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Item 1A. Risk Factors

2022-03-08 compared with 2021-03-10 · 147 added, 140 removed, 661 unchanged (30% of the section changed)

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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.

• 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.

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

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

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

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Risks Relating to Our Investment Strategy and Our Investment Advisor

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

• 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.

• The performance of our Innovations investments could result in financial losses and reduce our capital.

• 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.

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

• Apart from funds required for collateral purposes, substantially all of our investable assets are or are expected to be invested with SILP.

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.

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• 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 Tax Cuts and Jobs Act of 2017 (the “TCJA”) 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.

• 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.

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Risks Relating to Our Business

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.

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.

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

Greenlight Re’s A.M.

Best rating of “A- (Excellent)” with a stable outlook is the fourth highest of 13 ratings that A.M.

Best periodically reviews our ratings and may revise one or more of our ratings downward or revoke them at its sole discretion based primarily on its analysis of our balance sheet strength, operating performance and business profile.

Factors that may affect such an analysis include:

Best alters its capital adequacy assessment methodology in a manner that would adversely affect the rating of our reinsurance entities;

● if our actual losses significantly exceed our loss reserves;

● if unfavorable financial or market trends impact us;

● if we change our business practices from our organizational business plan in a manner that no longer supports our A.M.

Best ratings;

● if we are unable to retain our senior management and other key personnel;

● if our investments incur significant losses.

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.

Fluctuations in our results of operations will result from a variety of factors, including:

● our assessment of the quality of available reinsurance opportunities;

● loss experience on our reinsurance contracts;

● reinsurance contract pricing;

● the volume and mix of reinsurance products we underwrite;

● the performance of our Innovations investments and our investment in SILP ;

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

We seek attractive opportunities to underwrite products and make investments to achieve favorable returns on equity over the long term.

SILP’s investment strategy to invest primarily in long and short positions in publicly-traded equity and debt instruments is subject to market volatility and is likely to be more volatile than traditional fixed-income portfolios that are composed primarily of investment grade bonds.

The performance of our Innovations investments in start-up and early stage companies for which there may be no active markets may adversely impact our results of operations.

In addition, our

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differentiated strategy and focus on long-term growth in book value will result in fluctuations in total premiums written from period to period as we concentrate on underwriting contracts that we believe will generate better long-term, rather than short-term, results.

Additionally, if actual renewals do not meet expectations or if we choose not to write on a renewal basis because of pricing conditions, our premiums written in future years and our future operations could be materially adversely affected.

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

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

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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.

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● 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.

Disruptions in global financial markets (similar to those during 2020) 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”.

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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.

Fluctuations in our results of operations will result from a variety of factors, including:

● our assessment of the quality of available reinsurance opportunities;

● loss experience on our reinsurance liabilities;

● reinsurance contract pricing;

● the volume and mix of reinsurance products we underwrite;

● the performance of our investment portfolio;

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

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

Our investment strategy to invest primarily in long and short positions in publicly-traded equity and debt instruments is subject to market volatility and is likely to be more volatile than traditional fixed-income portfolios that are composed primarily of investment grade bonds.

In addition, our differentiated strategy and focus on long-term growth in book value will result in fluctuations in total premiums written from period to period as we concentrate on underwriting contracts that we believe will generate better long-term, rather than short-term, results.

Accordingly, our short-term results of operations 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.

Additionally, if A.M.

Greenlight Re’s A.M.

Best rating of “A- (Excellent)” is the fourth highest of 13 ratings that A.M.

Factors that may affect such an analysis include:

Best alters its capital adequacy assessment methodology in a manner that would adversely affect the rating of our reinsurance entities;

● if our actual losses significantly exceed our loss reserves;

● if unfavorable financial or market trends impact us;

● if we change our business practices from our organizational business plan in a manner that no longer supports our A.M.

Best ratings;

● if we are unable to retain our senior management and other key personnel;

● 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.

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

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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.

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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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Competitors with greater resources may make it difficult for us to effectively market our products or offer our products at a profit.

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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.

