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Item 1A. Risk Factors

2021-03-10 compared with 2020-03-09 · 266 added, 222 removed, 535 unchanged (48% of the section changed)

Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition.

The following risk factors could result in a significant or material adverse effect on our results of operations or financial condition.

Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

Risk Factors Summary

The following is a summary of the principal risks that could adversely affect our business, operations and financial results.

Risks Relating to Our Business

We cannot assure you that our strategic review will result in a transaction or that any such transaction would be successful, and the process of exploring strategic alternatives or its conclusion could adversely impact our business and our stock price.

In August 2019, we announced the engagement of Credit Suisse Securities (USA) LLP to assist us in identifying and evaluating a range of potential strategic alternatives.

This strategic review is ongoing and no timetable has been established for its completion.

There can be no assurances that the strategic review will yield additional value for shareholders.

Any potential transaction would be dependent on a number of factors that may be beyond our control, including, among other things, market conditions, industry trends, and interest of third parties in a potential transaction.

The strategic review could adversely affect our business, financial condition and results of operations.

We could incur substantial expenses associated with evaluating potential strategic alternatives.

In addition, the process may be time consuming and disruptive to our business operations, could divert the attention of management and the Board of Directors from our business, could negatively affect our ability to attract, retain and motivate key employees, and could expose us to potential litigation in connection with this process or any resulting transaction.

Further, speculation regarding any developments related to the review of strategic alternatives and perceived uncertainties related to the future of the Company could cause our stock price to fluctuate significantly.

In connection with our strategic review, we have implemented steps to preserve shareholder value and improve our position.

The implementation of any changes based on our strategic review may involve substantial uncertainties and risk, and our results of operations, business and financial strength rating may be materially and adversely impacted if we do not succeed in implementing such initiatives.

During the second quarter of 2019, A.M.

Best revised its rating outlook of the Company’s subsidiaries’ Financial Strength Rating of A- (Excellent) from “stable” to “negative.” Companies, insurers and reinsurance brokers use ratings from independent rating agencies as an important means of assessing the financial strength and quality of reinsurers.

These ratings reflect the rating agency’s opinion of our reinsurance subsidiaries’ financial strength, operating performance and ability to meet obligations.

They are not evaluations directed toward the protection of investors or a recommendation to buy, sell or hold our Class A ordinary shares.

As a result of A.M.

Best’s revision, we implemented steps designed to preserve shareholder value, including exploring strategic alternatives, de-risking our investment portfolio and conducting an analysis of our business lines, their positioning and internal operations.

These initiatives and their implementation involve significant uncertainties and risks that may result in unforeseen expenses and costs, complications or delays.

If we do not succeed in concluding our strategic review and implementing resulting initiatives on a timely basis, our results of operations, business and financial strength rating may be materially and adversely impacted.

Even if we successfully implement these measures, there can be no assurance that they will improve our results of operations, preserve shareholder value or maintain or improve our financial strength rating.

• The impact of COVID-19 and related risks could materially and adversely affect our results of operations, financial position and liquidity.

• Our results of operations will likely fluctuate from period to period and may not be indicative of our long-term prospects.

• A downgrade or withdrawal of either of our A.M.

Best ratings would materially and adversely affect our ability to implement our business strategy successfully.

• If our losses and loss adjustment expenses greatly exceed our loss reserves, our financial condition may be materially and adversely affected.

• The inability to obtain business provided from brokers could materially and adversely affect our ability to implement our business strategy and results of operations.

• We are subject to the credit risk of our brokers, cedents, agents and other counterparties.

Risks Relating to Insurance and Other Regulations

• Any suspension or revocation of our reinsurance licenses would materially and adversely impact our ability to do business and implement our business strategy.

• Our reinsurance subsidiaries are subject to minimum capital and surplus requirements, and our failure to meet these requirements could subject us to regulatory action.

• We are subject to the risk of possibly becoming an investment company under U.S.

federal securities law.

Risks Relating to Our Investment Strategy and Our Investment Advisor

• Under the SILP LPA, we are contractually obligated to invest substantially all our assets in SILP with certain exceptions.

SILP’s performance depends on the ability of DME Advisors to select and manage appropriate investments.

• Under our investment management structure, we have limited control over SILP.

• SILP effectuates short sales that subject our capital accounts to material and adverse loss potential.

• SILP may be concentrated in a few large positions, which could result in investment volatility and large losses.

• Apart from funds required for collateral purposes, substantially all of our investable assets are or are expected to be invested with SILP and, as a result, we depend upon DME II to implement our investment strategy.

• Potential conflicts of interest with DME Advisors may exist that could adversely affect us.

• The compensation arrangements of SILP may create an incentive to effect transactions that are risky or speculative.

• Certain investments made by SILP may have limited liquidity and lack valuation data, which could create a conflict of interest.

Risks Relating to our Class A Ordinary Shares

• Our level of debt may have an adverse impact on our liquidity, restrict our current and future operations, particularly our ability to respond to business opportunities, and increase our vulnerability to adverse economic and industry conditions.

• We may not be able to pay interest on the convertible notes or settle conversions of the convertible notes in cash or repurchase the notes upon a fundamental change, and our future debt, if any, may contain limitations on our ability to pay cash upon conversion or repurchase of the convertible notes.

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• Provisions of our Articles, the Companies Act of the Cayman Islands and our corporate structure may each impede a takeover, which could adversely affect the value of our Class A ordinary shares.

Risks Relating to Taxation

• Greenlight Capital Re, Greenlight Re and/or GRIL may be subject to United States federal income taxation.

• United States persons who own Class A ordinary shares may be subject to United States federal income taxation on our undistributed earnings and may recognize ordinary income upon disposition of Class A ordinary shares.

1, the recently passed tax reform bill, is causing us to undertake changes to the manner in which we conduct our business and could subject United States persons who own Class A ordinary shares to United States income taxation on our undistributed earnings.

• The impact of the initiative of the OECD and the EU to eliminate harmful tax practices is uncertain and could adversely affect our tax status in the Cayman Islands where we are exempt from income taxes.

Additional details relating to the above and other risk factors are described below:

Risks Relating to Our Business

The impact of COVID-19 and related risks could materially and adversely affect our results of operations, financial position and liquidity.

The global pandemic related to COVID-19 which began in March 2020 continues to impact the global economy.

Because of the size and breadth of the pandemic, direct and indirect consequences of COVID-19 are not yet fully known and will likely not emerge for some time.

We cannot provide assurance on the short-term or long-term impacts of COVID-19 on

our various product lines.

The potential exists for elevated frequency and severity losses in the event of legislative action to

retroactively mandate coverage irrespective of terms, exclusions or other conditions included in the policies that would

otherwise preclude coverage and, accordingly, historical analysis and data utilized in our assessment of anticipated losses may

not be reliable.

Identified risks to our operations, financial position and/or liquidity presented by the ongoing effects of COVID-19 include the following:

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We expect that the impact of COVID-19 on general economic activity will negatively impact the premium written of our cedents and, in turn, our gross written and earned premium.

The degree of the impact will depend on the extent and duration of economic contraction, particularly in the United States.

Given the anticipated impact of the pandemic on our gross written and earned premiums, we expect an increase in our underwriting expense ratio in the near term.

● Loss and Loss Adjustment Expenses.

We believe that, as a result of COVID-19, we will experience higher loss and loss adjustment expenses in certain lines of business due to anticipated increases in frequency and/or severity of claims.

For example, we may experience elevated frequency and severity in our workers’ compensation and health (medical stop loss) lines related to compensable claims by workers who demonstrate that the injury or illness arose both out of and in the course of their employment and, as discussed below, potentially as a result of legislative or regulatory action to effectively expand workers’ compensation coverage by creating presumptions of compensability for certain types of workers.

In addition, limited availability of medical resources could result in medical inflation and complicate, delay and/or extend treatment for COVID-19 and non-COVID-19 related issues.

Most of our health business relates to medical stop-loss coverage of employer health plans where the employer retains an initial level of risk.

To the extent COVID-19 workers’ compensation and health (medical stop loss) claims exceed the employers’ self-retention levels, our incurred losses will be adversely impacted.

Higher levels of unemployment will likely increase delinquencies and defaults by homeowners, thereby increasing the claims relating to our mortgage business.

Additionally, a decline in home prices and resulting foreclosures could further adversely impact losses on our mortgage business.

Frequency and severity of claims could also increase with respect to our motor business due to, among other things, disruptions in supply chains and reduced repair shop and/or parts availability.

Our cedents may experience higher losses resulting from delayed reporting and settlement of claims due to limited access to business locations;

collisions at faster speeds traveled as a result of less congested roadways;

and increased first party medical losses in certain jurisdictions.

We may also experience elevated frequency and severity in our liability coverages as a result of plaintiffs’ lawyers seeking to generate COVID-19-related claim activity against our insureds.

We have some exposure to construction surety, where there is the potential for elevated losses if contractors experience shutdowns, which could negatively impact their cash flows, or experience disruptions in their supply chains, unavailability of labor or increased costs for materials, each of which increases their costs.

In our commercial and multi-lines business, there is the potential for elevated frequency and severity due to an increase in the number of bankruptcies, cancellations and other contingency claims.

In addition, anticipated and unknown risks related to COVID-19 may cause additional uncertainty in the process of estimating claims and claim adjustment expense reserves.

For example, the behavior of underlying claimants and policyholders may change in unexpected ways (such as, our cedents may experience an increase in the number of fraudulent claims), the disruption to the court system may impact the timing and amounts of claims settlements and the actions taken by governmental bodies, both legislative and regulatory, in reaction to COVID-19 and their related impacts are hard to predict.

As a result, our estimated level of claims and claim adjustment expense reserves may change.

