What changed in this filing

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Item 1. Business

2023-03-08 compared with 2022-03-08 · 160 added, 115 removed, 450 unchanged (38% of the section changed)

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Greenlight Re UK Greenlight Re Marketing (UK) Limited

Syndicate 3456 Greenlight Innovation Syndicate 3456

GCM Greenlight Re Corporate Member Ltd.

We have included a Glossary of Selected Reinsurance Terms at the end of “Part 1, Item 1.

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In August 2004, we raised gross proceeds of $212.2 million from private placements of Greenlight Capital Re’s Class A ordinary shares and Class B ordinary shares, or, collectively, the ordinary shares.

On May 24, 2007, Greenlight Capital Re raised proceeds of $208.3 million, net of underwriting fees, in an initial public offering of Class A ordinary shares, as well as an additional $50.0 million from a private placement of Class B ordinary shares.

We are a global specialty property and casualty reinsurer headquartered in the Cayman Islands, with a reinsurance and investment strategy that we believe differentiates us from our competitors.

We conduct our reinsurance operations through two licensed and regulated entities:

On May 24, 2007, Greenlight Capital Re raised proceeds of $208.3 million, net of underwriting fees, in an initial public offering of Class A ordinary shares, and an additional $50.0 million from a private placement of Class B ordinary shares.

We are a global specialty property and casualty reinsurer headquartered in the Cayman Islands, with a reinsurance and investment strategy that we believe differentiates us from most of our competitors.

We conduct our operations through two licensed and regulated entities:

Greenlight Re, based in the Cayman Islands, and GRIL, based in Dublin, Ireland.

Greenlight Re provides multi-line property and casualty reinsurance globally, while GRIL focuses mainly on the European market.

In 2022, Greenlight Innovation Syndicate 3456 (“Syndicate 3456”) commenced insurance operations under the Lloyd’s syndicate-in-a-box model, with Greenlight Re as the sole capital provider.

The London market specialty business is central to our underwriting portfolio.

In 2020, we established a UK marketing Company, Greenlight Re UK, which has increased our London market presence and we expect it to facilitate continued growth in this market.

On January 1, 2023, we acquired a Lloyd’s corporate member, GCM, that provides underwriting capacity for various syndicates (including Syndicate 3456) that underwrite general insurance and reinsurance business at Lloyd’s.

Prior to acquiring GCM, we sourced our Funds at Lloyd’s (“FAL”) business through the same corporate member.

The ownership of GCM complements our Syndicate 3456 and provides us more control over the FAL business.

Our goal is to build long-term shareholder value by providing risk management products and services to the insurance, reinsurance, and other risk marketplaces.

We focus on delivering risk solutions to clients and brokers who value our expertise, analytics, and customer service offerings.

In 2018, we launched our Greenlight Re Innovations unit, which supports technology innovators in the (re)insurance market by providing investment, risk capacity, and access to a broad insurance network.

We aim to complement our underwriting results with a non-traditional investment approach to achieve higher rates of return over the long term than reinsurance companies that exclusively employ more traditional investment strategies.

Our investment portfolio is managed according to a value-oriented philosophy, in which our investment advisor takes long positions in perceived undervalued securities and short positions in perceived overvalued securities.

We aim to complement our underwriting activities with a non-traditional investment approach designed to achieve higher rates of return over the long term than reinsurance companies that exclusively employ more traditional investment strategies.

Our investment portfolio is managed by a value-oriented investment advisor that analyzes companies’ available financial data, business strategies, and prospects to identify undervalued and overvalued securities.

From time to time, we make long-term strategic investments in insurance companies and general agents to complement our strategy and strengthen our client relationships.

In certain instances, we utilize Verdant to facilitate strategic investments in property and casualty insurers, general agents, and other entities domiciled in the United States.

In 2020, we established a UK marketing Company, Greenlight Re UK, to increase our London market presence.

The London market specialty business is now central to our underwriting portfolio, and we believe Greenlight Re UK will facilitate continued growth in this market.

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Description of Business

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Our underwriting approach varies by class and type of opportunity:

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● Where we have domain-specific expertise and a high level of market access, we may seek to act as the lead underwriter to achieve greater influence in negotiating pricing, terms, and conditions;

● Where our expertise is sufficient to evaluate the risk thoroughly, we will generally seek to participate in syndicated placements negotiated and priced by another party that we judge to have market-leading expertise in the class or as a quota share retrocessionaire of a market-leading reinsurer;

● Where we have domain-specific expertise and a high level of market access, we may seek to act as the lead underwriter to achieve greater influence in negotiating pricing, terms, and conditions.

Risk innovation and strategic partnerships

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In evaluating Innovations opportunities, we generally ensure that each investment meets at least one of the following criteria:

● The value we add to a partnership primarily comes from the application of our risk expertise, not solely capital or reinsurance support;

● The partnership approach adds expertise to our company in specific risk areas, technology, product innovation, or other areas;

● The partnership approach provides access to a pool of capital, to products, or distribution;

● The value we add to a partnership is derived primarily from the application of our risk expertise, not solely capital or reinsurance support;

● The partnership adds expertise to our company in specific risk areas, technology, product innovation, or other areas;

● The partnership approach provides access to a pool of capital, products, or distribution;

● Overall, the partnership approach creates a combined effort that generates a durable strategic or competitive position in one or more markets and increases our opportunities to achieve revenue growth and margin expansion.

Our investment strategy, like our reinsurance strategy, is designed to maximize returns over the long term while minimizing the risk of capital loss.

Unlike the investment strategies of many of our traditional competitors, which invest primarily in fixed-income securities either directly or through fixed-fee arrangements with one or more investment managers, our investment strategy is focused primarily on long and short positions, primarily in publicly-traded equity and corporate debt instruments.