Generally, they include Arch Capital, Axis, Everest Re, Hamilton Re, Hannover Re, 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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Our results of operations and financial condition depend upon our ability to accurately assess the potential losses and loss adjustment expenses associated with the risks we reinsure.

Reserves are estimates at a given time of claims an insurer ultimately expects to pay, based upon facts and circumstances then known, predictions of future events, estimates of future trends in claim severity and other variable factors.

The inherent uncertainties associated with estimating loss reserves are generally greater for reinsurance companies than for primary insurance companies primarily due to:

Reserves are estimates at a given time of claims an insurer ultimately expects to pay, based upon facts and circumstances then known, predictions of future events, estimates of future trends in claim

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severity and other variable factors.

The inherent uncertainties associated with estimating loss reserves are generally greater for reinsurance companies than for primary insurance companies primarily due to:

● the reporting delays that occur between the occurrence of an event or claim, its reporting to the primary insurance company and subsequent reporting to the reinsurance company by the primary insurance company;

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

Inflation may adversely impact our results of operations or financial condition.

Our operations are susceptible to inflation, which could cause loss costs to increase, and could impact the performance of our investment portfolio.

Although we consider the potential effects of inflation in the underwriting process, underestimating inflation levels could result in underpricing the risks we reinsure.

Additionally, our reserving models include assumptions about future payments for the settlement of claims and claims-handling expenses, such as the value of replacing property, associated labor costs for the property business we write and litigation costs.

Inflation may cause costs to increase above loss reserves established for claims.

In that case, we will be required to increase our loss reserves with a corresponding reduction in net income in the period the deficiency is identified, which may have a material adverse effect on our results of operations and financial condition.

Unanticipated higher inflation could also lead to higher interest rates, potentially negatively impacting the value of any rate-sensitive financial instruments held by SILP.

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

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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.

As COVID-19 continues to be 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.

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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.

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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 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.

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,

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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 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.

Our two largest brokers each accounted for more than 10% of our gross written premiums, and in the aggregate they accounted for approximately 64.2% and 73.0% of our gross premiums written in 2020 and 2019, respectively.

Our three largest brokers each accounted for more than 10% of our gross written premiums, and in the aggregate they accounted for approximately 67.4% of our gross premiums written in 2021.

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

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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;

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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.

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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 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.

We could face unanticipated losses on our reinsurance contracts from geopolitical 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 unrest, geopolitical 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 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 .

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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, materially and adversely 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 Underwriting Officer, Chief Financial 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 Financial Officer, Chief Underwriting 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.

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

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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.

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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 may be unable to purchase reinsurance for the liabilities we reinsure, and if we successfully purchase such reinsurance, we may be unable to collect, which could adversely affect our business, financial condition and results of operations.

We purchase reinsurance for certain liabilities we reinsure, which we refer to as retrocessional coverage, in order to mitigate the effect of a potential concentration of losses upon our financial condition.

We purchase reinsurance for certain liabilities we reinsure in order to mitigate the effect of a potential concentration of losses upon our financial condition.

The insolvency or inability or refusal of a retrocessionaire to make payments under the terms of its agreement with us could have an adverse effect on us because we remain liable to our client.

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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.

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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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Notwithstanding these loss limitation techniques, one or more future catastrophic or other events could result in claims that substantially exceed our expectations in ways limiting the applicability of these techniques, which could have a material adverse effect on our financial condition and results of operations.

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

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avoidance and other illicit activity.

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

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

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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 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.

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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.

The Insurance (Capital and Solvency) (Classes B, C, and D Insurers) Regulations, (2018 Revision) (the “Capital and Solvency Regulations”) impose on Greenlight Re a minimum capital requirement of US$50 million, a prescribed capital requirement of US$222.6 million and a requirement to maintain solvency equal to or in excess of the total prescribed capital requirement (the “Capital Requirements”).

As of December 31, 2020, Greenlight Re was in compliance with the Capital Requirements.

At December 31, 2021, Greenlight Re was in compliance with the Capital Requirements.

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.

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.