Changes in economic conditions and steps taken by governments and regulatory authorities in response to COVID-19 could lead to higher inflation than anticipated, which could in turn lead to an increase in loss costs and the need to strengthen claims and claim adjustment expense reserves.

The impact of inflation on loss costs and loss and loss adjustment expense reserves could be more pronounced for those lines of business that require a relatively longer period of time to finalize and settle claims for a given accident year and, accordingly, are relatively more inflation sensitive.

● Investments.

Major equity indices experienced significant volatility throughout 2020 driven by COVID-19.

Similar disruptions in global financial markets due to the continuing impact of COVID-19 could result in investment losses, including potential impairments in our private equity investments relating to Innovations.

For further discussion of the risks related to our investment portfolio see “Risks Relating to Our Investment Strategy and Our Investment Advisor” included in “Part I-Item 1A-Risk Factors”.

● Operational Disruptions and Heightened Cybersecurity Risks.

Our operations could be disrupted if key members of our senior management or a significant percentage of our employees or those of our cedents, agents, brokers, suppliers or outsourcing providers are unable to continue to work because of illness, government directives or otherwise.

In addition, the interruption of our or their system capabilities could result in a deterioration of our ability to write and process new and renewal business, provide customer service, pay claims in a timely manner or perform other necessary business functions.

Having shifted to remote working arrangements, we also face a heightened risk of cybersecurity attacks or data security incidents and are more dependent on internet and telecommunications access and capabilities.

For a further discussion, see “Operational risks, including human or systems failures, are inherent in our business” included in “Part I-Item IA-Risk Factors”.

As a result of the above risks, COVID-19 could materially and adversely impact our results of operations, financial position and/or liquidity.

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Our results of operations will likely fluctuate from period to period and may not be indicative of our long-term prospects.

The performance of our operations will likely fluctuate from period to period.

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● our ability to assess and integrate our risk management strategy properly.

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In particular, we seek attractive opportunities to underwrite products and make investments to achieve favorable returns on equity over the long term.

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Accordingly, our short-term results of operations may not be indicative of our long-term prospects.

A downgrade in our ratings below specified levels or a significant decrease in our capital or surplus could enable certain clients to terminate reinsurance agreements or to require additional collateral.

Certain of our assumed reinsurance contracts contain provisions that permit our clients to cancel the contract or require additional collateral in the event of a downgrade in our ratings below specified levels or a reduction of our capital or surplus below specified levels over the course of the agreement.

We expect that similar provisions will also be included in some contracts in the future.

Whether a client would exercise such cancellation rights would likely depend, among other things, on the reason the provision is triggered, the prevailing market conditions, the degree of unexpired coverage and the pricing and availability of replacement reinsurance coverage.

The decrease in our surplus during 2018 triggered, in certain contracts, our client’s right to terminate and/or request additional collateral.

During 2018 and 2019 we increased the amount of collateral provided to certain clients.

We cannot predict how many of our clients would ultimately exercise such rights.

The exercise of such rights in aggregate could have a significant effect on our financial condition, results of operations and our underwriting capacity.

A downgrade or withdrawal of either of our A.M.

Best ratings may significantly and negatively affect our ability to implement our business strategy successfully.

Best downgrades or withdraws either of our ratings, we could be severely limited or prevented from writing any new reinsurance contracts, which would significantly and negatively affect our ability to implement our business strategy.

Best ratings would materially and adversely affect our ability to implement our business strategy successfully.

Best downgrades or withdraws either of our ratings, we could be severely limited or prevented from writing any new reinsurance contracts, which would materially and adversely affect our ability to implement our business strategy.

Additionally, if A.M.

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● if our investments incur significant losses.

A downgrade in A.M.

Best ratings below specified levels or a significant decrease in our capital or surplus could enable certain clients to terminate reinsurance agreements or to require additional collateral.

Certain of our assumed reinsurance contracts contain provisions that permit our clients to cancel the contract or require additional collateral in the event of a downgrade in our A.M.Best ratings below specified levels or a reduction of our capital or surplus below specified levels over the course of the agreement.

We expect that similar provisions will also be included in some contracts in the future.

We cannot predict how many of our clients would ultimately exercise such rights.

The exercise of such rights in aggregate could have a significant effect on our financial condition, results of operations and our underwriting capacity.

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● the experience and reputation of the members of our underwriting team in the particular lines of reinsurance we seek to underwrite.

Additionally, although the members of our underwriting deal teams have experience across many property and casualty lines, they may not have the requisite or specialized experience or expertise to compete for all transactions that fall within our strategy at times and in markets where capacity and alternatives may be limited.

Our competitors vary according to the individual market and situation, but generally include Arch, Axis, Everest Re, Hamilton Re, Hannover Re, Partner Re, Renaissance Re and Third Point Re as well as smaller companies, other niche reinsurers and Lloyd’s syndicates and their related entities.

Additionally, although the members of our underwriting deal team have experience across many property and casualty lines, they may not have the requisite or specialized experience or expertise to compete for all transactions that fall within our strategy at times and in markets where capacity and alternatives may be limited.

Our competitors vary according to the individual market and situation.

Generally, they include Arch Capital, Axis, Everest Re, Hamilton Re, Hannover Re, PartnerRe, RenaissanceRe, SiriusPoint, and smaller companies, other niche reinsurers and Lloyd’s syndicates and their related entities.

Although we seek to provide coverage where capacity and alternatives are limited, we directly compete with these and other larger companies due to the breadth of their coverage across the property and casualty market in substantially all lines of business that we write.

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We could also experience more robust competition from larger, better capitalized competitors.

Any of the foregoing could significantly, and negatively, affect our business or our results of operations.

Any of the foregoing could materially and adversely affect our business or our results of operations.

We cannot provide assurance that we will be able to compete successfully in the reinsurance market.

Our failure to compete effectively could significantly and negatively affect our financial condition and results of operations and may increase the likelihood that we may be deemed to be a passive foreign investment company or an investment company.

Our failure to compete effectively could materially and adversely affect our financial condition and results of operations and may increase the likelihood that we may be deemed to be a passive foreign investment company or an investment company.

See “Item 1A.

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If we determine our loss reserves to be inadequate, we will increase our loss reserves with a corresponding reduction in our net income and capital in the period in which we identify the deficiency, and such a reduction would also negatively affect our results of operations.

If our losses and loss adjustment expenses greatly exceed our loss reserves, our financial condition may be significantly and negatively affected.

If our losses and loss adjustment expenses greatly exceed our loss reserves, our financial condition may be materially and adversely affected.

For a summary of the effects of reserve re-estimation on prior year reserves and net income, see “Part II.

Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates, Loss and Loss Adjustment Expense Reserves ”

We may face risks arising from future strategic transactions such as acquisitions, dispositions, mergers or joint ventures.

We may pursue strategic transactions in the future, which could involve acquisitions or dispositions of businesses or assets.

Any strategic transactions could have an adverse impact on our reputation, business, results of operation or financial condition.

We face a number of risks arising from these types of transactions, including financial, accounting, tax and regulatory challenges;

difficulties with integration, business retention, execution of strategy, unforeseen liabilities or market conditions;

and other managerial or operating risks and challenges.

Any future transactions could also subject us to risks such as failure to obtain appropriate value, post-closing claims being levied against us and disruption to our other businesses during the negotiation or execution process or thereafter.

Accordingly, these risks and difficulties may prevent us from realizing the expected benefits from such strategic transactions.

For example, businesses that we acquire or our strategic alliances or joint ventures may underperform relative to the price paid or resources committed by us;

we may not achieve anticipated cost savings;

or we may otherwise be adversely affected by transaction-related charges.

Through strategic transactions, we may also assume unknown or undisclosed business, operational, tax, regulatory and other liabilities, fail to properly assess known contingent liabilities, or assume businesses with internal control deficiencies.

Risk-mitigating provisions that we put in place in the course of negotiating and executing these transactions, such as due diligence efforts and indemnification provisions, may not be sufficient to fully address these liabilities and contingencies.

The effect of emerging claim and coverage issues on our business is uncertain.

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The effects of unforeseen developments or substantial government intervention could adversely impact our ability to attain our goals.

For example, on January 30, 2020, the World Health Organization declared the outbreak of coronavirus (the “COVID-19”) to be a public health emergency of international concern.

Due to the evolving and highly uncertain nature of this event, it is currently not possible to estimate the direct or indirect impacts this outbreak may have on our business.

However, if the COVID-19 were to develop into a global pandemic, it could materially and adversely affect our results of operations and financial condition due to the disruptions to commerce, reduced economic activity and other consequences of a pandemic.

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For example, due to the evolving and highly uncertain nature of COVID-19, it is currently not possible to estimate the direct or indirect impacts this pandemic may have on our business.

As COVID-19 has developed into a global pandemic, it could materially and adversely affect our results of operations, financial condition and liquidity due to the disruptions to commerce, reduced economic activity and other consequences of a pandemic.

The property and casualty reinsurance market may be affected by cyclical trends.

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

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Unpredictable developments, including courts granting increasingly larger awards for certain damages, natural disasters (such as catastrophic hurricanes, windstorms, tornadoes, earthquakes, wildfires and floods), fluctuations in interest rates, changes in the investment environment that affect market prices of investments and inflationary pressures, affect the industry’s profitability.

The effects of cyclicality could significantly and negatively affect our financial condition and results of operations.

The effects of cyclicality could materially and adversely affect our financial condition and results of operations.

Global economic downturns and any significant weakness in the U.S.

economy could harm our business, our liquidity and financial condition and our stock price.

Weak economic conditions may adversely affect (among other aspects of our business) the demand for and claims made under our products, the ability of customers, counterparties and others to establish or maintain their relationships with us, our ability to access and efficiently use internal and external capital resources and our investment performance.

Volatility in the U.S.

and other securities markets may adversely affect our investment portfolio and our stock price.

and other securities markets may adversely affect our investment in SILP and our stock price.