Unlike the investment strategies of many of our competitors, which invest primarily in fixed-income securities either directly or through fixed-fee arrangements with one or more investment managers, our investment strategy is focused mainly on long and short positions, primarily in publicly-traded equity and corporate debt instruments.

We measure our success by long-term growth in book value per share, which we believe is the most comprehensive gauge of our performance.

Accordingly, we design our incentive compensation plan to align employee and shareholder interests.

We seek to grow and diversify our underwriting portfolio.

Our allocation of risk will vary based on our perception of the opportunities available in each line of business at each point in time.

As our focus on certain lines fluctuates based upon market conditions, we may only offer or underwrite a limited number of lines in any given period.

Accordingly, we have incorporated a metric based on growth in book value per share in our incentive compensation plan to align employee and shareholder interests.

The size and diversification of our underwriting portfolio will vary based on our perception of the opportunities available in each line of business at each point in time.

As our focus on certain lines fluctuates based on market conditions, we may only offer or underwrite a limited number of lines in any given period.

● target markets and lines of business where we believe an appropriate risk/reward profile exists;

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Professional Liability 1,921 0.3 316 0.1 204 —

316 0.1 204 — (448) (0.1)

Workers' Compensation 28,381 5.0 62,188 11.0 82,189 17.1

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$ 563,171 100.0 % $ 565,393 100.0 % $ 479,791 100.0 %

(1) Negative balances reflect premium adjustments and premium returned upon contracts’ termination, novation, or commutation.

The following table sets forth our gross premiums written by the geographic area of the risk insured:

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(1) “Worldwide” comprises contracts that reinsure risks in more than one geographic area and may include risks in the U.S.

(2) Negative balances reflect premium adjustments and premium returned upon contract’s termination, novation, or commutation.

Additional information about our business is set forth in “Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

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Additional information about our business is set forth in “Part II, Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Marketing and Distribution

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We source a majority of our business through reinsurance brokers.

Brokerage distribution channels provide us with access to an efficient, variable cost and global distribution system without the significant time and expense that would be incurred in creating a wholly-owned distribution network.

In some cases, intermediaries also provide other valuable services, including risk analytics, processing, and clearing.

Brokerage distribution channels provide us with access to an efficient, variable cost and global distribution system.

In some cases, intermediaries also provide other services, including risk analytics, processing, and clearing.

We aim to build and strengthen long-term relationships with global reinsurance brokers.

Our management team has relationships with most primary and specialty broker intermediaries in the reinsurance marketplace.

By maintaining close relationships with brokers, we believe that we will continue to obtain access to a broad range of reinsurance clients and opportunities.

By maintaining close

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relationships with brokers, we believe that we will continue to obtain access to a broad range of reinsurance clients and opportunities.

We seek to strengthen our broker relationships and become the preferred choice of brokers and clients by providing, where applicable:

● customized solutions that address the specific business needs of our clients;

● demonstrated expertise in the underlying reinsured exposures and the operation of the contracts;

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● timely claims payments;

● customized solutions that address the specific business needs of our clients;

● financial security;

● a clear indication of risks we will and will not underwrite.

We focus on the quality and financial strength of any brokerage firm we do business with.

We focus on the quality and financial strength of any brokerage firm we conduct business with.

Brokers do not have the authority to bind us to any reinsurance contract.

Reinsurance brokers receive a brokerage commission, usually a percentage of gross premiums written.

Their commissions are generally determined based on a percentage of gross premiums written.

We rely on a small number of broker relationships, which has continued to decrease in recent years as a result of consolidation in the broker sector.

In 2022, five brokerage firms accounted for 69.4% of our gross premiums written.

The following table sets forth the premiums generated through our largest brokers and their subsidiaries and affiliates:

Year ended December 31

2021 2020 2019

($ in thousands)

Guy Carpenter (Marsh) $ 178,336 31.5 % $ 195,274 40.7 % $ 297,150 56.7 %

Aon Benfield $ 159,421 28.3 %

Gallagher Re 91,239 16.2

BMS Group 51,435 9.1

Guy Carpenter (Marsh) 50,626 9.0

Howden 38,376 6.8

Total of largest brokers 391,097 69.4

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Total $ 563,171 100.0 %

We frequently meet in the Cayman Islands, Ireland, and elsewhere with brokers and senior representatives of clients and prospective clients.

We frequently meet in the Cayman Islands, Ireland, U.K.

and elsewhere with brokers and senior representatives of clients and prospective clients.

We review and (when we deem appropriate) approve all contract submissions in the Cayman Islands or Ireland.

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See “Item 1A.

Risk Factors — Risks Related to 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.

Risk Factors — Risks Related to Our Business — The inability to obtain business provided from brokers could materially and adversely affect our business, financial condition and results of operations.

” We may assume a degree of the credit risk of our reinsurance brokers.

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Risk Factors — Risks Related to Our Business — We are subject to the credit risk of our brokers, cedents, agents and other counterparties.

While most of our business is sourced through reinsurance brokers, we also write some insurance and reinsurance business on a direct basis.

Our Innovations partnerships are a growing source of directly placed business.

Our FAL business, which represented approximately one third of our gross written premiums in the 2022 fiscal year, was generated through a Lloyd’s corporate member, which we subsequently acquired effective January 1, 2023.

We may also selectively delegate underwriting authority to managing general agents to transact business within the constraints of prescribed underwriting guidelines.

We expect to delegate underwriting authority primarily relating to Syndicate 3456, and sporadically through carefully selected managing agents.

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Underwriting and Risk Management

We have established an underwriting platform composed of experienced underwriters and actuaries.

We have underwriting operations in two locations, Cayman Islands and Dublin, Ireland, that respectively provide proximity to key markets in the U.S.

Our experienced team allows us to deploy our capital in a variety of lines of business and capitalize on opportunities that we believe offer favorable returns on equity over the long term.

