Housing Finance Plans for 2022-2024.

These plans are designed to foster housing finance markets that provide equitable access to affordable and sustainable housing, including through the use of special purpose credit programs (“SPCPs”).

SPCPs are lending programs designed to expand access to credit among disadvantaged borrowers.

The Consumer Finance Protection Bureau, the Department of Housing and Urban Development, and other federal agencies have issued guidance encouraging the use of SPCPs and providing assurances that properly structured SPCPs are permissible under federal law.

New practices or programs implemented under the GSEs’ Equitable Housing Plans, may impact the underwriting and servicing standards on mortgages purchased by the GSEs and could increase the presence of multiple higher-risk characteristics in our insured loan portfolio.

Further, the legal landscape applicable to SPCPs remains untested and loans originated under these programs could be subject to increased risk of private litigation or enforcement actions under state and federal law.

Changes to the role of the GSEs in the U.S.

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If the charters of the GSEs were amended to change or eliminate the acceptability of private mortgage insurance, our mortgage insurance business could decline significantly.

In January 2021, the U.S.

Department of Treasury (the “Treasury Department”) and FHFA announced an agreement to amend the preferred stock purchase agreements between the Treasury Department and the GSEs, originally entered into in September 2008, in order to, among other things, codify several existing FHFA conservatorship practices for the GSEs and outline a plan for the Treasury Department, in consultation with FHFA, to develop a proposal for continued GSE reform.

If any GSE reform is adopted, whether through legislation or administrative action, it could impact the current role of private mortgage insurance as credit enhancement, including its reduction or elimination.

Passage and timing of any comprehensive GSE reform or incremental change (legislative or administrative) is uncertain, making the actual impact on the mortgage insurance industry difficult to predict.

Furthermore, the FHFA and/or the GSEs could chose to reduce the amount of CRT protection purchased on their loan portfolios, which could reduce the CRT investment

On January 2, 2025, the U.S.

Department of Treasury (the “Treasury Department”) and FHFA announced an agreement to amend the preferred stock purchase agreements between

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opportunities available for reinsurers.

the Treasury Department and the GSEs, originally entered into in September 2008, in order to, among other things, codify the requirement that Treasury consent before the conservatorships can be terminated, memorialize that ending the conservatorship should be based on consideration of the financial condition of the GSEs and the potential impact on the housing market, and outline an agreed upon process for eventual public input.

Furthermore, the FHFA and/or the GSEs could chose to reduce the amount of CRT protection purchased on their loan portfolios, which could reduce the CRT investment opportunities available for reinsurers.

Future legislative, administrative or changes to business practices related to the use or requirement for credit enhancement could have a material adverse impact on the Company.

The PMIERs apply to Arch Mortgage Insurance Company and United Guaranty Residential Insurance Company, which are GSE-approved mortgage insurers (“eligible mortgage insurers”).

The PMIERs apply to AMIC and UGRIC, which are eligible mortgage insurers.

The PMIERs impose limitations on the type of risk insured, the forms and insurance policies issued, standards for the geographic and customer diversification of risk, acceptable underwriting practices, quality assurance, loss mitigation, claims handling, standards for certain reinsurance cessions and financial requirements, among other things.

The financial requirements require a mortgage insurer’s available assets to meet or exceed “minimum required assets” as of each quarter end.

In August 2024, the GSEs updated PMIERs to incorporate new deductions to the definition of available assets for investment risk.

This update will become effective March 31, 2025, but the impact will be phased in through September 30, 2026.

Arch MI U.S.’s minimum required assets under the PMIERs will be determined, in part, by the particular risk profiles of the loans it insures.

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Our eligible mortgage insurers each satisfied the PMIERs’ financial requirements as of December 31, 2024.

While we intend to continue to comply with these requirements, there can be no assurance that the GSEs will not change the PMIERs or that Arch Mortgage Insurance Company or United Guaranty Residential Insurance Company will continue as eligible mortgage insurers.

If either or both of the GSEs were to cease to consider Arch Mortgage Insurance Company or United Guaranty Residential Insurance Company as eligible mortgage insurers and, therefore, cease accepting our mortgage insurance products, our results of operations and financial condition would be adversely affected.

While we intend to continue to comply with these requirements, there can be no assurance that the GSEs will not change the PMIERs or that AMIC or UGRIC will continue as eligible mortgage insurers.

If either or both of the GSEs were to cease to consider AMIC or UGRIC as eligible mortgage insurers and, therefore, cease accepting our mortgage insurance products, our results of operations and financial condition would be adversely affected.

The implementation of the Basel III Capital Accord and FHFA’s Enterprise Regulator Capital Framework may adversely affect the use of mortgage insurance and CRT opportunities.

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regulators decide to adopt the proposed Basel III Endgame approach to mortgage assets, the capital treatment of mortgages held in portfolio will increase and the capital relief benefits of mortgage insurance would be eliminated, which could adversely affect the volume of mortgages originated by banks subject to the rule and the demand for mortgage insurance.