Operational risks, including human or systems failures, are inherent in our business.

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Like all companies, our information technology and application systems may be vulnerable to data breaches, interruptions or failures due to events that may be beyond our control, including, but not limited to, natural disasters, theft, terrorist attacks, malicious cyber-attacks , computer viruses, hackers and general technology failures.

A major defect or failure in our internal controls or information technology and application systems could result in management distraction, a violation of applicable privacy or other laws, harm our reputation, cause a loss of customers or give rise to

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monetary fines or penalties or otherwise increase expenses.

We believe appropriate controls and mitigation procedures are in place to prevent significant risk of data breaches, interruptions or failures in, information technology and application systems, but internal controls provide only a reasonable, not absolute, assurance as to the absence of errors or irregularities and any ineffectiveness of such controls and procedures could have a material adverse effect on our business.

The inability to obtain business provided from brokers could adversely affect our business strategy and results of operations.

The inability to obtain business provided from brokers could materially and adversely affect our ability to implement our business strategy and results of operations.

Substantially all of our business is placed through brokered transactions, which involve a limited number of reinsurance brokers which exposes us to concentration risk.

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Because broker-produced business is concentrated with a small number of brokers, we are exposed to concentration risk.

To lose or fail to expand all or a substantial portion of the business provided through brokers, could significantly and negatively affect our business and results of operations.

To lose or fail to expand all or a substantial portion of the business provided through brokers, could materially and adversely affect our business and results of operations.

We may need additional capital in the future in order to operate our business, and such capital may not be available to us or may not be available to us on favorable terms.

We may need to raise additional capital in the future through public or private equity or debt offerings or otherwise in order to:

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● fund liquidity needs caused by underwriting or investment losses;

● repay our convertible notes;

● meet rating agency capital requirements;

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We believe that factors including increases in the value and geographic concentration of insured property, particularly along coastal regions, the possibility of an increase in the frequency and/or severity of extreme weather events, and the effects of inflation may increase the severity of claims from catastrophic events in the future.

Claims from catastrophic events such as hurricanes, typhoons and wildfires in 2017, 2018 and 2019 have reduced our earnings and caused substantial volatility in our results of operations and have affected our financial condition.

Future catastrophic events may significantly reduce our earnings and cause further volatility in our results of operations and the corresponding reductions in our surplus levels could impact our ability to write new reinsurance policies.

Claims from catastrophic events such as hurricanes, typhoons, derecho and wildfires from 2017 to 2020 have reduced our earnings and caused substantial volatility in our results of operations and have affected our financial condition.

Future catastrophic events may materially reduce our earnings and cause further volatility in our results of operations and the corresponding reductions in our surplus levels could impact our ability to write new reinsurance policies.

Catastrophic losses are a function of the insured exposure in the affected area and the severity of the event.

Because accounting regulations do not permit reinsurers to reserve for catastrophic events until they occur, claims from catastrophic events could cause substantial volatility in our financial results for any fiscal quarter or year and could significantly and negatively affect our financial condition and results of operations.

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Because accounting regulations do not permit reinsurers to reserve for catastrophic events until they occur, claims from catastrophic events could cause substantial volatility in our financial results for any fiscal quarter or year and could materially and adversely affect our financial condition and results of operations.

We depend on our clients’ evaluations of the risks associated with their insurance underwriting, which may subject us to reinsurance losses.

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Therefore, we are dependent on the claims decisions made by our clients.

We could face unanticipated losses from political instability which could have a material adverse effect on our financial condition and results of operations.

We could face unanticipated losses on our reinsurance contracts from political instability which could have a material adverse effect on our financial condition and results of operations.

We could be exposed to unexpected losses on our reinsurance contracts resulting from political instability and other politically driven events globally.

These risks are inherently unpredictable and it is difficult to predict the timing of these events or to estimate the amount of loss that any given occurrence will generate.

To the extent that losses from these risks occur, our financial condition and results of operations could be significantly and negatively affected.

Our failure to maintain sufficient collateral arrangements or to increase our collateral capacity on commercially acceptable terms as we grow could significantly and negatively affect our ability to implement our business strategy.

We are not licensed or admitted as a reinsurer in any jurisdiction other than the Cayman Islands and the European Economic Area.

Certain jurisdictions, including the United States, do not permit insurance companies to take credit for reinsurance obtained from unlicensed or non-admitted insurers on their statutory financial statements unless appropriate security measures are implemented.

Consequently, certain clients will require us to provide collateral often in the form of a letter of credit, a trust agreement or funds withheld.

When we provide collateral, we are customarily required to provide collateral to the letter of credit provider or beneficiary of the trust agreement.

Our ability to provide collateral, and the costs at which we provide collateral, are primarily dependent on the composition of our investment portfolio.

Typically, letters of credit are collateralized and trust agreements are funded with fixed-income securities or cash.

Banks may be willing to accept our investment portfolio as collateral, but on terms that may be less favorable to us than reinsurance companies that invest solely or predominantly in fixed-income securities.

The inability to renew, maintain or obtain letters of credit collateralized by our investment portfolio or to fund trust agreements may significantly limit the amount of reinsurance we can write or require us to modify our investment strategy.

Our access to funds under our existing credit facility is dependent on the ability of the bank that is a party to the facility to meet its funding commitments.

The bank may not be able to meet its funding commitments if it experiences shortages of capital and liquidity or if it experiences excessive volumes of borrowing requests within a short period of time, and we might be forced to replace credit sources in a difficult market.

Any significant consolidation in the financial industry could lead to increased reliance on and exposure to particular institutions.

If we cannot obtain adequate capital or sources of credit on favorable terms, or at all, our business, operating results and financial condition could be adversely affected.

It is possible that, in the future, rating agencies may reduce our existing ratings.

If one or more of our ratings were downgraded, we could incur higher borrowing costs and our ability to access the capital markets could be impacted.

Our inability to obtain adequate capital could have a significant and negative effect on our business, financial condition and results of operations.

We may need additional collateral capacity as we grow, and if we are unable to renew, maintain or increase our collateral facilities or are unable to do so on commercially acceptable terms we may need to liquidate all or a portion of our investment portfolio and invest in a fixed-income portfolio or other forms of investment acceptable to our clients and banks as collateral, which could significantly and negatively affect our ability to implement our business strategy.

To the extent that losses from these risks occur, our financial condition and results of operations could be materially and adversely affected.

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Our failure to comply with restrictive covenants contained in our current or future credit facilities could trigger prepayment obligations, which could adversely affect our business, financial condition and results of operations .

Our credit facility requires us and/or certain of our subsidiaries to comply with certain covenants, including restrictions on our ability to place a lien or charge on pledged assets, issue debt and in certain circumstances on the payment of dividends.

Our failure to comply with these or other covenants could result in an event of default under the credit facility or any credit

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facility we may enter into in the future, which, if not cured or waived, could result in us being required to repay the amounts outstanding under these facilities prior to maturity.

As a result, our business, financial condition and results of operations could be significantly and negatively affected.

If we lose or are unable to retain our senior management and other key personnel and are unable to attract qualified personnel, our ability to implement our business strategy could be delayed or hindered, which, in turn, could significantly and negatively affect our business.

Our failure to comply with these or other covenants could result in an event of default under the credit facility or any credit facility we may enter into in the future, which, if not cured or waived, could result in us being required to repay the amounts outstanding under these facilities prior to maturity.

As a result, our business, financial condition and results of operations could be materially and adversely affected.

Our future success depends, to a significant extent, on the efforts of our senior management and other key personnel to implement our business strategy.

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We could face challenges attracting and retaining personnel in the Cayman Islands and/or in Dublin, Ireland.

Accordingly, the loss of the services of one or more of the members of our senior management or other key personnel, or our inability to hire and retain other key personnel, could prevent us from continuing to implement our business strategy and, consequently, significantly and negatively affect our business.

We do not currently maintain key man life insurance with respect to any of our senior management, including our Chief Executive Officer, Chief Financial Officer, Chief Underwriting Officer, Chief Risk Officer or General Counsel.

We do not currently maintain key man life insurance with respect to any of our senior management, including our Chief Executive Officer, Chief Underwriting Officer, Chief Financial Officer, Chief Risk Officer, or General Counsel.

If any member of senior management dies or becomes incapacitated, or leaves the Company to pursue employment opportunities elsewhere, we would be solely responsible for locating an adequate replacement for such senior management and for bearing any related cost.

To the extent that we are unable to locate an adequate replacement or are unable to do so within a reasonable period of time, our business may be significantly and negatively affected.

To the extent that we are unable to locate an adequate replacement or are unable to do so within a reasonable period of time, our business may be materially and adversely affected.

We may face risks arising from future strategic transactions such as acquisitions, dispositions, mergers or joint ventures.

We may pursue strategic transactions in the future, which could involve acquisitions or dispositions of businesses or assets.

Any strategic transactions could have an adverse impact on our reputation, business, results of operation or financial condition.

We face a number of risks arising from these types of transactions, including financial, accounting, tax and regulatory challenges;

difficulties with integration, business retention, execution of strategy, unforeseen liabilities or market conditions;

and other managerial or operating risks and challenges.

Accordingly, these risks and difficulties may prevent us from realizing the expected benefits from such strategic transactions.

For example, businesses that we acquire or our strategic alliances or joint ventures may underperform relative to the price paid or resources committed by us;

we may not achieve anticipated cost savings;

or we may otherwise be adversely affected by transaction-related charges.

Our ability to implement our business strategy could be adversely affected by Cayman Islands employment restrictions.

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The failure of these work permits to be granted or extended could prevent us from continuing to implement our business strategy.

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We are subject to the credit risk of our brokers, cedents, agents and other counterparties.

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We have recognized losses due to counterparties’ inability to repay us, and we may incur such losses in the future.