We have underwriting operations in three locations:

the Cayman Islands, Dublin, Ireland, and London, U.K.

These platforms provide access to key markets in the U.S.

Our experienced team allows us to deploy our capital in various lines of business and capitalize on opportunities that we believe offer favorable returns on equity over the long term.

Our underwriters and actuaries have expertise in multiple lines of business.

We generally apply the following underwriting and risk management principles:

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Economics of Results

Our primary underwriting goal is to build a reinsurance portfolio that maximizes profitability, subject to risk and volatility constraints.

Our primary underwriting goal is to build a (re)insurance portfolio that maximizes profitability, subject to risk and volatility constraints.

Underwriting Analysis

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Our underwriting professionals specialize in business lines, and our quantitative professionals assist in evaluating all risks we underwrite.

Combined with cross-line management, we believe this approach enables us to build and deploy expertise and insight into the business line’s risk dynamics and external risk factors that will affect each transaction.

Combined with cross-line management, we believe this approach enables us to build and deploy expertise and insight into the business line’s risk dynamics and external factors that will affect each transaction.

We assign a deal team composed of underwriting and quantitative professionals to evaluate each potential transaction’s pricing and structure.

Before committing capital to any transaction, the deal team must obtain approval from the Chief Executive Officer/Chief Underwriting Officer.

Before committing capital to any transaction, the deal team and the regional Chief Underwriting Officer must obtain approval from the Chief Executive Officer.

In seeking this approval, the deal team presents the key components of the proposed transaction, including assumptions and threats, market and individual deal risk factors, market capacity dynamics, transaction structure and pricing, maximum downside, and other factors.

We collaborate with our current and prospective clients and brokers to understand the risks associated with each potential transaction.

For most of our business, we follow terms set by recognised market leads.

The remainder of our business is considered lead business, including business linked to our Innovations portfolio or in areas where we have significant market expertise.

We generally use contract structure to ensure alignment of interest where we lead the business.

For most of our business, we follow terms set by recognized market leads.

We consider the remainder of our underwriting portfolio, including contracts linked to our Innovations partners or in areas where we have significant market expertise, to be “lead business.” When underwriting lead business, we generally structure the reinsurance agreements to ensure that our cedents’ interests and ours are aligned.

Where appropriate, we conduct or contract for on-site audits or reviews of the clients’ underwriting files, systems, and operations.

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● reports provided by independent industry specialists.

We develop and use proprietary quantitative models and use several commercially available tools to price our business.

We develop proprietary quantitative models and use several commercially available tools to price our business.

Our models consider conventional underwriting and risk metrics and incorporate various class-specific and market-specific aspects from our line-of-business analyses.

We use models to evaluate the quantitative work’s quality and predictive power and undertake a detailed assessment of the data quality.

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Underwriting Authorities

The Underwriting Committee of our Board of Directors, which we refer to as the Underwriting Committee, sets parameters for aggregate property catastrophic caps and limits for maximum loss potential under any individual contract.

The Underwriting Committee of our Board of Directors (the “Underwriting Committee”) sets parameters for aggregate property catastrophic caps and limits for maximum loss potential under any individual contract.

The Underwriting Committee must approve any exceptions to the established limits.

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to manage our overall catastrophe events or aggregate exposure, reduce our net liability on individual risks, obtain additional underwriting capacity, and balance our underwriting portfolio.

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The amount of retrocessional coverage that we purchase varies based on numerous factors, including the inherent volatility and risk accumulation of the portfolio of business we write and our capital base.

The retrocessional coverage we purchase varies based on numerous factors, including the inherent volatility and risk accumulation of our underwriting portfolio and capital base.

Our portfolio, and by extension our gross risk position, will change in size from year to year depending on market opportunities, so it is difficult to predict the level of retrocessional coverage that we will purchase in any future year.

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For lower-rated or non-rated reinsurers, we endeavor to obtain and monitor collateral in the form of cash, funds withheld, letters of credit, regulatory trusts, or other collateral in the form of guarantees.

At December 31, 2021, the aggregate amount due from reinsurers from retrocessional coverages represents 2.1% (December 31, 2020:

At December 31, 2022, the aggregate amount due from reinsurers from retrocessional coverages represented 2.4% (2021:

2.1%) of our gross loss reserves.

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We regularly evaluate the financial condition of our reinsurers to assess their ability to honor their obligations.

At December 31, 2021, the Company had recorded an allowance for expected credit losses of $0.1 million (December 31, 2020:

At December 31, 2022, the Company had recorded an allowance for expected credit losses from retrocessionaires of $0.4 million (2021:

$0.1 million).

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We review reserving and settlement authority under the individual contract requirements and, as necessary, discuss with the contract’s underwriter.

Our in-house claims officer oversees claims reviews and provides approval for complex or large claim settlements.

Claims above the claims officer’s authority are referred to the general counsel, together with the claims officer’s recommendations, for secondary approval.

Our in-house claims officer oversees claims reviews and approves complex or large claim settlements.

Claims above the claims officer’s authority are referred to the General Counsel or Chief Financial Officer, together with the claims officer’s recommendations, for secondary approval.

Our Chief Executive Officer must approve claim payments above a certain threshold.

We believe that this process ensures that we pay claims in accordance with each contract's terms and conditions.

Where appropriate, we conduct or contract for on-site claims audits at cedents and third-party administrators, particularly for large accounts and for those whose performance differs from our expectations.

We evaluate and monitor the third-party administrators’ and ceding companies’ organization and claims-handling practices through these audits.

Where appropriate, we conduct or contract for on-site claims audits at cedents and third-party administrators, particularly for large accounts, Innovations partners, and those whose performance differs from our expectations.

Through these audits, we evaluate and monitor the third-party administrators’ and the ceding companies’ organization and claims-handling practices.

