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• interest rate risk;
+Added: • credit risk;
• political risk.
−Removed: Return to table of contents
Equity Price Risk
−Removed: As of March 31, 2020 , our investments consisted primarily of an investment in SILP.
+Added: As of June 30, 2020, our investments consisted primarily of an investment in SILP.
Among SILP’s holdings are equity securities, the carrying values of which are based primarily on quoted market prices.
1 unchanged sentence
This risk is partly mitigated by the presence of both long and short equity securities as part of our investment strategy.
−Removed: As of March 31, 2020 , a 10% decline in the price of each of the underlying listed equity securities and equity-based derivative instruments would result in a loss of $5.2 million , or 1.1% , of our Investment Portfolio.
+Added: As of June 30, 2020, a 10% decline in the price of each of the underlying listed equity securities and equity-based derivative instruments would result in a loss of $7.0 million, or 1.5%, of our Investment Portfolio.
Computations of the prospective effects of hypothetical equity price changes are based on numerous assumptions, including the maintenance of the existing level and composition of investment securities and should not be relied on as indicative of future results.
2 unchanged sentences
SILP’s investments periodically include long or short investments in commodities or in derivatives directly impacted by fluctuations in the prices of commodities.
−Removed: As of March 31, 2020 , SILP’s investments included unhedged exposure to changes in gold prices, through physical gold holdings and derivative instruments with underlying exposure to changes in the price of natural gas and lean hogs.
−Removed: The following table summarizes the net impact that a 10% increase and decrease in commodity prices would have on the value of our Investment Portfolio as of March 31, 2020 .
+Added: As of June 30, 2020, SILP’s investments included unhedged exposure to changes in gold prices, through physical gold holdings and derivative instruments with underlying exposure to changes in the price of natural gas.
+Added: Return to table of contents
+Added: The following table summarizes the net impact that a 10% increase and decrease in commodity prices would have on the value of our Investment Portfolio as of June 30, 2020.
The below table excludes the indirect effect that changes in commodity prices might have on equity securities in our Investment Portfolio.
−Removed: 10% increase in commodity prices
−Removed: 10% decrease in commodity prices
+Added: 10% increase in commodity prices 10% decrease in commodity prices
+Added: Commodity Change in
+Added: fair value Change in
($ in millions)
+Added: Gold $ 0.5 $ (0.5)
+Added: Natural Gas 0.5 (0.5)
+Added: Total $ 1.0 $ (1.0)
Foreign Currency Risk
−Removed: Certain of our reinsurance contracts provide that ultimate losses may be payable or calculated in foreign currencies depending on the country of original loss.
−Removed: Foreign currency exchange rate risk exists to the extent that our foreign currency liabilities (case reserves and IBNR) are in excess of (or less than) the corresponding foreign currency cash balances and there is an increase (or decrease) in the exchange rate of that foreign currency.
−Removed: As of March 31, 2020 , we held GBP currency valued at $6.7 million while our exposure to GBP denominated loss reserves (net of funds withheld by cedents) was $10.7 million .
−Removed: As of March 31, 2020 , a 10% decrease in the U.S.
−Removed: dollar against the GBP (all else constant) would result in an estimated $0.5 million foreign exchange loss .
−Removed: Alternatively, a 10% increase in the U.S dollar against the GBP, would result in an estimated $0.5 million foreign exchange gain .
+Added: Certain of our reinsurance contracts are denominated in foreign currencies whereby premiums are receivable and losses are payable in foreign currencies.
+Added: Foreign currency exchange rate risk exists to the extent that our foreign currency reinsurance balances are in excess of (or less than) the corresponding foreign currency cash balances and there is an increase (or decrease) in the exchange rate of that foreign currency.
While we do not seek to precisely match our liabilities under reinsurance policies that are payable in foreign currencies with investments denominated in such currencies, we continually monitor our exposure to potential foreign currency losses and may use foreign currency cash and cash equivalents or forward foreign currency exchange contracts in an effort to mitigate against adverse foreign currency movements.
+Added: As of June 30, 2020, our net exposure to GBP denominated balances was £9.8 million.
+Added: As of June 30, 2020, a 10% decrease in the U.S.
+Added: dollar against the GBP (all else constant) would result in an estimated $1.2 million foreign exchange gain.
+Added: Alternatively, a 10% increase in the U.S dollar against the GBP, would result in an estimated $1.2 million foreign exchange loss.
We may also be exposed to foreign currency risk through SILP’s underlying cash, forwards, options and investments in securities denominated in foreign currencies.
−Removed: As of March 31, 2020 , some of our currency exposure resulting from foreign denominated securities (longs and shorts) was reduced by offsetting cash balances denominated in the corresponding foreign currencies.
−Removed: As of March 31, 2020 , a 10% increase or decrease in the value of the U.S.
+Added: As of June 30, 2020, some of our currency exposure resulting from foreign denominated securities (longs and shorts) was reduced by offsetting cash balances denominated in the corresponding foreign currencies.
+Added: As of June 30, 2020, a 10% increase or decrease in the value of the U.S.
dollar against foreign currencies would have no meaningful impact on the value of our Investment Portfolio.
−Removed: Return to table of contents
Interest Rate Risk
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Additionally, some of the derivative investments may also be sensitive to interest rates and their value may indirectly fluctuate with changes in interest rates.
−Removed: As of March 31, 2020 , a 100 basis points increase or decrease in interest rates would have no meaningful impact on the value of our Investment Portfolio.
+Added: As of June 30, 2020, a 100 basis points increase or decrease in interest rates would have no meaningful impact on the value of our Investment Portfolio.
We, along with DME Advisors, monitor the net exposure to interest rate risk and generally do not expect changes in interest rates to have a materially adverse impact on our operations.
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We obtain collateral in the form of funds withheld, trusts and letters of credit from our counterparties to mitigate this credit risk.
−Removed: We monitor our net exposure to each counterparty relative to the financial strength of our counterparties and assess the collectibility of these balances on a regular basis.
+Added: Return to table of contents
+Added: monitor our net exposure to each counterparty relative to the financial strength of our counterparties and assess the collectibility of these balances on a regular basis.
See Note 2 of the accompanying condensed consolidated financial statements for further details on allowance for credit loss on reinsurance assets and notes receivable.
2 unchanged sentences
Political Risk
−Removed: Through our assumed reinsurance contracts, we currently provide limited amount of political risk insurance coverage which is not expected to have a materially adverse impact on our underwriting results.
+Added: Through our assumed reinsurance contracts, we currently provide a limited amount of political risk insurance coverage which is not expected to have a materially adverse impact on our underwriting results.
We are exposed to political risk to the extent that we underwrite business from entities located in foreign markets and to the extent that DME Advisors, on behalf of SILP and subject to our investment guidelines, trades securities that are listed on various U.S.
5 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.