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Our reinsurance balances receivable from brokers and cedents at December 31, 2019 totaled $ 230.4 million , which included premiums and ceding commissions receivable, a majority of which are not collateralized.

Our reinsurance balances receivable from brokers and cedents at December 31, 2020 totaled $330.2 million, which included premiums, ceding commissions receivable as well as funds at Lloyds of London, a majority of which are not collateralized.

We cannot provide assurance that such receivables will be collected or that valuation allowances or write downs for uncollectible recoverable amounts will not be required in future periods.

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Accordingly, we may not be able to obtain our desired amounts of retrocessional coverage or negotiate terms that we deem appropriate or acceptable or obtain retrocessional coverage from entities with satisfactory creditworthiness.

Our failure to establish adequate retrocessional arrangements or the failure of our retrocessional arrangements to protect us from overly concentrated risk exposure could significantly and negatively affect our business, financial condition and results of operations.

Our failure to establish adequate retrocessional arrangements or the failure of our retrocessional arrangements to protect us from overly concentrated risk exposure could materially and adversely affect our business, financial condition and results of operations.

The failure of any risk management and loss limitation methods we employ, as well as an unexpected accumulation of attritional losses, could have a material adverse effect on our financial condition and results of operations.

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Non-compliance with laws, regulations and taxation regarding transactions with international counter-parties may adversely affect our business.

As we provide reinsurance on a worldwide basis, we are subject to an expanding legal, regulatory and tax environment intended to help detect and prevent anti-trust activity, money laundering, terrorist financing, proliferation financing, fraud, tax avoidance and other illicit activity.

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avoidance and other illicit activity.

These requirements include, among others, regulations promulgated and administered by CIMA, the U.S.

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We may incur foreign currency exchange gains or losses as we ultimately receive premiums and settle claims in foreign currencies.

In addition, DME Advisors may invest a portion of our portfolio in securities or cash denominated in currencies other than the U.S.

Consequently, we may experience exchange rate losses to the extent any of our foreign currency exposure is not hedged, which could significantly and negatively affect our business.

If we do seek to hedge our foreign currency exposure through the use of forward foreign currency exchange contracts or currency swaps, we will be subject to the risk that our counterparties to the arrangements fail to perform.

In addition, SILP may invest in securities or cash denominated in currencies other than the U.S.

Consequently, we may experience exchange rate losses to the extent any of our foreign currency exposure is not hedged, which could materially and adversely affect our business.

If we or SILP hedge our foreign currency exposure through the use of forward foreign currency exchange contracts or currency swaps, we will be subject to the risk that our or SILP’s counterparties to the arrangements fail to perform.

There are differences under Cayman Islands corporate law and Delaware corporate law with respect to interested party transactions which may benefit certain of our shareholders at the expense of other shareholders.

Under Cayman Islands corporate law, a director may vote on a contract or transaction where the director has an interest as a shareholder, director, officer or employee provided such interest is disclosed.

None of our contracts will be deemed to be

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void because any director is an interested party in such transaction and interested parties will not be held liable for monies owed to the Company.

None of our contracts will be deemed to be void because any director is an interested party in such transaction and interested parties will not be held liable for monies owed to the Company.

Under Delaware law, interested party transactions are voidable.

Risks Relating to Insurance and Other Regulations

Any suspension or revocation of our reinsurance license would materially impact our ability to do business and implement our business strategy.

Any suspension or revocation of our reinsurance license would materially and adversely impact our ability to do business and implement our business strategy.

We are presently licensed as a reinsurer only in the Cayman Islands and the European Economic Area.

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Any such suspension or revocation of our license would negatively impact our reputation in the reinsurance marketplace and could have a material adverse effect on any potential license application and on our results of operations.

CIMA and CBI may take a number of actions, including suspending or revoking a reinsurance license whenever the regulatory body believes that a licensee is or may become unable to meet its obligations, is carrying on business in a manner likely to be detrimental to the public interest or to the interest of its creditors or policyholders, has contravened the terms of the Law or has otherwise behaved in such a manner so as to cause such regulatory body to call into question the licensee’s fitness to conduct regulated activity.

CIMA and CBI may take a number of actions, including suspending or revoking a reinsurance license whenever the regulatory body believes that a licensee is or may become unable to meet its obligations, is carrying on business in a manner likely to be detrimental to the public interest or to the interest of its creditors or policyholders, has contravened the terms of the Act or has otherwise behaved in such a manner so as to cause such regulatory body to call into question the licensee’s fitness to conduct regulated activity.

Further, based on statutes, regulations and policies in their respective jurisdictions, CIMA and CBI may suspend or revoke our license if:

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federal securities law .”)

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Our reinsurance subsidiaries are subject to minimum capital and surplus requirements, and our failure to meet these requirements could subject us to regulatory action.

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Under the prudential regime applying prior to the introduction of Solvency II, GRIL, our Irish subsidiary, was required to maintain statutory reserves, particularly in respect of underwriting liabilities.

Effective January 1, 2016, Solvency II introduced risk-based solvency requirements which GRIL is required to comply with, including calculating and maintaining a minimum capital requirement and solvency capital requirement.

GRIL is required to comply with risk-based solvency requirements under Solvency II including calculating and maintaining a minimum capital requirement and solvency capital requirement.

As of December 31, 2020, GRIL’s minimum capital requirement and solvency capital requirement was approximately $6.9 million and $27.8 million, respectively.

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Further, any changes in existing risk based capital requirements or minimum statutory capital requirements may require us to increase our statutory capital levels, which we might be unable to do.

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We are a holding company that depends on the ability of our subsidiaries to pay dividends.

We are a holding company and do not have any significant operations or assets other than our ownership of the shares of our subsidiaries.

Dividends and other permitted distributions from our subsidiaries are our primary source of funds to meet ongoing cash requirements, including future debt service payments, if any, and other expenses, and to pay dividends to our shareholders if we choose to do so.

Dividends and other permitted distributions from our subsidiaries are our primary source of funds to meet ongoing cash requirements, including future debt service payments, if any, and other corporate expenses, and to repurchase shares or pay dividends to our shareholders if we choose to do so.

Some of our subsidiaries are subject to significant regulatory restrictions limiting their ability to declare and pay dividends.

The inability of our subsidiaries to pay dividends in an amount sufficient to enable us to meet our cash requirements at the holding company level could have an adverse effect on our operations and our ability to pay dividends to our shareholders if we choose to do so and/or meet our debt service obligations, if any.

The inability of our subsidiaries to pay dividends in an amount sufficient to enable us to meet our cash requirements at the holding company level could have an adverse effect on our operations and our ability to repurchase shares or pay dividends to our shareholders if we choose to do so and/or meet our debt service obligations, if any.

To the extent any of our subsidiaries located in jurisdictions other than the Cayman Islands consider declaring dividends, such subsidiaries are required to comply with restrictions set forth under applicable law and regulations in such other jurisdictions.

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If we could not identify or retain such an advisor, we would be required to make substantial modifications to our investment strategy.

Any such changes to our investment strategy could significantly and negatively impact our investment results, financial condition and our ability to implement our business strategy.

If at any time it were established that we had been operating as an investment company in violation of the registration requirements of the Investment Company Act, there would be a risk, among other material adverse consequences, that we could become subject to monetary penalties or injunctive relief, or both, or that we would be unable to enforce contracts with third parties or that third parties could seek to obtain rescission of transactions with us undertaken during the period in which it was established that we were an unregistered investment company.

Any such changes to our investment strategy could materially and adversely impact our investment results, financial condition and our ability to implement our business strategy.

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parties or that third parties could seek to obtain rescission of transactions with us undertaken during the period in which it was established that we were an unregistered investment company.

To the extent that the laws and regulations change in the future so that contracts we write are deemed not to be reinsurance contracts, we will be at greater risk of not qualifying for the Investment Company Act exception.

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It also imposes group solvency and governance requirements on groups with insurers and/or reinsurers operating in the European Economic Area.

A number of European Commission delegated

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acts and technical standards have been adopted, which set out more detailed requirements based on the overarching provisions of the Solvency II Directive.

A number of European Commission delegated acts and technical standards have been adopted, which set out more detailed requirements based on the overarching provisions of the Solvency II Directive.

However, further delegated acts, technical standards and guidance are likely to be published on an ongoing basis.

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Failure to comply with, or to obtain desired authorizations and/or exemptions under, any applicable laws could result in restrictions on our ability to do business or undertake activities that are regulated in one or more of the jurisdictions in which we operate and could subject us to fines and other sanctions.

The Monetary Authority Law (2018 revision) includes amendments that provide for a specific administrative fines framework whereby CIMA has been granted the power to issue monetary penalties up to 1 million Cayman Dollars for a very serious breach.

The Monetary Authority Act (2020 Revision) includes amendments that provide for a specific administrative fines framework whereby CIMA has been granted the power to issue monetary penalties up to 1 million Cayman Dollars for a very serious breach.

In addition, governmental authorities worldwide have become increasingly interested in potential risks posed by the insurance industry as a whole, and to the commercial and financial systems in general.

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Changes in the laws or regulations to which our subsidiaries are subject or may become subject, or in the interpretations thereof by enforcement or regulatory agencies, could have a material adverse effect on our business.

The U.K.’s exit from the EU could impact our business.

On January 31, 2020, the UK formally exited from the EU (“Brexit”) and entered an 11-month transition period (unless a single extension of one to two years to this transition period is agreed between the U.K.

government and the EU, by June 30, 2020).

During the transition period, the U.K.’s trading relationship with the EU is expected to remain largely unchanged while the negotiations to determine the terms of the U.K.’s future relationship with the EU continue.

As a result, we face risks associated with the potential uncertainty and consequences that may follow Brexit, including with respect to volatility in financial markets, exchange rates and interest rates.

The U.K.’s exit from the EU could materially and adversely impact our results of operations or financial condition.