These practices include:

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We recognize that the fair interpretation of our reinsurance agreements and timely payment of covered claims are essential components of the service we provide to our clients.

Our reserving philosophy is to set reserves that represent our best estimate of the amount we will ultimately be required to pay in connection with risks we have underwritten.

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Our reserving philosophy is to set reserves at the level representing our best estimate of the amount we will ultimately be required to pay in connection with risks we have underwritten.

Our actuarial staff performs quarterly reviews of our portfolio and provides reserving estimates according to our stated reserving philosophy.

In doing so, our actuarial staff groups our portfolio of business into reserving analysis segments based primarily on homogeneity considerations.

In doing so, our actuarial staff groups our portfolio into reserving analysis segments based primarily on homogeneity considerations.

Currently, this process involves analysis at the individual client or transaction level.

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Although the methods for establishing reserves are well established, many assumptions about anticipated loss emergence patterns are subject to unanticipated fluctuation.

We base our estimates on our assessment of facts and circumstances, future trends in claim severity and frequency, judicial theories of liability, and other factors, including the actions of third parties, which are beyond our control.

We base our estimates on our assessment of facts and circumstances, future trends in claim severity and frequency, judicial theories of liability, and other factors, including inflation, interest rate changes, political risks and the actions of third parties, which are beyond our control.

See Note 7 of the accompanying consolidated financial statements for a reconciliation of claims reserves, loss development tables by accident year, and explanations of significant prior period loss development movements.

See “Item 1A.

Risk Factors — Risks Relating to Our

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

Risk Factors — Risks Relating to Our Business — If our losses and loss adjustment expenses greatly exceed our loss reserves, our financial condition may be materially and adversely affected.

Collateral Arrangements and Letter of Credit Facilities

We are licensed and admitted as an insurer only in the Cayman Islands and the European Economic Area.

We are licensed and admitted as a reinsurer only in the Cayman Islands and the European Economic Area (the “EEA”).

Many jurisdictions, including the United States, do not permit clients to take credit for reinsurance on their statutory financial statements if they obtain such reinsurance from unlicensed or non-admitted insurers without appropriate collateral.

As a result, our U.S.

clients and a portion of our non-U.S.

clients and some non-U.S.

clients require us to provide collateral for the contracts we bind with them.

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The reinsurance industry is highly competitive.

We compete with major reinsurers, most of which are well established, have significant operating histories and strong financial strength ratings, and have developed long-standing client relationships.

We compete with major reinsurers, most of which are well-established and have significant operating histories, strong financial strength ratings, and long-standing client relationships.

Our competitors vary according to the individual market and situation.

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Best is the fourth highest of 13 ratings.

We believe that a strong rating is an important factor in marketing reinsurance products to clients and brokers.

We believe a strong rating is important in marketing reinsurance products to clients and brokers.

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

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See “Item 1A.

Risk Factors — 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.

Risk Factors — Risks Relating to Our Business — A downgrade or withdrawal of our A.M.

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

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Cayman Islands Insurance Regulation

The legislative framework for conducting insurance and reinsurance business in and from within the Cayman Islands is composed of The Insurance Act, 2010 (as amended) and underlying regulations thereto (the “Act”), which became effective in the Cayman Islands effective November 1, 2012.

Greenlight Re holds a Class D insurer license issued in accordance with the terms of the Act and is subject to regulation and supervision by CIMA.

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Greenlight Re is required to comply with the following principal requirements under the Act:

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● to maintain capital and a margin of solvency in accordance with the capital and solvency requirements prescribed by the Act;

● to carry on its business in accordance with the laws of the Cayman Islands, including the regulatory laws, regulations, rules, and statements of guidance, where applicable;

● to carry on its business in accordance with its business plan and the laws of the Cayman Islands, including the regulatory laws, regulations, rules, and statements of guidance, where applicable;

● to maintain adequate arrangements, including internal controls, for the management of risks and a system of governance as approved by CIMA;

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● to examine and make recommendations with respect to, among other things, proposals for the revocation of licenses and cases of suspected insolvency of licensed entities.

Greenlight Re is also required to comply with the Rule on Corporate Governance for Insurers and the Rule on Risk Management for Insurers.

Respectively, these rules require regulated insurers to establish and maintain (a) a corporate governance framework which provides for the sound and prudent management and oversight of the insurer's business, including outsourcing and internal controls, and which adequately recognizes and protects the interests of its policyholders, and (b) a risk management framework that is capable of promptly identifying, measuring, assessing, reporting, monitoring and controlling all sources of risks that could have a material impact on its operations.

Greenlight Re is also required to comply with, amongst other standards, the Rule on Corporate Governance for Insurers, the Rule on Risk Management for Insurers, and the Rule on Investment Activities for Insurers and the associated Statement of Guidance.

Respectively, these rules require regulated insurers to establish and maintain (a) a corporate governance framework that provides for the sound and prudent management and oversight of the insurer's business, including outsourcing and internal controls, and which adequately recognizes and protects the interests of its policyholders, and (b) a risk management framework that is capable of promptly identifying, measuring, assessing, reporting, monitoring and controlling all sources of risks that could have a material impact on its operations, and (c) implement investment activities that consider all of Greenlight Re’s risks and solvency requirements.

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The Act provides that where CIMA believes a licensee is committing, or is about to commit or pursue, an act that is an unsafe or unsound business practice, CIMA may direct the licensee to cease or refrain from committing the act or pursuing the offending course of conduct.

Failure to comply with such a CIMA direction may be punishable on summary conviction by a fine of up to 100,000 Cayman Islands dollars (approximately US$120,000) or to imprisonment for a term of five years or to both, and on conviction on indictment to a fine of 500,000 Cayman Islands dollars (approximately US$600,000) or to imprisonment for a term of ten years or to both and to an additional 10,000 Cayman Islands dollars (approximately US$12,000) for every day after conviction that the breach continues.