With the change in the Presidential administration, and based on feedback received in response to the proposed rule, the Federal Banking agencies have indicated an intent to repropose the Basel III Rules, though the timing, requirements, and implementation of the reproposed rule remain uncertain.

In January 2025, the European Commission stated that it is considering what steps to take in light of possible delay or changes to the Basel III implementation in the United States, and the Bank of England announced a one-year delay in implementation in order to get clarity on what the United States plans to do.

On December 17, 2020, the FHFA published a new Enterprise Regulatory Capital Framework (“ERCF”) Enterprise Capital Rule for Fannie Mae and Freddie Mac that significantly increases minimum capital requirements for these GSEs.

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and exposures of an Enterprise to the other Enterprise.

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The ERCF includes higher risk-capital charges for residential mortgages and continues to take into account the benefits of mortgage insurance, provided the mortgage insurer is compliant with the PMIERs.

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This could have a negative impact on our return on equity.

In addition, higher capital standards could impact the guarantee fees charged to acquire loans.

In January 2023, after the Enterprises had fully transitioned to the new ERCF capital regime, FHFA announced new pricing matrices redesigned and recalibrated to align the fee structure more closely with the risk factors utilized in the capital framework.

Future changes to the ERCF, or the guarantee fees charged to acquire loans, could adversely impact credit for credit risk transfer, the capital relief afforded mortgage insurance or the volume of loans purchased by the Enterprises and the demand for mortgage insurance.

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Risk Relating to Our Company and Our Shares

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and for limitations on a shareholder’s right to raise proposals or nominate directors at general meetings.

Our bye-laws provide that certain provisions that may have anti-takeover effects may be repealed or altered only with prior Board approval and upon the affirmative vote of holders of shares representing at least 65% of the total voting power of our shares entitled generally to vote at an election of directors.

Our bye-laws provide that certain provisions that may have anti-takeover effects may be repealed or altered only with prior Board approval and upon the affirmative vote of holders of shares

representing at least 65% of the total voting power of our shares entitled generally to vote at an election of directors.

The bye-laws also contain a provision limiting the rights of any U.S.

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Notwithstanding this provision, the Board may make such final adjustments to the aggregate number of votes conferred by the shares of any U.S.

person that the Board considers fair and reasonable in all circumstances to ensure that such votes represent 9.9% of the aggregate voting power of the votes conferred by all shares of Arch Capital entitled to vote

generally at an election of directors.

Arch Capital will assume that all shareholders (other than specified persons) are U.S.

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In addition, these provisions could also result in the entrenchment of incumbent management.

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There are regulatory limitations on the ownership and transfer of our common shares.

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The regulator may require the shareholder to reduce its holding in the insurer or an insurer's holding company and direct, among other things, that such shareholder’s voting rights attaching to the shares in an insurer or an insurer's holding company shall not be exercisable.

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Arch Capital is a holding company and is dependent on dividends and other distributions from its operating subsidiaries.

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if dividends on our series F or series G preferred shares are authorized and declared with respect to any subsequent dividend period, Arch Capital will be free to pay dividends on any other series of preferred shares and/or our common shares.

In the past, we have not paid dividends on our common shares.

We paid a special cash dividend on our common shares during fiscal year 2024, but there is no assurance that any dividend will be declared and paid in the future.

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Our preferred shares are equity and are subordinate to our existing and future indebtedness.

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The issuance of securities ranking equally with or senior to our preferred shares may reduce the amount available for dividends and the amount recoverable by holders of such series in the event of a liquidation, dissolution or winding-up of Arch Capital.

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The voting rights of holders of our preferred shares are limited.

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Pillar I addresses the broader challenge of a digitalized economy and focuses on the allocation of group profits among taxing jurisdictions based on a market-based concept rather than historical “permanent establishment” concepts.

In January 2020, the OECD released a statement excluding most financial services activities, including insurance activities, from the scope of the profit reallocation mechanism in Pillar I.

In January 2020, the OECD released a statement excluding most financial services activities, including insurance activities, from the scope of the profit reallocation mechanism in Pillar I (referred to under Pillar I as “Amount A”).

The OECD statement cited the presence of commercial (rather than consumer) customers as grounds for the carve-out, but also acknowledged that a “compelling case” could be made that the consumer-facing business lines of insurance companies should be excluded from the scope of Pillar I given the impact of regulations and licensing requirements that typically ensure that residual profits are largely realized in local customer markets.

However, profits from “unregulated elements of the financial services sector” remain in scope but only where revenue exceeds €20 billion.

Pillar II addresses the remaining BEPS risk of profit shifting to certain in-scope entities in low tax jurisdictions by introducing a global minimum tax (15%), which would operate through a denial of a deduction or imposition of source-based taxation (including withholding tax) on certain payments.

In calculating whether the effective tax rate of an in-scope entity meets the minimum tax rate, certain deferred income tax assets and liabilities reflected or disclosed in the financial accounts of an in-scope entity are taken into account.

In October 2021, 136 jurisdictions agreed on a two-pillar solution to address the tax challenges arising from the digitalization of the economy.