On January 31, 2020, the U.K.

formally exited from the EU (“Brexit”) and entered an 11-month transition period which ended on December 31, 2020.

On December 24, 2020, the U.K.

and the EU announced a Trade and Cooperation Agreement which took effect from January 1, 2021.

However, the Trade and Cooperation Agreement did not address financial services in any material way, with the effect that there has been a “hard” Brexit in respect of financial services.

The United Kingdom and the European Union are to negotiate and agree a Memorandum of Understanding in relation to financial services by March 31, 2021.

It remains uncertain whether this will address issues such as market access or equivalence.

As a result, we face risks associated with the potential uncertainty and consequences, including with respect to volatility in financial markets, exchange

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rates and interest rates.

These uncertainties could increase the volatility of, or reduce, our investment results in particular periods or over time.

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These uncertainties could affect the operations, strategic position or results of insurers or reinsurers on whom we ultimately rely to access underlying insured coverages.

Any of these potential effects of Brexit, and others we cannot anticipate, could adversely affect our results of operations or financial condition.

Any of these potential effects of Brexit, and others we cannot anticipate, could materially and adversely affect our results of operations or financial condition.

Risks Relating to Our Investment Strategy and Our Investment Advisor

Our investment management structure could subject us to various risks and uncertainties, any of which could impact our investment results and could materially and adversely affect our business, financial condition and results of operations.

On September 1, 2018, each of GLRE, Greenlight Re and GRIL entered into the SILP LPA with DME II as general partner.

Commencing on September 1, 2018, all new investments to be made on behalf of Greenlight Re and GRIL have been made through SILP, pursuant to the SILP LPA, and not through the Joint Venture.

In accordance with the SILP LPA, substantially all the assets and related liabilities that comprise our investment portfolio have been transferred to SILP as of January 2, 2019.

However, assets required to provide collateral for underwriting activities were not transferred to SILP but rather were transferred to accounts designated by each of Greenlight Re and GRIL for use by the companies to operate their respective businesses.

As a result of the change in our investment management structure, we may derive a significant portion of our income

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from our investment in SILP.

Our operating results will, therefore, depend in part on the performance of SILP and on DME Advisors as the investment advisor of SILP.

SILP is not, and is not expected to be, registered as an “investment company” under the Investment Company Act of 1940 or any comparable regulatory requirements.

Therefore, investors in SILP, including Greenlight Re and GRIL, will not have the benefit of the protections afforded by such registration and regulation.

In addition, we will be subject to various existing and new risks and uncertainties, some of which we may not be able to identify at this time.

SILP may be concentrated in a few large positions, which could result in large losses.

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We cannot provide assurance that DME Advisors will be successful in meeting our investment objectives.

The failure of DME Advisors to perform adequately could significantly and negatively affect our business, results of operations and financial condition.

The failure of DME Advisors to perform adequately could materially and adversely affect our business, results of operations and financial condition.

Our investment performance depends in part on the performance of SILP, and may suffer as a result of adverse financial market developments or other factors that impact our liquidity, which could in turn adversely affect our financial condition and results of operations.

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We cannot provide assurance that DME Advisors on behalf of SILP will successfully structure investments in relation to our liquidity needs or liabilities.

Failure to do so could force us to withdraw investments from SILP at a significant loss or at prices that are not optimal, which could significantly and adversely affect our financial results.

Failure to do so could force us to withdraw investments from SILP at a significant loss or at prices that are not optimal, which could materially and adversely affect our financial results.

The risks associated with the value-oriented investment strategy expected to be employed by SILP may be substantially greater than the risks associated with traditional fixed-income investment strategies.

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The success of the investment strategy may also be affected by general economic conditions.

Unexpected market volatility and illiquidity associated with our investment in SILP could significantly and negatively affect our investment results, financial condition or results of operations.

Under our new investment management structure, we have limited control over SILP .

Under the SILP LPA, subject to the investment guidelines and certain other conditions, DME II has complete and exclusive power and responsibility for all investment and investment management decisions to be undertaken on behalf of SILP and for managing and administering the affairs of SILP, and has the power and authority to do all things that it, as the general partner, considers necessary or desirable to carry out its duties thereunder.

These broad rights of DME II include the power to delegate its authorities under the SILP LPA.

Pursuant to the IAA, DME II has delegated to DME Advisors the authority to direct the investments of SILP and other day-to-day business.

In addition, DME II may resign or withdraw from SILP and may admit new limited partners to SILP without our consent, which may cause SILP to be deemed an “investment company” under

Unexpected market volatility and illiquidity associated with our investment in SILP could materially and adversely affect our investment results, financial condition or results of operations.

SILP effectuates short sales that subject our capital accounts to unlimited loss potential.

SILP enters into transactions in which it sells a security it does not own, which we refer to as a short sale, in anticipation

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the Investment Company Act of 1940.

We have no right to remove DME II as general partner of SILP and do not have any right to participate in the conduct or management of SILP, other than by amending our investment guidelines.

of a decline in the market value of the security.

Short sales subject our capital accounts to material and adverse loss potential

since the market price of securities sold short may continuously increase.

SILP may mitigate such losses by buying back the

securities sold short before the market price has increased significantly but we have no control over such mitigation, if any.

Under adverse market conditions, SILP might have difficulty borrowing securities to meet short sale delivery obligations and

may have to cover short sales at suboptimal prices.

Several securities have recently been targeted for trading by participants on social media platforms in part due to the amount of short interest in the security.

If SILP holds a short interest in a targeted security, the short interest may attract social media attention and related trading.

Given changes to market structure and the low cost of trading for retail clients, the volume of social-media related trading may be significant, which could raise a targeted security’s share price.

T he borrowing costs for short securities increases as the price of the security increases (and may typically only be ended through purchases of securities).

As a result, social-media-related trading may cause SILP to incur outsize losses or to exit short positions earlier than it normally would so exit.

It is possible that U.S.

lawmakers and regulators may react to the volatility related to social-media related trading and restrict, or require the public reporting of, short interest, which may limit SILP’s ability to achieve its trading objectives.

Under our investment management structure, we have limited control over SILP.

While SILP is not, and is not expected to be registered as an “investment company” under the Investment Company Act of 1940 or any comparable U.S.

regulatory requirements, the general partner, or its designee, may resign or withdraw from SILP and may admit new limited partners to SILP without our consent, which may cause SILP to be deemed an “investment company” under the Investment Company Act of 1940.

We have no right to remove the general partner of SILP and do not have any right to participate in the conduct or management of SILP, other than by amending our investment guidelines.

The historical performance of DME Advisors and its affiliates should not be considered as indicative of the future results of our investment portfolio or of our future results or of any returns expected on our Class A ordinary shares.

The historical returns of the funds managed by DME Advisors and its affiliates are not directly linked to our Class A ordinary shares.

The historical returns of SILP and other the funds managed by DME Advisors and its affiliates are not directly linked to our Class A ordinary shares.

Results for our investment in SILP could differ from results of the other funds managed by DME Advisors and its affiliates as a result of restrictions imposed by our investment guidelines and other factors.

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The historical performance of DME Advisors and its affiliates may impact our A.M.

The historical performance of DME Advisors and its funds is not necessarily indicative of future results, but losses incurred to date may be taken into account by A.M.

The historical performance of DME Advisors and its funds, including SILP, is not necessarily indicative of future results, but losses incurred to date may be taken into account by A.M.

and may adversely affect our financial strength rating.

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Risk Factors - Risks Relating to Our Business - “A downgrade or withdrawal of either of our A.M.

Best ratings may significantly and negatively affect our ability to implement our business strategy successfully.

Best downgrades our ratings, we cannot provide assurance that our regulators, Cayman Islands Monetary Authority and the Central Bank of Ireland, would continue to authorize our current investment strategy.

Best ratings would materially and adversely affect our ability to implement our business strategy successfully.

Best downgrades our ratings, we cannot provide assurance that our regulators, CIMA and CBI, would continue to authorize our current investment strategy.

Apart from funds required for collateral purposes, substantially all of our investable assets are or are expected to be invested with SILP and, as a result, we depend upon DME II to implement our investment strategy.

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The diminution or loss of the services of DME Advisors’ principals, or diminution or loss of their reputation or any negative market or industry perception arising from that diminution or loss, could have a material adverse effect on our business.

In addition, the loss of DME Advisors’ key personnel, or DME Advisors’ inability to hire and retain other key personnel, over which we have no control, could delay or prevent DME Advisors from fulfilling its obligations pursuant to the IAA, which could significantly and negatively affect SILP’s performance and correspondingly our business and financial performance.

In addition, the loss of

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DME Advisors’ key personnel, or DME Advisors’ inability to hire and retain other key personnel, over which we have no control, could delay or prevent DME Advisors from fulfilling its obligations pursuant to the IAA, which could materially and adversely affect SILP’s performance and correspondingly our business and financial performance.

Our investment performance may suffer as a result of adverse financial market developments or other factors that impact our liquidity, which could in turn adversely affect our financial condition and results of operations.

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We strive to structure our investments in a manner that recognizes our liquidity needs for future liabilities.

We cannot provide assurance that DME Advisors will successfully structure our investments in relation to our anticipated liabilities.

Failure to do so could force us to liquidate investments at a significant loss or at prices that are not optimal, which could significantly and adversely affect our financial results.

We cannot provide assurance that DME Advisors will successfully structure the investments in SILP in relation to our anticipated liabilities.

Failure to do so could force us to liquidate investments at a significant loss or at prices that are not optimal, which could materially and adversely affect our financial results.

The risks associated with DME Advisors’ value-oriented investment strategy may be substantially greater than the risks associated with traditional fixed-income investment strategies.

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The success of our investment strategy may also be affected by general economic conditions.

Unexpected market volatility and illiquidity associated with our investments could significantly and negatively affect our investment portfolio results.