The Monetary Authority Act (“MAA”) also provides CIMA with authority to impose administrative fines on licensees.

The Monetary Authority Act (“MAA”) also provides CIMA with the authority to impose administrative fines on licensees.

The recent Monetary Authority (Administrative Fines) (Amendment) Regulations, 2020 (the “Amendment Regulations”) came into force on 26 June 2020.

They extended the scope of the fines which CIMA may impose for breaches of a range of regulatory laws, including the Act.

Breaches are categorised as minor, serious or very serious and, depending on the category of breach, fines range from US$6,100 to US$1,220,000 per breach for very serious breaches.

They extended the scope of the fines CIMA may impose for breaches of a range of regulatory laws, including the Act.

Breaches are categorized as minor, serious, or very serious, and, depending on the category of the breach, fines range from US$6,100 to US$1,220,000 per breach for very serious breaches.

Where a breach is committed by a corporate entity and is shown to have been committed with the consent, connivance, knowledge, or neglect of an individual, that individual may also be subject to an administrative fine.

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contravened the terms of the Act or has otherwise behaved in such a manner to cause CIMA to call into question the licensee’s fitness, CIMA may take one of several steps.

Whenever CIMA believes that a licensee is or may become unable to meet its obligations as they fall due, is carrying on business in a manner likely to be detrimental to the public interest or the interests of its creditors or policyholders, has contravened the terms of the Act or has otherwise behaved in such a manner to cause CIMA to call into question the licensee’s fitness, CIMA may take one of several steps.

The steps include requiring the licensee to rectify the matter, suspending the license of the licensee, revoking the license, imposing conditions upon the license and amending or revoking any such condition, requiring the substitution of any director, manager, or officer of the licensee, at the expense of the licensee, appointing a person to advise the licensee on the proper conduct of its affairs and to report to CIMA thereon, at the expense of the licensee, appointing a person to assume control of the licensee’s affairs or otherwise requiring such action to be taken by the licensee as CIMA considers necessary.

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As Cayman Islands exempted companies, Greenlight Capital Re and Greenlight Re may not carry on business or trade locally in the Cayman Islands except in furtherance of their business outside the Cayman Islands and are prohibited from soliciting the public of the Cayman Islands to subscribe for any of their securities or debt.

We are further required to file a return with the Registrar of Companies in January of each year (“Annual Return”) and to pay an annual registration fee at that time.

Both these companies are further required to file a return with the Registrar of Companies in January of each year (“Annual Return”) and to pay an annual registration fee at that time.

Economic substance law requiring a “relevant entity” conducting “relevant activity” to file notifications and, unless exempt, to report to the Tax Information Authority (“TIA”) and maintain economic substance has been introduced in the Cayman Islands.

The International Tax Co-operation (Economic Substance) Act (2020 Revision) and International Tax Co-operation (Economic Substance) Regulations, 2020, were published on January 14, 2020, and August 11, 2020, respectively (together, the “ES Act”).

The latest version of the Guidance on Economic Substance for Geographically Mobile Activities (“ES Guidance”) was published on July 13, 2020.

The latest version of the Guidance on Economic Substance for Geographically Mobile Activities (“ES Guidance”) was published in July 2022.

Commencing January 2020, Greenlight Capital Re and Greenlight Re are required to confirm their economic substance classification and submit this classification to the TIA as a prerequisite to the Annual Return filing.

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Solvency II is supplemented by the European Commission Delegated Regulation (EU) 2015/35, other European Commission “delegated acts” and binding technical standards, and guidelines issued by the European Insurance and Occupational Pensions Authority (“Delegated Acts and Guidelines”).

GRIL is required to comply at all times with the Irish Regulations, the Irish Insurance Acts 1909 to 2018, regulations relating to insurance business or reinsurance business promulgated under the European Communities Act 1972, the Irish Central Bank Acts 1942 to 2018 as amended, regulations promulgated thereunder and directions, guidelines and codes of conduct issued by CBI (collectively the “Irish Insurance Acts and Regulations”).

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“Irish Insurance Acts and Regulations”).

In addition, GRIL is required to comply with the Delegated Acts and Guidelines and must meet risk-based solvency requirements imposed under Solvency II on insurers and reinsurers across all member states, including Ireland.

Solvency II and the Delegated Acts and Guidelines set out classification and eligibility requirements, including the characteristics which capital, including any capital contribution, must display to qualify as regulatory capital.

Solvency II and the Delegated Acts and Guidelines set out classification and eligibility requirements, including the characteristics that capital, including any capital contribution, must display to qualify as regulatory capital.

GRIL is also required to comply with the European Union (Insurance Distribution) Regulations 2018 (the "2018 Regulations"), which apply to distributors of insurance and reinsurance products (including insurers and reinsurers).

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On May 25, 2018, the General Data Protection Regulation (the "GDPR") came into force across the EU.

The GDPR significantly increases the organizations’ obligations and responsibilities in collecting, using, storing, and protecting personal data.

Organizations in breach of the GDPR may incur sizable financial penalties.

The GDPR significantly increases organizations’ obligations and responsibilities in collecting, using, storing, and protecting personal data.

Organizations in breach of the GDPR may incur sizable financial penalties up to, the higher of €10 million or 4% of annual global turnover.

UK Regulations

Lloyd’s Oversight

Syndicate 3456 is subject to oversight by Lloyd’s, substantially effected through the Lloyd’s Council.

Our business plan for Syndicate 3456, including maximum underwriting capacity, requires annual approval by Lloyd’s.

Lloyd’s may require changes to any business plan presented to it or additional capital to be provided to support the underwriting plan.

We have deposited certain assets with Lloyd’s to support GCM’s underwriting business at Lloyd’s.