As of December 31, 2020, GRIL has been in compliance with the capital requirements required under the Irish Insurance Acts and Regulations.

At December 31, 2021, GRIL’s minimum capital requirement and solvency capital requirement was approximately $10.6 million and $42.6 million, respectively.

At December 31, 2021, GRIL has been in compliance with the capital requirements required under the Irish Insurance Acts and Regulations.

Any failure to meet applicable requirements or minimum statutory capital requirements could subject us to further examination or action by regulators, including restrictions on dividend payments, limitations on our writing of additional business or engaging in financial or other activities, enhanced supervision, financial or other penalties or liquidation.

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These restrictions could adversely impact the Company.

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

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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.

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.

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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We may not be able to comply fully with, or obtain desired exemptions from, revised statutes, regulations and policies that currently, or may in the future, govern the conduct of our business.

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.

Failure to comply with, or to obtain desired

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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 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.

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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 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.

Brexit could adversely affect European or worldwide political, regulatory, economic or market conditions and could contribute to instability in global political institutions and regulatory agencies.

Brexit could also lead to legal uncertainty and differing laws and regulations between the U.K.

and the EU, and could impair or adversely affect the ability of the Lloyd’s market and the wider London market to transact business in EU countries.

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 materially and adversely affect our results of operations or financial condition.

Risks Relating to Our Investment Strategy and Our Investment Advisor

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

Our investment guidelines provide that SILP may commit up to 20% of Greenlight Re’s capital account (10% for GRIL) to any one investment.

In addition, GRIL’s investment guidelines require that the 10 largest investments shall not constitute more than 50% of the total investment portfolio and GRIL’s investment portfolio shall at all times, unless waived by the GRIL board of directors, be composed of a minimum of 50 debt or equity securities of publicly traded companies.

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

Our investment guidelines provide that SILP may commit up to, but not more than, 10% of Greenlight Re Surplus (as defined in the SILP LPA) and 7.5% of GRIL Surplus (as defined in the SILP LPA) to any single investment, unless a waiver has been obtained by the board of directors of Greenlight Re or GRIL, as applicable.

At December 31, 2021, SILP, along with certain affiliates of DME Advisors, collectively owned 34.3% of of Green Brick Partners, Inc., a publicly traded company (NYSE:

GRBK) (the “GRBK Shares”).

At December 31, 2021, SILP had invested more than 10% of Greenlight Re Surplus in GRBK.

Under applicable securities laws, DME Advisors may be unable to, or be limited in its ability to trade GRBK Shares of behalf of SILP.

As of the date of this filing, the board of directors of Greenlight Re had waived the applicable investment guidelines to allow SILP’s investment in the GRBK Shares to exceed the 10% threshold.

The board of directors of Greenlight Re and GRIL may grant future waivers relating to the GRBK Shares.

In addition, GRIL’s investment guidelines require that the 10 largest investments shall not constitute more than 40% of the GRIL Surplus and GRIL’s investment portfolio shall at all times, unless waived by the GRIL board of directors, be composed of a minimum of 50 debt or equity securities of publicly traded companies.

From time to time SILP may hold a few, relatively large security positions in relation to our capital accounts.

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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.

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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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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.

The performance of our Innovations investments could result in financial losses and reduce our capital.

Our Innovations investments include private investments and unlisted equities in early stage or start-up entities for which no active market may exit.

The valuation of these investments on our consolidated balance sheet may differ significantly from the values that would be used if ready markets existed for the securities representing interests in the relevant entities.

If we were to sell these assets (which may be necessary if we need liquidity to pay claims or other expenses), the proceeds may be significantly lower than our carrying values.

Furthermore, some of our Innovations investments may be subject to restrictions on redemptions and sales that limit our ability to liquidate these investments in the short term.

Our Innovations investments may become concentrated in a limited number of entities or have significant exposure to certain geographic areas or economic sectors.

Concentration of investments can increase investment risk and volatility.

Any of the foregoing could result in a decline in our investment performance and capital resources, and accordingly, adversely affect our financial results.

SILP effectuates short sales that subject our capital accounts to material and adverse 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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of a decline in the market value of the security.