Unexpected market volatility and illiquidity associated with our investments could materially and adversely affect our investment portfolio results.

Potential conflicts of interest with DME Advisors may exist that could adversely affect us.

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None of DME Advisors or its principals, including David Einhorn, Chairman of our Board of Directors and the President of Greenlight Capital, Inc., are obligated to devote any specific amount of time to our investment in SILP.

Affiliates of DME Advisors, including Greenlight Capital, Inc., manage and expect to continue to manage other client accounts, some of which have objectives similar to SILP, including collective

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investment vehicles managed by DME Advisors’ affiliates and in which DME Advisors or its affiliates may have an equity interest.

Affiliates of DME Advisors, including Greenlight Capital, Inc., manage and expect to continue to manage other client accounts, some of which have objectives similar to SILP, including collective investment vehicles managed by DME Advisors’ affiliates and in which DME Advisors or its affiliates may have an equity interest.

Pursuant to the SILP LPA and the IAA, DME Advisors has the exclusive right to manage SILP and is required to follow our investment guidelines and act in a manner that is fair and equitable in allocating investment opportunities to us, but neither the SILP LPA or the IAA impose any specific obligations or requirements concerning allocation of time, effort or investment opportunities to us or any restriction on the nature or timing of investments for accounts that DME Advisors or its affiliates may manage.

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DME Advisors’ approach to managing those risks could prove insufficient, exposing SILP, and correspondingly our investment portfolio, to material unanticipated or material losses.

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We and SILP are exposed to credit risk primarily from the possibility that counterparties may default on their obligations to us.

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Fluctuations in the market value of our investment in SILP could have a disproportionately large effect in relation to our capital.

Any event which may adversely affect the value of positions SILP holds could significantly and negatively affect the net asset value of our investment portfolio and thus our results of operations.

SILP effectuates short sales that subject our capital accounts to unlimited loss potential.

SILP enters into transactions in which it sells a security it does not own, which we refer to as a short sale, in anticipation of a decline in the market value of the security.

Short sales for our account theoretically will involve unlimited loss potential since the market price of securities sold short may continuously increase.

SILP may mitigate such losses by replacing the securities sold short before the market price has increased significantly but we have no control over such mitigation, if any.

Under adverse market conditions, SILP might have difficulty purchasing securities to meet short sale delivery obligations and may have to cover short sales at suboptimal prices.

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Any event which may adversely affect the value of positions SILP holds could materially and adversely affect the net asset value of our investment portfolio and thus our results of operations.

SILP may transact in derivatives trading, which may increase the risk of our investment portfolio.

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DME Advisors may from time to time place its or its affiliates’ representatives on creditors’ committees and/or boards of certain companies in which SILP has invested.

While such representation may enable DME Advisors to enhance the sale value of SILP’s investments, it may also prevent SILP from freely disposing of our investments and may subject us to indemnification liability.

While such representation may enable DME Advisors to enhance the sale value of SILP’s investments, it may also prevent SILP from freely disposing of our investments and may subject us to

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indemnification liability.

The IAA provides for the indemnification of DME Advisors or any other person designated by DME Advisors for claims arising from such board representation.

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Because the SILP LPA contains exclusivity and limited termination provisions, we are unable to use other investment managers for so long as Greenlight Re and GRIL are limited partners in SILP.

Although we may withdraw funds from SILP for operational purposes by giving three days notice, Greenlight Re or GRIL may withdraw as a limited partner upon notice only on the Greenlight Re Relevant Date or the GRIL Relevant Date (as defined in the SILP LPA) or “for cause”, which is defined as:

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Although we may withdraw funds from SILP for operational purposes by giving three day’s notice, Greenlight Re or GRIL may withdraw as a limited partner upon notice only on the Greenlight Re Relevant Date or the GRIL Relevant Date (as defined in the SILP LPA) or “for cause”, which is defined as:

● a material violation of applicable law relating to DME II’s or DME Advisors’ advisory business;

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Increased regulation or scrutiny of alternative investment advisors may affect DME II and DME Advisors’ ability to manage SILP or affect our business reputation.

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The regulatory environment for investment managers is evolving, and changes in the regulation of managers may adversely affect the ability of DME Advisors to obtain the leverage it might otherwise obtain or to pursue its trading strategies.

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As a result, we may not be able to effectively pursue a short selling strategy due to a limited supply of securities available for borrowing.

We may also incur additional costs in connection with short sale

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transactions, including, if SILP is required to enter into a borrowing arrangement in advance of any short sales.

We may also incur additional costs in connection with short sale transactions, including, if SILP is required to enter into a borrowing arrangement in advance of any short sales.

Moreover, the ability to continue to borrow a security is not guaranteed and we are subject to strict delivery requirements.

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Our level of debt may have an adverse impact on our liquidity, restrict our current and future operations, particularly our ability to respond to business opportunities, and increase our vulnerability to adverse economic and industry conditions.

In August 2018, we sold $100 million of convertible notes.

In August 2018, we sold $100 million of convertible notes that mature on August 1, 2023.

Our level of debt and the provisions of such debt could have significant consequences, which include, but are not limited to, the following:

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• make us more vulnerable to economic downturns and limiting our ability to withstand competitive pressures or take advantage of new opportunities to grow our business.

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We may from time to time seek to refinance our indebtedness by issuing additional shares of our common stock in one or more securities offerings.

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Thus, holders of our common stock bear the risk of our future offerings diluting and potentially reducing the value of our common stock.

Conversion of the notes or future sales or issuances of Class A ordinary shares may dilute the ownership interest of existing shareholders, including holders who have previously converted their notes.

Such dilution may adversely affect the trading price of our Class A ordinary shares and the notes and the conversion rate of the notes may not be adjusted for all dilutive events.

Conversion of our convertible notes or future sales or issuances of Class A ordinary shares may dilute the ownership interest of existing shareholders, including holders who have previously converted their notes.

Such dilution may adversely affect the trading price of our Class A ordinary shares and the convertible notes and the conversion rate of the convertible notes may not be adjusted for all dilutive events.

We may issue equity securities in the future for a number of reasons, including to finance our operations and business strategy, to acquire assets or companies, to adjust our ratio of debt to equity, or in connection with our incentive and stock option plans.

Any issuance of equity securities, including the issuance of shares, if any, upon conversion of the notes, could dilute the interests of our existing shareholders, including holders who have previously received shares upon conversion of their notes, and could substantially affect the trading price of our Class A ordinary shares and the notes.

In addition, the anticipated conversion of the notes into our Class A ordinary shares could depress the price of our Class A ordinary shares.

We may not be able to pay interest on the notes or settle conversions of the notes in cash or to repurchase the notes upon a fundamental change, and our future debt, if any, may contain limitations on our ability to pay cash upon conversion or repurchase of the notes.

Holders of notes have the right to require us to repurchase all or a portion of their notes for cash upon the occurrence of a fundamental change under the indenture governing the notes.

In addition, upon conversion of the notes, unless we elect to

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deliver solely Class A ordinary shares to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the notes being converted.

However, we may not have enough available cash or be able to obtain financing on favorable terms, if at all, at the time we are required to make repurchases of notes surrendered therefor or pay cash with respect to the notes being converted.

Any issuance of equity securities, including the issuance of shares, if any, upon conversion of the convertible notes, could dilute the interests of our existing shareholders, including holders who have previously received shares upon conversion of their notes, and could substantially affect the trading price of our Class A ordinary shares and the convertible notes.

In addition, the anticipated conversion of the convertible notes into our Class A ordinary shares could depress the price of our Class A ordinary shares.

We may not be able to pay interest on the convertible notes or settle conversions of the convertible notes in cash or to repurchase the convertible notes upon a fundamental change, and our future debt, if any, may contain limitations on our ability to pay cash upon conversion or repurchase of the convertible notes.

Holders of notes have the right to require us to repurchase all or a portion of their notes for cash upon the occurrence of a fundamental change under the indenture governing the convertible notes.

In addition, upon conversion of the convertible notes, unless we elect to deliver solely Class A ordinary shares to settle such conversion (other than paying cash in lieu of delivering any fractional share), we will be required to make cash payments in respect of the convertible notes being converted.

However, we may not have enough available cash or be able to obtain financing on favorable terms, if at all, at the time we are required to make repurchases of convertible notes surrendered therefor or pay cash with respect to the convertible notes being converted.

In addition, our ability to make the required repurchase upon a fundamental change may be limited by law or the terms of other debt agreements or securities.

Our failure to pay interest on the notes or to make the required cash repurchase or cash payment, as the case may be, would constitute an event of default under the indenture governing the notes which, in turn, could constitute an event of default under other debt agreements or securities, thereby resulting in their acceleration and required prepayment and thereby further restricting our ability to make such interest payments and repurchases.

If, due to a default, the repayment of related indebtedness were to be accelerated after any applicable notice or grace periods, we may not have sufficient funds to repay such indebtedness and the notes.

Our failure to pay interest on the convertible notes or to make the required cash repurchase or cash payment, as the case may be, would constitute an event of default under the indenture governing the convertible notes which, in turn, could constitute an event of default under other debt agreements or securities, thereby resulting in their acceleration and required prepayment and thereby further restricting our ability to make such interest payments and repurchases.

We may be required to refinance all or part of our debt, sell important strategic assets at unfavorable prices, incur additional indebtedness or issue common stock or other equity securities, which we may be unable to do on terms acceptable to us, in amounts sufficient to meet our needs or at all.

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Refinancing our indebtedness may also require us to expense previous debt issuance costs or to incur new debt issuance costs.

The accounting method for convertible debt securities that may be settled in cash, such as the notes, could have a material effect on our reported financial results.

The accounting method for convertible debt securities that may be settled in cash, such as the convertible notes, could have a material effect on our reported financial results.