In December 2021, the OECD released Model Rules for implementation of Pillar II followed by the release of detailed commentary in March 2022.

The OECD has released additional administrative guidance on the global minimum tax in February, July and December of 2023.

Under the European Union’s minimum tax directive, unanimously agreed by the member states in 2022, each member state is required to adopt domestic legislation implementing the minimum tax rules effective for periods beginning on or after December 31, 2023, with the “under-taxed profit rule” to take effect for periods beginning on or after December 31, 2024.

Legislatures in multiple countries outside of the European Union have also drafted and/or enacted legislation to implement the OECD’s minimum tax proposal.

Given the OECD's continued release of guidance regarding Pillar II, that only certain jurisdictions have currently enacted laws to give effect to Pillar II, and that jurisdictions may interpret such laws in different manners, the overall implementation of Pillar II remains uncertain and subject to change, possibly on a retroactive basis.

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2024 FORM 10-K

threshold is expected to be reduced to €10 billion following future review of the operation of Amount A.

The review of when to reduce the revenue threshold begins beginning seven years after the effective date of Amount A.

Pillar II addresses the remaining BEPS risk of profit shifting to certain in-scope entities in low tax jurisdictions by introducing a global minimum tax (15%), which would operate through the imposition of residence-based and source-based taxation (including potentially through the denial of certain deductions).

In calculating whether the effective tax rate of an in-scope entity meets the minimum tax rate, certain deferred income tax assets and liabilities (“Deferred Tax Items”) reflected or disclosed in the financial accounts of an in-scope entity are taken into account.

In October 2021, 136 jurisdictions agreed on a two-pillar solution to address the tax challenges arising from the digitalization of the economy.

In December 2021, the OECD released Model Rules for implementation of Pillar II followed by the release of detailed commentary in March 2022, with the latest update to the commentary in December 2023.

The OECD has released additional administrative guidance on the global minimum tax in February, July and December of 2023, June of 2024 and January of 2025 (with this latest administrative guidance introducing a new interpretation (with retroactive effect) for determining the treatment of Deferred Tax Items, which may affect the effective tax rate calculations of an in-scope entity following a grace period).

The members of the EU have either already adopted domestic legislation implementing the minimum tax rules, pursuant to the EU’s minimum tax directive, unanimously agreed by the member states in 2022 or have exercised their option to postpone implementation on the basis of certain exceptions available to countries that have a small number of multi-national groups to which the rules would apply.

For many members of the EU that have adopted such rules, such rules are effective for periods beginning on or after December 31, 2023, with the “under-taxed profit rule” taking effect for periods beginning on or after January 1, 2025.

Legislatures in multiple countries outside of the EU have also drafted and/or enacted legislation to implement the OECD’s minimum tax proposal.

Given the OECD’s continued release of guidance regarding Pillar II, that only certain jurisdictions have currently enacted laws to give effect to Pillar II, that some jurisdictions have just recently enacted such laws, that jurisdictions may interpret such laws in different manners, and that certain elements of such laws are currently subject to challenge pursuant to legal proceedings, the overall implementation of Pillar II remains uncertain and subject to change, possibly on a retroactive basis.

On August 8, 2023, the Bermuda Ministry of Finance published its first Public Consultation announcing the proposed implementation of a new corporate income tax regime applicable to Bermuda businesses that are part of Multinational Enterprise Groups with annual revenue of €750 million or more.

A Second Public Consultation was published on October 5, 2023 confirming, inter alia, a statutory corporate tax rate of 15% and a Third Public Consultation was published on November 15, 2023.

The Bermuda CIT Act was enacted on December 27, 2023 and is to be effective for tax years beginning on or after January 1, 2025.

The Bermuda CIT Act was enacted on December 27, 2023 and is effective for tax years beginning on or after January 1, 2025.

The Bermuda Government announced in its Second Public Consultation that any new Bermuda corporate income tax regime would supersede existing Tax Assurance Certificates held by entities within the scope of the new Bermuda corporate income tax (such as those issued to us, referred to above under “—Taxation of Arch Capital.

Given the potential for the new Bermuda corporate income tax to supersede existing Tax Assurance Certificates, it is likely that Arch will be subject to Bermuda tax for tax years beginning on or after January 1, 2025.

It is expected that the Bermuda CIT generally will prevent or mitigate the risk of other adopting countries from collecting “top-up” taxes from Bermuda companies to reach the 15% minimum rate, although the continued evolution of the implementation of Pillar II may in some cases mean that the Bermuda CIT does not avoid a “top-up” tax in all scenarios.

The adoption of the tax laws described above (in particular, the adoption of an “under-taxed profit rule” by certain countries in which we and our affiliates do business and the expected implementation of a corporate income tax regime in Bermuda) are expected to result in an increase to our effective tax rate and aggregate tax liability, which may adversely affect our financial position and results of operations, and is expected to increase the complexity and cost of our worldwide tax compliance.

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What changed 10-K

Item 1A. Risk Factors