By entering into a membership agreement with Lloyd’s, GCM has undertaken to comply with all Lloyd’s by-laws and regulations as well as the provisions of the Lloyd’s Acts and the Financial Services and Markets Act 2000, as amended by the Financial Services Act 2012.

This arrangement subjects us to the following:

● Capital Requirements.

The underwriting capacity of a member of Lloyd’s must be supported by providing a deposit, referred to as “Funds at Lloyd’s” or “FAL,” in an amount determined on the basis of such entity’s solvency and capital requirements.

The amount of such deposit is calculated for each member through the completion of an annual capital adequacy exercise.

In addition, if the FAL are not sufficient to cover all losses, the Lloyd’s Central Fund provides an additional level of security for policyholders.

Dividends from a Lloyd’s managing agent and a Lloyd’s corporate member can be declared and paid provided the relevant company has sufficient profits available for distribution.

The financial security of the Lloyd’s market as a whole is regularly assessed by three independent rating agencies (A.M.

Best, S&P and Fitch).

Syndicates at Lloyd’s take their financial security rating from the rating of the Lloyd’s market.

A satisfactory credit rating issued by an accredited rating agency is necessary for Lloyd’s syndicates to be able to trade in certain classes of business at current levels.

● Intervention Powers.

The Lloyd’s Council has wide discretionary powers to regulate members’ underwriting at Lloyd’s, including, the power to withdraw a member’s permission to underwrite business or to underwrite a particular class of business and to change the basis on which syndicate expenses are allocated.

● Assessments.

If Lloyd’s determines that the Central Fund needs to be increased, it has the power to assess premium levies on current Lloyd’s members up to 5% of a member’s underwriting capacity in any one year.

PRA and FCA Regulation .

The Prudential Regulation Authority (“PRA”) and the Financial Conduct Authority (“FCA”) regulate all financial services firms in the U.K.

including the Lloyd’s market, and Syndicate 3456, and have substantial powers of intervention in relation to regulated firms.

Lloyd’s is required to implement certain rules prescribed by the PRA and the FCA.

If it appears to either the PRA or the FCA that either Lloyd’s is not fulfilling its delegated regulatory responsibilities or that managing agents are not complying with the applicable regulatory rules and guidance, the PRA or the FCA may intervene at their discretion.

Lloyd’s is subject to an annual PRA solvency test which measures whether Lloyd’s has sufficient assets in the aggregate to meet all outstanding liabilities of its members, both current and run-off.

If Lloyd’s fails this test, the PRA may require the entire Lloyd’s market to cease underwriting or individual Lloyd’s members may be required to cease or reduce their underwriting.

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amendment revised the mechanics for calculating the Carryforward Account and Performance Allocation (as defined in the SILP LPA) to consider withdrawals from and subsequent recontributions of capital to SILP.

On January 7, 2021, effective as of January 1, 2021, we entered into a second amendment to the SILP LPA, which amended (a) the definition of “Additional Investment Ratio” and (b) each of the defined terms “Greenlight Re Surplus” and “GRIL Surplus.” The second amendment to the SILP LPA also incorporated the requirement that the Investment Portfolio, as defined in the SILP LPA, will not exceed 50% of GLRE Surplus.

On January 7, 2021, effective as of January 1, 2021, we entered into a second amended and restated SILP LPA, which amended (a) the definition of “Additional Investment Ratio” and (b) each of the defined terms “Greenlight Re Surplus” and “GRIL Surplus.” The amendment to the SILP LPA also incorporated the requirement that the Investment Portfolio, as defined in the SILP LPA, will not exceed 50% of GLRE Surplus.

Effective January 1, 2023, we amended the SILP LPA to increase the maximum Investment Portfolio to 60% of GLRE Surplus.

DME Advisors receives a monthly management fee at an annual rate of 1.5% of each limited partner’s Investment Portfolio, as provided in the SILP LPA.

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Affiliates of DME Advisors presently serve as the general partner or the investment advisor of Greenlight Capital, LP, Greenlight Capital Offshore Qualified, Ltd., GCOQ Intermediate, LP, Greenlight Capital Offshore Partners, Ltd., Greenlight Capital Investors, LP, Greenlight Capital Offshore Investors, Ltd., GCOI Intermediate, LP, Greenlight Capital Offshore Master, Ltd., Greenlight Masters, LP, Greenlight Masters Qualified, LP, Greenlight Masters Offshore, Ltd., Greenlight Masters Offshore I, Ltd., Greenlight Masters Offshore Partners and Greenlight Masters Partners (collectively, the “Greenlight Funds”).

We have agreed to use commercially reasonable efforts to cause all of our current and future subsidiaries to enter into the SILP LPA.

We have agreed to use commercially reasonable efforts to cause all our current and future subsidiaries to enter into the SILP LPA.

Under the SILP LPA, we are contractually obligated to use commercially reasonable efforts to cause substantially all investable assets of Greenlight Re and GRIL, with limited exceptions, to be contributed to SILP.

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Furthermore, DME II has agreed to indemnify us against any liability incurred in connection with certain actions.

Under the SILP LPA, either of the GLRE Limited Partners may voluntarily withdraw all or part of its capital account for its operating needs by giving DME II at least three business days’ notice.

Either of the GLRE Limited Partners may withdraw as a partner and fully withdraw all of its capital account from SILP on three business days’ notice if the limited partner’s board declares that a cause for withdrawal exists as per the SILP LPA.

Under the SILP LPA, either GLRE Limited Partner may voluntarily withdraw all or part of its capital account for its operating needs by giving DME II at least three business days’ notice.

Either of the GLRE Limited Partners may withdraw as a

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partner and fully withdraw all of its capital account from SILP on three business days’ notice if the limited partner’s board declares that a cause for withdrawal exists as per the SILP LPA.