Under Accounting Standards Codification (“ASC”) 470-20, Debt with Conversion and Other Options , which we refer to

as ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments (such as the notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the entity’s economic interest cost.

The effect of ASC 470-20 on the accounting for the notes is that the equity component is required to be included in the additional paid-in capital section of shareholders’ equity on our consolidated balance sheet, and the value of the equity component would be treated as original issue discount for purposes of accounting for the debt component of the notes.

As a result, we are required to record a greater amount of non-cash interest expense in current periods presented as a result of the amortization of the discounted carrying value of the notes to their face amount over the term of the notes.

We report lower net income in our financial results because ASC 470-20 requires interest to include both the current period’s amortization of the debt discount and the instrument’s coupon interest, which could adversely affect our reported or future financial results, the trading price of our Class A ordinary shares and the trading price of the notes.

as ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments (such as the convertible notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the entity’s economic interest cost.

The effect of ASC 470-20 on the accounting for the convertible notes is that the equity component is required to be included in the additional paid-in capital section of shareholders’ equity on our consolidated balance sheet, and the value of the equity component would be treated as original issue discount for purposes of accounting for the debt component of the convertible notes.

As a result, we are required to record a greater amount of non-cash interest expense in current periods presented as a result of the amortization of the discounted carrying value of the convertible notes to their face amount over the term of the convertible notes.

We report lower net income in our financial results because ASC 470-20 requires interest to include both the current period’s amortization of the debt discount and the instrument’s coupon

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interest, which could adversely affect our reported or future financial results, the trading price of our Class A ordinary shares and the trading price of the convertible notes.

A shareholder may be required to sell its Class A ordinary shares.

Our Third Amended and Restated Memorandum and Articles of Association, or Articles, provide that we have the option, but not the obligation, to require a shareholder to sell its Class A ordinary shares for their fair market value to us, to other shareholders or to third parties if our Board of Directors determines that ownership of our Class A ordinary shares by such shareholder may result in adverse tax, regulatory or legal consequences to us, any of our subsidiaries or any of our shareholders and that such sale is necessary to avoid or cure such adverse consequences.

Provisions of our Articles, the Companies Law of the Cayman Islands and our corporate structure may each impede a takeover, which could adversely affect the value of our Class A ordinary shares.

Provisions of our Articles, the Companies Act of the Cayman Islands and our corporate structure may each impede a takeover, which could adversely affect the value of our Class A ordinary shares.

Our Articles contain certain provisions that could make it difficult for a third party to acquire us, even if doing so would be beneficial to our shareholders.

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Our Board of Directors may authorize the issuance of preferred shares with terms and conditions and under circumstances that could have an effect of discouraging a takeover or other transaction, deny shareholders the receipt of a premium on their Class A ordinary shares in the event of a tender or other offer for Class A ordinary shares and have a depressive effect on the market price of the Class A ordinary shares.

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As compared to mergers under corporate law in the United States, it may be more difficult to consummate a merger of two or more companies in the Cayman Islands or the merger of one or more Cayman Islands companies with one or more overseas companies, even if such transaction would be beneficial to our shareholders.

Cayman Islands law has statutory provisions that provide for the reconstruction and amalgamation of companies, which are commonly referred to, in the Cayman Islands, as “schemes of arrangement”.

The Companies Law (2020 Revision) of the Cayman Islands (the “Companies Law”) provides for the merger or consolidation of two or more companies that are Cayman Islands entities or the merger of one or more Cayman Islands companies with one or more overseas companies, where the surviving entity is either a Cayman Islands company or an overseas company.

Prior to the adoption of certain amendments to the Companies Law, the “scheme of arrangement” was the only vehicle available to consolidate companies and Cayman Islands law did not provide for mergers as that term is understood under corporate law in the United States.

The Companies Act (2021 Revision) of the Cayman Islands (the “Companies Act”) provides for the merger or consolidation of two or more companies that are Cayman Islands entities or the merger of one or more Cayman Islands companies with one or more overseas companies, where the surviving entity is either a Cayman Islands company or an overseas company.

Prior to the adoption of certain amendments to the Companies Act, the “scheme of arrangement” was the only vehicle available to consolidate companies and Cayman Islands law did not provide for mergers as that term is understood under corporate law in the United States.

Although the current merger provisions have made it faster and more procedurally straightforward for companies to merge or consolidate than by using a “schemes of arrangement” statutory provision, these provisions do not replace the “schemes of arrangement” provision which continues to apply.

The procedural and legal requirements necessary to consummate these transactions under the merger and consolidation provisions of the Companies Law or the “schemes of arrangement” provision may be more rigorous and take longer to complete than the procedures typically required to consummate a merger in the United States.

The procedural and legal requirements necessary to consummate these transactions under the merger and consolidation provisions of the Companies Act or the “schemes of arrangement” provision may be more rigorous and take longer to complete than the procedures typically required to consummate a merger in the United States.

Under Cayman Islands law and practice, a “scheme of arrangement” must be approved at a shareholders’ meeting by each class of shareholders, in each case, by a majority of the number of holders of each class of an entity’s shares that are present and voting, either in person or by proxy, at such a meeting, which holders must also represent 75% in value of such class issued that are present and voting, either in person or by proxy, at such meeting, excluding the shares owned by the parties to the scheme of arrangement.

A merger requires approval by a special resolution of the shareholders of each company (which normally requires, as a minimum, a two thirds majority of shareholders voting together as one class) and such other authorization, if any, as may be specified in such constituent company’s articles of association.

Although a merger under the Companies Law does not require court approval, the convening of these meetings and the terms of an amalgamation under the “schemes of arrangement” provision must be sanctioned by the Grand Court of the Cayman Islands.

Although a merger under the Companies Act does not require court approval, the convening of these meetings and the terms of an amalgamation under the “schemes of arrangement” provision must be sanctioned by the Grand Court of the Cayman Islands.

Although there is no requirement to seek the consent of the creditors of the parties involved in the scheme of arrangement, the Grand Court typically seeks to ensure that the creditors have consented to the transfer of their liabilities to the surviving entity or that the scheme of arrangement does not otherwise materially adversely affect the creditors’ interests.

Furthermore, the Grand Court will only approve a scheme of arrangement if it is satisfied that:

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● the statutory provisions as to majority vote have been complied with;

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● the scheme of arrangement is such as a businessperson would reasonably approve;

the scheme of arrangement is not one that would more properly be sanctioned under some other provision of the Companies Law.

● the scheme of arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act.

In addition, David Einhorn, Chairman of our Board of Directors, owns all of the outstanding Class B ordinary shares.

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Because we are a Cayman Islands company, there is uncertainty as to whether the Grand Court of the Cayman Islands would recognize or enforce judgments of United States courts obtained against us predicated upon the civil liability provisions of the securities laws of the United States or any state thereof, or be competent to hear original actions brought in the Cayman Islands against us predicated upon the securities laws of the United States or any state thereof.

We are incorporated as an exempted company limited by shares under the Companies Law.

We are incorporated as an exempted company limited by shares under the Companies Act.

A significant amount of our assets are located outside of the United States.

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courts predicated upon the civil liability provisions of the federal securities laws of the United States or any state of the United States.

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competent jurisdiction if such judgment is final, for a liquidated sum, not in respect of taxes or a fine or penalty if not inconsistent with a Cayman Islands judgment in respect of the same matters, and was not obtained in a manner, and is not of a kind, the enforcement of which is contrary to the public policy of the Cayman Islands.

Although there is no statutory enforcement in the Cayman Islands of judgments obtained in the United States, the courts of the Cayman Islands will, based on the principle that a judgment by a competent foreign court will impose upon the judgment debtor an obligation to pay the sum for which judgment has been given, recognize and enforce a foreign judgment of a court of competent jurisdiction if such judgment is final, for a liquidated sum, not in respect of taxes or a fine or penalty if not inconsistent with a Cayman Islands judgment in respect of the same matters, and was not obtained in a manner, and is not of a kind, the enforcement of which is contrary to the public policy of the Cayman Islands.

There is doubt, however, as to whether the courts of the Cayman Islands will, in an original action in the Cayman Islands, recognize or enforce judgments of U.S.

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In certain circumstances, the total voting power of our Class A ordinary shares held by any one person will be reduced to less than 9.9% of the total issued and outstanding ordinary shares, and the total voting power of the Class B ordinary shares will be reduced to 9.5% of the total voting power of the total issued and outstanding ordinary shares.

In the event a holder of our Class A ordinary shares acquires shares representing 9.9% or more of the total voting power of our total ordinary shares or the Class B ordinary shares represent more than 9.5% of the total voting power of our total outstanding shares, there will be an effective reallocation of the voting power of the Class A ordinary shares or Class B ordinary shares which may cause a shareholder to acquire 5% or more of the voting power of the total ordinary shares.

In the event a holder of our Class A ordinary shares acquires shares representing 9.9% or more of the total voting power of our total ordinary shares or the

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Class B ordinary shares represent more than 9.5% of the total voting power of our total outstanding shares, there will be an effective reallocation of the voting power of the Class A ordinary shares or Class B ordinary shares which may cause a shareholder to acquire 5% or more of the voting power of the total ordinary shares.

Such a shareholder may become subject to the reporting and disclosure requirements of Sections 13(d) and (g) of the Exchange Act.

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We cannot be assured that after such date we would not be subject to any such tax.

If we were to become subject to taxation in the Cayman Islands, our financial condition and results of operations could be significantly and negatively affected.

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If we were to become subject to taxation in the Cayman Islands, our financial condition and results of operations could be materially and adversely affected.

Greenlight Capital Re, Greenlight Re and/or GRIL may be subject to United States federal income taxation.

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However, we cannot provide assurance that none of Greenlight Capital Re, Greenlight Re, or GRIL will be a PFIC for the current taxable year or any future taxable year.