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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).

The 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.

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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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Even if our investment in SILP generates investment income in a given period, our overall performance could be adversely affected by losses generated by our reinsurance operations.

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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

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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.

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 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.

We may derive a significant portion of our income from our investment portfolio.

As a result, our operating results depend in part on the performance of our investment portfolio.

As a result, our operating results depend in part on the performance of our investment portfolio managed by DME Advisors.

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

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DME Advisors’ interest and the interests of its affiliates, including Greenlight Capital, Inc., may at times conflict, possibly to DME Advisors’ detriment, which, in turn, may potentially adversely affect SILP’s investment opportunities and returns, and correspondingly, our investment portfolio.

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Einhorn, Chairman of our Board of Directors, is not, under Cayman Islands law, legally restricted from participating in making decisions with respect to Greenlight Re’s investment guidelines.

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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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Such defaults could have a significant and negative effect on us and/or SILP, and, correspondingly, our investment portfolio and our results of operations, financial condition and cash flows.

SILP may trade on margin and use other forms of financial leverage, which could potentially adversely affect our revenues.

SILP may trade on margin and use other forms of financial leverage, which may increase the risk of our investment portfolio.

Our investment guidelines provide SILP with the ability to trade on margin and use other forms of financial leverage.

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In the event of the counterparty’s default, SILP will generally only rank as an unsecured creditor and risk the loss of all or a portion of the amounts SILP is contractually entitled to receive.

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

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These performance compensation arrangements may create an incentive for DME Advisors to engage in transactions that focus on the potential for short-term gains rather than long-term growth or that are particularly risky or speculative.

The losses incurred under the venture agreement have been carried over to SILP and must be recouped in accordance with the loss carry forward provisions contained in the SILP LPA.

DME Advisors’ representatives’ service on boards and committees may place trading restrictions on our investments and may subject us to indemnification liability.

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

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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 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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If Greenlight Re becomes dissatisfied with the results of the investment performance of SILP, we will be unable to hire new investment managers unless the SILP LPA is terminated for cause.

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

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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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issuers may be subject to less stringent financial reporting and informational disclosure standards, regulatory oversight, practices and requirements than those applicable to U.S.

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Risks Relating to our Class A Ordinary Shares

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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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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 convertible notes.

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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our needs or at all.

Our ability to meet the debt service obligations contained in our debt agreements depends on our available cash and our future performance, which will be affected by financial, business, economic and other factors.

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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.

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 convertible notes.

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

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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 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.

The procedural and legal requirements necessary to consummate these transactions under the merger and consolidation provisions

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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.

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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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Dissenting shareholders to a merger have the right to be paid the fair value of their shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) if they follow the required procedures.

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Shareholders of Cayman Islands exempted companies such as ours have no general rights under Cayman Islands law to inspect corporate records and accounts.

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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

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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.

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.

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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Shareholders should consult their own legal counsel regarding the possible reporting requirements under Section 13 of the Exchange Act.

As of December 31, 2020, David Einhorn owned 18.1% of the issued and outstanding ordinary shares, which given that each Class B share is entitled to ten votes, causes him to exceed the 9.5% limitation imposed on the total voting power of the Class B ordinary shares.

At December 31, 2021, David Einhorn owned 18.5% of the issued and outstanding ordinary shares, which given that each Class B share is entitled to ten votes, causes him to exceed the 9.5% limitation imposed on the total voting power of the Class B ordinary shares.

Thus, the voting power held by the Class B ordinary shares that is in excess of the 9.5% limitation will be reallocated pro-rata to holders of Class A ordinary shares according to their percentage interest in the Company.

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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.

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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.

Passive income generally includes interest, dividends and other investment income but does not include income derived in the active conduct of an insurance business by a corporation predominantly engaged in an insurance business.

As of January 1, 2018, the active conduct of an insurance business is defined as an insurance company which has applicable insurance liabilities, as reported on its annual financial statement, exceeding 25% of its total assets.

Passive income generally includes interest, dividends and other investment income.