Investment Strategy

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Assets will be invested in such fashion that Greenlight Re has a reasonable expectation that it can meet any of its liabilities as they become due.

Greenlight Re will review with the Investment Advisor the liquidity of the portfolio on a periodic basis.

Greenlight Re will review with the Investment Advisor the liquidity of the portfolio on periodic basis.

● Monitoring:

Greenlight Re will require the Investment Advisor to re-evaluate each position in its Investment Portfolio, monitor changes in intrinsic value and trading value, and provide monthly reports on its Investment Portfolio to Greenlight Re as Greenlight Re may reasonably determine.

No new investments to increase net long exposure shall be made when Greenlight Re’s pro-rata share of Assets (excluding cash equivalents) exceed its Investment Portfolio.

Greenlight Re will require the Investment Advisor to re-evaluate each position in its Investment Portfolio and to monitor changes in intrinsic value and trading value and provide monthly reports on its Investment Portfolio to Greenlight Re as Greenlight Re may reasonably determine.

No new investments to increase net long exposure shall be made when Greenlight Re’s pro-rata share of Assets (excluding cash equivalents) exceeds its Investment Portfolio.

In any event, Greenlight Re’s pro-rata share of Assets (excluding cash equivalents) may not exceed 110% of its Investment Portfolio.

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At December 31, 2022, taking into account a waiver provided by the Board of Directors of Greenlight Re, relating to SILP’s concentration in a single investment, DME Advisors was in compliance with each of Greenlight Re’s and GRIL’s investment guidelines.

See “Risk Factors – SILP may be concentrated in a few large positions, which could result in investment volatility and large losses.”

See “Part I, Item 1A.

Risk Factors – Risks Relating to Our Investment Strategy — SILP may be concentrated in a few large positions, which could result in investment volatility and large losses.”

Investment Results

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Derivative financial instruments (not designated as hedging instruments) — — 335 0.1

Investment accounted for under the equity method — — 6,545 3.3

Debt and convertible debt securities 1,846 0.8 — —

Certificates of deposit 6,000 2.4 — —

Total investments $ 248,476 100.0 % $ 230,975 100.0 %

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The delta-adjusted basis is the number of shares or contracts underlying the option multiplied by the delta and the underlying stock (or commodity) price.

The following table represents the composition of SILP’s investments at December 31, 2021, and December 31, 2020:

The following table represents the composition of SILP’s investments at December 31, 2022 and 2021:

Long % Short % Long % Short %

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Total 88.2 % 49.7 % 84.2 % 45.0 %

1 Effective January 1, 2021, the Investment Portfolio, and the corresponding exposure, is calculated on the basis of 50% of GLRE Surplus.

2 Prior to January 1, 2021, the Investment Portfolio and the corresponding exposure, was calculated on the basis of several factors, including the Companies’ shares of Solasglas’s net asset value, collateral posted by the Companies, and the Companies’ net reserves.

The above exposure analysis does not include cash (U.S.

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The monthly investment return is calculated by dividing the investment income/loss (net of fees and expenses) by the Investment Portfolio.

GAAP financial statements.

It is adjusted monthly for the Companies’ net profits and net losses as reported by Solasglas during any intervening period.

Prior to January 1, 2021, the Investment Portfolio was calculated on the basis of several factors, including the Companies’ shares of Solasglas’s net asset value, collateral posted by the Companies, and the Companies’ net reserves.

Effective January 1, 2021, the Investment Portfolio is calculated on the basis of 50% of GLRE Surplus, or the shareholders’ equity of Greenlight Capital Re, Ltd., as reported in Greenlight Capital Re, Ltd.’s then most recent quarterly financial statements prepared in conformity with accounting principles generally accepted in the United States of America (“U.S.

It is adjusted monthly for the Company’s net profits and net losses as reported by SILP during any intervening period.

This basis was increased to 60% effective January 1, 2023.

Prior to January 1, 2021, the Investment Portfolio was calculated on the basis of several factors, including the Companies’ shares of SILP’s net asset value, collateral posted by the Companies, and the Companies’ net reserves.

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We frequently review our investment and underwriting portfolios to assess the impact on capital under stressed scenarios.

With the assistance of DME Advisors, we analyze our investment assets and liabilities, including the numerous risk components in our portfolio, such as concentration risk and liquidity risk.

With the assistance of DME Advisors, we analyze our investment assets and liabilities, including the numerous risk components in our portfolio, such as concentration and liquidity risks.

Information Technology

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We have increased our use of cloud-based services as the security and reliability have proven cost-effective and provide the high levels of service and redundancy required.

We have implemented backup procedures to ensure we save key data daily and we can restore it promptly as needed.

We have implemented backup procedures to ensure we save key data daily and that we can restore it promptly as needed.

We have a disaster recovery plan for our information technology infrastructure that includes data and system snapshots with restore points.

We believe we can access our core systems with minor outages and restore our primary systems within our MTTR (mean time to restore).

We believe we can access our core systems with minor outages and restore our primary systems within our mean time to restore.

We protect our information systems with physical, electronic, and software safeguards considered appropriate by our management.

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Risk Factors — Risks Related to Our Business — Operational risks, including human or systems failures, are inherent in our business.

” and “— Technology breaches or failures, including those resulting from a malicious ransomware or cyber-attack on us or our business partners and service providers, could disrupt or otherwise negatively impact our business .

Human Capital

At March 4, 2022, we had 44 full-time employees, 29 of whom were based in Grand Cayman, Cayman Islands, eleven in Dublin, Ireland, and four in London, United Kingdom.

At March 3, 2023, we had 48 full-time employees, 31 of whom were based in Grand Cayman, Cayman Islands, 12 in Dublin, Ireland, and 5 in London, United Kingdom.

We believe that our employee relations are good.

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We use short-term compensation composed of base salary and annual cash bonuses and long-term compensation composed of stock options, restricted share units, and restricted shares, as applicable, to align our employees’ and executive officers’ interests with those of our shareholders.