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In general, any of Greenlight Capital Re, Greenlight Re or GRIL would be a PFIC for a taxable year if either (i) 75% or more of its income constitutes “passive income” or (ii) 50% or more of its assets produce “passive income”, or are held for the production of passive income.

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United States persons who, directly or indirectly or through attribution rules, own 10% or more of the total combined voting power or value of our shares, which we refer to as United States 10% shareholders, may be subject to the controlled foreign corporation, or CFC, rules.

Under the CFC rules, each United States 10% shareholder must

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annually include his pro-rata share of the CFC’s “subpart F income” and “global intangible low-tax income” in his or her gross income in the year earned by the CFC, even if no distributions are made.

Under the CFC rules, each United States 10% shareholder must annually include his pro-rata share of the CFC’s “subpart F income” and “global intangible low-tax income” in his or her gross income in the year earned by the CFC, even if no distributions are made.

In general, a foreign insurance company will be treated as a CFC only if during the taxable year United States 10% shareholders collectively own more than 25% of the total combined voting power or total value of the entity’s shares.

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Consequently, we cannot provide assurance that a person who is a direct or indirect United States shareholder will not be required to include amounts in its income in respect of related person insurance income in any taxable year.

If a United States shareholder is treated as disposing of shares in a foreign insurance corporation that has related person insurance income and in which United States persons own 25% or more of the voting power or value of the entity’s shares, any gain from the disposition will generally be treated as a dividend to the extent of the United States shareholder’s portion of the corporation’s undistributed earnings and profits that were accumulated during the period that the United States shareholder owned the shares.

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gain from the disposition will generally be treated as a dividend to the extent of the United States shareholder’s portion of the corporation’s undistributed earnings and profits that were accumulated during the period that the United States shareholder owned the shares.

In addition, the shareholder will be required to comply with certain reporting requirements, regardless of the amount of shares owned by the direct or indirect United States shareholder.

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If you are a United States tax-exempt organization, we advise you to consult your own tax advisor regarding the risk of recognizing unrelated business taxable income.

1, may cause us to undertake changes to the manner in which we conduct our business and could subject United States persons who own Class A ordinary shares to United States income taxation on our undistributed earnings.

On December 22, 2017, H.R.

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One of the H.R.

1’s potential impacts is that this limitation could result in the treatment of offshore

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insurers or reinsurers that write business on a low frequency/high severity basis, such as property catastrophe companies and financial guaranty companies, as PFICs, as significant reserves for losses may not be recorded until a catastrophic event actually occurs.

1’s potential impacts is that this limitation could result in the treatment of offshore insurers or reinsurers that write business on a low frequency/high severity basis, such as property catastrophe companies and financial guaranty companies, as PFICs, as significant reserves for losses may not be recorded until a catastrophic event actually occurs.

Accordingly, subject to any future corrections or clarifications that may be made to H.R.

1, or any regulations that may be promulgated thereunder, the Company will be treated as a PFIC for any taxable year in which it does not meet the bright-line applicable insurance liabilities requirement of H.R.

1, or any additional regulations that may be promulgated thereunder, the Company will be treated as a PFIC for any taxable year in which it does not meet the bright-line applicable insurance liabilities requirement of H.R.

As of December 31, 2020, 2019, and 2018 the Company met the bright-line applicable insurance liabilities test.

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The IRS or Congress may issue additional regulations or legislation regarding the applicable insurance liabilities bright-line test of the passive foreign investment company (“PFIC”) rules or other aspects of the PFIC rules applicable to foreign insurance companies.

On July 11, 2019, the IRS issued proposed regulations that would provide additional guidance and requirements regarding the exclusion from the definition of “passive income” for income derived in the active conduct of an insurance business by a qualified insurance corporation (the “July 2019 Proposed Regulations”).

We understand that the additional requirements of the July 2019 Proposed Regulations, as proposed, will be effective (if at all) only on a prospective basis for taxable years beginning on or after the date final or temporary regulations are issued (unless the Company otherwise relies on the July 2019 Proposed Regulations for its 2019 taxable year, which the Company does not intend to do).

Accordingly, the July 2019 Proposed Regulations will not be effective for the Company’s 2019 taxable year.

We can offer no assurance whether, in what form or when the July 2019 Proposed Regulations could be adopted.

We also can offer no assurance as to the potential impact of the July 2019 Proposed Regulations for the Company.

We are monitoring developments with respect to both the applicable insurance liabilities test and the IRS proposed regulations.

On December 4, 2020, the IRS issued proposed regulations (the “2020 Proposed Regulations”) and final regulations (the “2020 Final Regulations”) that would provide additional guidance and requirements regarding the exclusion from the definition of “passive income” for income derived in the active conduct of an insurance business by a qualified insurance corporation (“QIC”) and the application of certain look-through rules with respect to assets held, and income earned, through subsidiaries.

Under the 2020 Proposed Regulations, a QIC is in the “active conduct” of an insurance business only if it satisfies either a “factual requirements test” or an “active conduct percentage test.” The factual requirements test requires that the officers and employees of the QIC carry out substantial managerial and operational activities on a regular and continuous basis with respect to its core functions and that they perform virtually all of the active decision-making functions relevant to underwriting functions.

The active conduct percentage test generally requires that (i) the total costs incurred by the QIC with respect to its officers and employees for services rendered with respect to its core functions (other than investment activities) equal or exceed 50 percent of total costs incurred by the QIC with respect to its officers and employees and any other person or entities for services rendered with respect to its core functions (other than investment activities) and (ii) to the extent the QIC outsources any part of its core functions to unrelated entities, officers and employees of the QIC with experience and relevant expertise

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must select and supervise the person that performs the outsourced functions, establish objectives for performance of the outsourced functions and prescribe rigorous guidelines relating to the outsourced functions which are routinely evaluated and updated.

Under certain exceptions, however, a QIC (a) that has no or only a nominal number of employees or (b) that is a vehicle that (x) has the effect of securitizing or collateralizing insurance risks underwritten by other insurance or reinsurance companies or (y) is an insurance linked securities fund that invests in securitization vehicles, is deemed not engaged in the active conduct of an insurance business.

A QIC’s officers and employees include those of certain affiliates for these purposes.

The 2020 Final Regulations contain guidance on the treatment of the assets and income of certain look-through subsidiaries of a QIC, among other provisions related to QICs and PFICs.

We currently expect that the Company would not be a PFIC for the 2021 taxable year under the rules described above, were they effective for such year.

However, the rules are subject to varying interpretations and are highly dependent on the facts and circumstances, which may change from year to year or within a year.

We can offer no assurance whether, in what form or when the 2020 Proposed Regulations could be adopted.

We also can offer no assurance as to the potential impact of the 2020 Proposed Regulations or the 2020 Final Regulations for the Company in any year.

We are monitoring developments with respect to both the applicable insurance liabilities test and the IRS regulations.

At this time, we cannot predict whether or what, if any, additional regulations will be adopted or additional legislation will be enacted.

If regulations are adopted or legislation enacted that cause us to fail to meet the requirements of the insurance company exception, or if we fail to meet the recently enacted applicable insurance liabilities test such failure could have a material adverse effect on the taxation of our shareholders who are U.S.

If regulations are adopted or legislation enacted that cause us to fail to meet the requirements of the insurance company exception, or if we fail to meet the applicable insurance liabilities test such failure could have a material adverse effect on the taxation of our shareholders who are U.S.

In that event we may undertake further changes to the manner in which we conduct our business, which also could have a material effect on our results of operations.

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Based on administrative practice, taxable income derived from investments made by GRIL is generally taxed in Ireland at the rate of 12.5% on the grounds that such investments either form part of the permanent capital required by regulatory authorities, or are otherwise integral to the reinsurance business carried on by GRIL.

GRIL intends to operate in such a manner

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so that the level of investments held by GRIL does not exceed the amount that is integral to the reinsurance businesses carried on by GRIL.

GRIL intends to operate in such a manner so that the level of investments held by GRIL does not exceed the amount that is integral to the reinsurance businesses carried on by GRIL.

If, however, investment income earned by GRIL exceeds these thresholds or if the administrative practice of the Irish Revenue Commissioners changes, Irish corporation tax could apply to such investment income at a higher rate (currently 25%) instead of the general 12.5% rate, and our results of operations could be materially adversely affected.

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The impact of the initiative of the OECD and the EU to eliminate harmful tax practices is uncertain and could adversely affect our tax status in the Cayman Islands.

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While the Cayman Islands is currently on the list of jurisdictions that have substantially implemented the internationally agreed tax standard, we are not able to predict if additional requirements will be imposed, and if so, whether changes arising from such additional requirements will subject us to additional taxes.

On February 18, 2020, the EU announced that following a meeting of the EU's Economic and Financial Affairs Council, the Cayman Islands had been moved to Annex 1 of the EU’s list of non-cooperative jurisdictions for tax purposes (“Annex 1”) due to the Cayman Islands not having appropriate measures in place relating to economic substance in the area of collective investment vehicles (“CIVs”).

The Cayman Islands Government (“CIG”) has stated that the EU’s concerns over CIVs were addressed by the enactment of The Private Funds Law and The Mutual Funds (Amendment) Law on February 7, 2020, of which the EU was duly notified.

The CIG has announced that it has commenced discussions with EU officials to begin the process of having the Cayman Islands removed from Annex 1 as soon as possible, which is expected to be October 2020 at the earliest.

The move to Annex 1 appears to be a technical issue arising out of the delay in enacting this legislation and it is therefore expected that the Cayman Islands will be removed from Annex 1 at the first available opportunity.

The Cayman Islands’ economic substance legislation had already been evaluated in June 2019 by the OECD’s Forum on Harmful Tax Practices as “not harmful”, which is the highest rating possible.

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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.

What changed 10-K

Item 1A. Risk Factors