QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
−Removed: We believe we are exposed to the following types of market risk:
+Added: We believe we are principally exposed to the following types of market risk:
• equity price risk;
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• political risk.
−Removed: Return to table of contents
Equity Price Risk
−Removed: At September 30, 2021, our investments consisted primarily of an investment in SILP.
+Added: At March 31, 2022, our investments consisted primarily of an investment in SILP.
Among SILP’s holdings are equity securities, the carrying values of which are based primarily on quoted market prices.
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This risk is partly mitigated by the presence of both long and short equity securities as part of our investment strategy.
−Removed: At September 30, 2021, a 10% decline in the price of each of the underlying listed equity securities and equity-based derivative instruments would result in a $6.9 million loss to our Investment Portfolio.
+Added: At March 31, 2022, a 10% decline in the price of each of the underlying listed equity securities and equity-based derivative instruments would result in a $4.8 million loss to our Investment Portfolio.
Computations of the prospective effects of hypothetical equity price changes are based on numerous assumptions, including the maintenance of the current composition of SILP’s portfolio.
−Removed: They should not be relied on as indicative of future results.
+Added: The computations should not be relied on as indicative of future results.
Commodity Price Risk
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SILP’s investments periodically include long or short investments in commodities or derivatives directly impacted by fluctuations in the prices of commodities.
−Removed: At September 30, 2021, SILP’s investments incorporate unhedged exposure to changes in gold, silver, and crude oil prices.
−Removed: The following table summarizes the net impact that a 10% increase and decrease in commodity prices would have on the value of our Investment Portfolio at September 30, 2021.
+Added: At March 31, 2022, SILP’s investments incorporate unhedged exposure to changes in gold, silver, and crude oil prices.
+Added: Return to table of contents
+Added: The following table summarizes the net impact that a 10% increase and decrease in commodity prices would have on the value of our Investment Portfolio at March 31, 2022.
The below table excludes the indirect effect that changes in commodity prices might have on equity securities in our Investment Portfolio.
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While we do not seek to precisely match our liabilities under reinsurance policies that are payable in foreign currencies with investments denominated in such currencies, we continually monitor our exposure to potential foreign currency losses and may use foreign currency cash and cash equivalents or forward foreign currency exchange contracts to mitigate against adverse foreign currency movements.
−Removed: At September 30, 2021, our exposure to GBP denominated net reinsurance asset balance was £1.8 million.
−Removed: At September 30, 2021, a 10% decrease in the U.S.
+Added: At March 31, 2022, our exposure to GBP denominated net reinsurance asset balance was £11.3 million.
+Added: At March 31, 2022, a 10% decrease in the U.S.
dollar against the GBP (all else constant) would result in an estimated $1.5 million foreign exchange gain.
Alternatively, a 10% increase in the U.S dollar against the GBP would result in an estimated $1.5 million foreign exchange loss.
−Removed: Similarly, at September 30, 2021, our net exposure to Euro-denominated reinsurance liability balances was €4.8 million.
−Removed: At September 30, 2021, a 10% decrease in the U.S.
+Added: Similarly, at March 31, 2022, our net exposure to Euro-denominated reinsurance liability balances was €5.0 million.
+Added: At March 31, 2022, a 10% decrease in the U.S.
dollar against the Euro (all else constant) would result in an estimated $0.6 million foreign exchange loss.
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We may also be exposed to foreign currency risk through SILP’s underlying cash, forwards, options, and investments in securities denominated in foreign currencies.
−Removed: At September 30, 2021, most of our currency exposures resulting from foreign denominated securities (longs and shorts) were reduced by offsetting cash balances denominated in the corresponding foreign currencies.
−Removed: At September 30, 2021, a 10% increase or decrease in the value of the U.S.
+Added: At March 31, 2022, most of our currency exposures resulting from foreign denominated securities (longs and shorts) were reduced by offsetting cash balances denominated in the corresponding foreign currencies.
+Added: At March 31, 2022, a 10% increase or decrease in the value of the U.S.
dollar against foreign currencies would have no meaningful impact on the value of our Investment Portfolio.
−Removed: Return to table of contents
Interest Rate Risk
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Additionally, some derivative investments may be sensitive to interest rates, and their value may indirectly fluctuate with changes in interest rates.
−Removed: As of September 30, 2021, a 100 basis points increase or decrease in interest rates would have no meaningful impact on the value of our Investment Portfolio.
+Added: At March 31, 2022, a 100 basis points increase or decrease in interest rates would have no meaningful impact on the value of our Investment Portfolio.
We, along with DME Advisors, monitor the net exposure to interest rate risk and generally do not expect changes in interest rates to have a materially adverse impact on our operations.
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Our maximum exposure to credit risk is the carrying value of our financial assets.
−Removed: We evaluate the financial condition of our business partners and clients relating to balances receivable under our reinsurance contracts, including premiums receivable, losses recoverable, and commission adjustments recoverable.
+Added: We evaluate the
+Added: Return to table of contents
+Added: financial condition of our business partners and clients relating to balances receivable under our reinsurance contracts, including premiums receivable, losses recoverable, and commission adjustments recoverable.
We obtain collateral in the form of funds withheld, trusts, and letters of credit from our counterparties to mitigate this credit risk.
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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.