In addition, from time to time and under certain circumstances, we award sign-on bonuses, retention bonuses, and other bonuses opportunities.

In addition, from time to time and under certain circumstances, we award sign-on bonuses, retention bonuses, and other bonus opportunities.

We also offer welfare benefits and other perquisites, including a defined contribution pension plan and medical insurance coverage for our employees.

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We believe our employees are fairly compensated without regard to gender, race, and ethnicity.

We believe in creating and maintaining a workplace that is free from discrimination or harassment on the basis of color, race, sex, national origin, ethnicity, religion, age, disability, sexual orientation, gender identification or expression, or any other status protected by applicable law.

We believe in creating and maintaining a workplace free from discrimination and harassment.

Each of our employees annually acknowledges complying with our Code of Business Conduct and Ethics, which provides employees with access to an anonymous whistleblower hotline to report any violations.

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Our website address is www.greenlightre.com, and we make available, free of charge, on or through our website, links to our annual reports on Form 10-K and quarterly reports on Form 10-Q, current reports on Form 8-K, and other documents we file with or furnish to the SEC, as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.

Information contained on our website is not incorporated by reference into this annual report.

Glossary of Selected Reinsurance Terms

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Claim Request by an insured or reinsured for indemnification by an insurance or reinsurance company for loss incurred from an insured peril or event.

Client A party whose liability is reinsured by a reinsurer.

Also known as a cedent.

Client A party whose liability is reinsured by a reinsurer, also known as a cedent.

Combined ratio The combined ratio is the sum of the loss ratio, acquisition cost ratio, and underwriting expense ratio.

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Corporate expenses Corporate expenses include those costs associated with operating as a publicly listed entity and an allocation of other general and administrative expenses.

Deposit assets and liabilities Assets (or liabilities) representing the consideration paid (or received) in connection with contracts that do not incorporate sufficient risk transfer to merit reinsurance accounting.

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Development The difference between the amount of reserves for losses and loss adjustment expenses initially estimated by an insurer or reinsurer and the amount re-estimated in an evaluation at a later date.

Excess of loss reinsurance Reinsurance that indemnifies the reinsured against all or a specified portion of losses above a specified dollar or percentage loss ratio amount.

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Financial strength rating The opinion of rating agencies regarding an insurance or reinsurance company’s financial ability to meet its financial obligations under its policies.

Funds at Lloyd’s Funds of an approved form that are lodged and held in trust at Lloyd's as security for a member’s underwriting activities.

Funds at Lloyd’s (FAL) Funds of an approved form that are lodged and held in trust at Lloyd's as security for a member’s underwriting activities.

They comprise the member’s deposit, personal reserve fund, and special reserve fund.

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Health insurance Insurance against loss by illness or bodily injury.

Health insurance provides coverage for medicine, visits to the doctor or emergency room, hospital stays, and other medical expenses.

Health insurance covers medicine, visits to the doctor or emergency room, hospital stays, and other medical expenses.

Incurred but not reported (IBNR) Reserves for estimated loss and loss adjustment expenses incurred by insureds and reinsureds but not yet reported to the insurer or reinsurer, including unknown future developments on loss and loss adjustment expenses known to the insurer or reinsurer.

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Professional liability insurance Professional liability insurance protects a company and its representatives against legal claims arising from error or misconduct in providing or failing to provide professional services.

This coverage type includes errors and omissions policies, directors and officers coverage, and specialty coverage like employment practices liability insurance.

This coverage includes errors and omissions policies, directors and officers coverage, and specialty coverage like employment practices liability insurance.

Profit commission A commission paid by a reinsurer to a ceding insurer based on a predetermined percentage of the profit realized by the reinsurer on the ceded business.

Property insurance Property insurance covers a business’s building and its contents—money and securities, records, inventory, furniture, machinery, supplies, and even intangible assets such as trademarks—when damage, theft.

or loss occurs.

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Property catastrophe reinsurance Property catastrophe reinsurance contracts are typically ‘‘all risk’’ in nature, meaning that they protect against losses from natural and human-made catastrophes.

Property catastrophe reinsurance Property catastrophe reinsurance contracts are typically ‘‘all risk’’ in nature, protecting against losses from natural and human-made catastrophes.

Losses on these contracts typically stem from direct property damage and business interruption.

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Quota-share reinsurance A form of proportional reinsurance in which the reinsurer assumes an agreed percentage of each underlying insurance contract being reinsured.

Reinstatement premium A Premium charged for the reinstatement of the amount of reinsurance coverage to its full amount otherwise reduced as a result of a reinsurance loss payment.

Reinstatement premium Premium charged for the reinstatement of the amount of reinsurance coverage to its full amount otherwise reduced as a result of a reinsurance loss payment.

Reinsurance An arrangement in which a reinsurer agrees to indemnify an insurance company, the client, against all or a portion of the insurance risks underwritten by the client under one or more policies.

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and (3) insurance indemnifying banks, bankers, brokers, financial or moneyed corporations or associations against loss.

Underwriter An employee of an insurance or reinsurance company who examines, accepts, or rejects risks and classifies risks to charge an appropriate premium for each accepted risk.

Underwriter An insurance or reinsurance company employee who examines, accepts, or rejects risks and classifies risks to charge an appropriate premium for each accepted risk.

Underwriting The process of evaluating, defining, and pricing reinsurance risks including, where appropriate, the rejection of such risks, and the acceptance of the obligation to pay the reinsured under the terms of the contract.

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The underwriting expense ratio also incorporates interest income and expenses from deposit-accounted contracts.

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Workers’ compensation insurance Workers’ compensation insurance provides medical, disability, and lost-wage benefits to employees for injuries and illness sustained in the course of their employment.

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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 1. Business