However, under an “active insurance” exception, income is not treated as passive if it is derived in the active conduct of an insurance business by a qualifying insurance corporation.

A qualifying insurance corporation is an insurance company which has applicable insurance liabilities, as reported on its annual financial statement, exceeding 25% of its total assets.

Applicable insurance liabilities means, with respect to our property and casualty reinsurance business, reserves for loss and loss adjustment expenses, and excludes unearned premium reserves.

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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.

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

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combined voting power or total value of the entity’s shares.

We believe that the dispersion of our Class A ordinary shares among holders and the restrictions placed on transfer, issuance or repurchase of our Class A ordinary shares , will in most cases prevent shareholders who acquire Class A ordinary shares from being United States 10% shareholders.

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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.

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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.

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.

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.

1, commonly referred to as “the Tax Cuts and Jobs Act,” was signed into law.

1 provides a bright-line test that a non-U.S.

The TCJA 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, TCJA was signed into law.

The TCJA provides a bright-line test that a non-U.S.

insurance company only will receive the benefit, for passive foreign investment company purposes, of being engaged in the active conduct of an insurance business if its applicable insurance liabilities constitute more than 25% of its total assets.

For this purpose, the term “applicable insurance liabilities” does not include unearned premium reserves.

One of the H.R.

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.

One of the TCJA’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 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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At December 31, 2021, 2020, and 2019 the Company met the bright-line applicable insurance liabilities test.

However, there is still substantial uncertainty regarding the application of the test.

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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.

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We are not able to predict if, when or in what form such guidance will be provided and whether such guidance will have a retroactive effect.

1 may have a detrimental effect on the Company and its assets.

The TCJA may have a detrimental effect on the Company and its assets.

The regulatory and tax environment globally is evolving, and changes in the regulation or taxation of the Company and its assets may materially adversely shareholders.

1, among other things, makes significant changes to the rules applicable to the taxation of the Company and its assets, such as changing the rules applicable to active insurance income for passive foreign investment company purposes (discussed above), changing rules applicable to controlled foreign investment company purposes, new base erosion rules, changing the general corporate tax rate to a flat 21% rate, modifying the rules regarding limitations on certain deductions, introducing a capital investment deduction in certain circumstances, placing certain limitations on the interest deduction, modifying the rules regarding the usability of certain net operating losses, and the migration from a worldwide system of taxation to a modified territorial system.

At this time the ultimate outcome of the new legislation on the Company and its shareholders is uncertain and could be adverse.

The TCJA among other things, made significant changes to the rules

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applicable to the taxation of the Company and its assets, such as changing the rules applicable to active insurance income for passive foreign investment company purposes (discussed above), changing rules applicable to controlled foreign investment company purposes, new base erosion rules, changing the general corporate tax rate to a flat 21% rate, modifying the rules regarding limitations on certain deductions, introducing a capital investment deduction in certain circumstances, placing certain limitations on the interest deduction, modifying the rules regarding the usability of certain net operating losses, and the migration from a worldwide system of taxation to a modified territorial system.

At this time the ultimate outcome of the legislation on the Company and its shareholders is uncertain and could be adverse.

Shareholders should consult their own tax advisors regarding potential changes in tax laws.

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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.

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.

The OECD has published reports and launched a global dialogue among member and non-member countries on measures to limit harmful tax competition.

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There are no immediate regulatory, tax, trade or other legal impacts to the Company, but we are not able to predict any future EU actions and whether the EU will deem the newly enacted laws to be compliant with its requirements in order to remove the Cayman Islands from Annex 1.

On October 8, 2021, the OECD announced an accord endorsing and providing an implementation plan for a global minimum tax rate of at least 15% for large multinational corporations on a jurisdiction-by-jurisdiction basis, known as the “two pillar plan.” The global minimum tax rate would apply to overseas profits of multinational firms with annual revenue of more than €750 million.

While the implementation of the accord is uncertain and the minimum tax is not expected to apply to the Company as currently proposed, adjustments to the threshold could impact the Company in future periods.

UNRESOLVED STAFF COMMENTS

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