7 unchanged sentences
• political risk.
−Removed: Return to table of contents
+Added: See “Part II, Item 7A.
+Added: Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2022, for a discussion of our exposure to these risks.
+Added: The following is an update of the material changes in our exposure to market risk at March 31, 2023 since December 31, 2022:
Equity Price Risk
−Removed: At September 30, 2022, our investments consisted primarily of an investment in SILP.
−Removed: Among SILP’s holdings are equity securities, the carrying values of which are based primarily on quoted market prices.
−Removed: Generally, market prices of common equity securities are subject to fluctuation, which could cause the amount to be realized upon the closing of a position to differ significantly from its current reported value.
−Removed: 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, 2022, a 10% decline in the price of each of the underlying listed equity securities and equity-based derivative instruments would result in a $2.2 million loss to our Investment Portfolio.
−Removed: 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: The computations should not be relied on as indicative of future results.
+Added: At March 31, 2023, a 10% decline in the price of each of the underlying listed equity securities and equity-based derivative instruments would result in a $12.0 million loss to our Investment Portfolio and $2.1 million loss to our proportionate share of the equity exposure held by the Lloyd’s syndicates.
+Added: Return to table of contents
Commodity Price Risk
−Removed: Generally, market prices of commodities are subject to fluctuation.
−Removed: 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, 2022, SILP’s investments incorporate unhedged exposure to changes in gold, silver, uranium 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, 2022.
+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, 2023.
The below table excludes the indirect effect that changes in commodity prices might have on equity securities in our Investment Portfolio.
9 unchanged sentences
Foreign Currency Risk
−Removed: Certain of our reinsurance contracts are denominated in foreign currencies, whereby premiums are receivable and losses are payable in foreign currencies.
−Removed: Foreign currency exchange rate risk exists to the extent that our foreign currency reinsurance balances are more than (or less than) the corresponding foreign currency cash balances and there is an increase (or decrease) in the exchange rate of that foreign currency.
−Removed: 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: Certain cedents report to us in foreign currencies even though some or all of the underlying exposure is denominated in U.S.
−Removed: Our condensed consolidated statements of operations may report a foreign exchange gain or loss associated with this exposure when reported by the cedents.
−Removed: Additionally, we may report foreign exchange gains or losses due to the mismatch between the currency exchange rates applied to foreign-denominated (i) monetary balances and (ii) non-monetary balances under U.S.
−Removed: See Note 2 of the accompanying condensed consolidated financial statements for further information regarding our accounting treatment of foreign currency transactions.
−Removed: We monitor our foreign currency-denominated assets and liabilities on an “underlying exposure” basis without distinguishing between monetary and non-monetary balances.
−Removed: Return to table of contents
−Removed: At September 30, 2022, our underlying exposure to GBP denominated net reinsurance asset balance was £5.9 million.
−Removed: At September 30, 2022, a 10% decrease in the U.S.
−Removed: dollar against the GBP (all else constant) would result in an estimated $0.7 million foreign exchange gain.
−Removed: Alternatively, a 10% increase in the U.S dollar against the GBP would result in an estimated $0.7 million foreign exchange loss.
−Removed: Similarly, at September 30, 2022, our net underlying exposure to Euro-denominated reinsurance liability balances was €11.6 million.
−Removed: At September 30, 2022, a 10% decrease in the U.S.
−Removed: dollar against the Euro (all else constant) would result in an estimated $1.1 million foreign exchange loss.
−Removed: Alternatively, a 10% increase in the U.S dollar against the Euro would result in an estimated $1.1 million foreign exchange gain.
−Removed: We may also be exposed to foreign currency risk through SILP’s underlying cash, forwards, options, and investments in securities denominated in foreign currencies.
−Removed: At September 30, 2022, most of SILP’s currency exposures resulting from foreign denominated securities (longs and shorts) were reduced by offsetting cash balances denominated in the corresponding foreign currencies.
−Removed: At September 30, 2022, a 10% increase or decrease in the value of the U.S.
−Removed: dollar against foreign currencies would have no meaningful impact on the value of our Investment Portfolio.
+Added: The following table summarizes the net impact of a hypothetical 10% currency rate movement relating to our GBP and Euro denominated reinsurance net liabilities (including balances held at Lloyd's) at March 31, 2023:
+Added: Currency Net Exposure 10% increase in currency rate 10% decrease in currency rate
+Added: ($ in thousands)
+Added: GBP £ 6,589 $ 812 $ (812)
+Added: Euro € (10,477) (1,136) 1,136
+Added: Total foreign exchange loss (gain) $ (324) $ 324
+Added: Additionally, a 10% increase or decrease in the value of the U.S.
+Added: dollar against foreign currencies would have no meaningful impact on the value of our Investment Portfolio at March 31, 2023.
Interest Rate Risk
−Removed: The primary market risk exposure for any debt instrument is interest rate risk.
−Removed: As interest rates rise, the fair value of a long fixed-income portfolio generally falls.
−Removed: Similarly, falling interest rates generally lead to increases in the fair value of fixed-income securities.
−Removed: Additionally, some derivative investments may be sensitive to interest rates, and their value may indirectly fluctuate with changes in interest rates.
−Removed: The caption “Reinsurance balances receivable” in our condensed consolidated balance sheets incorporates amounts held by cedents, including the Lloyd’s syndicates that we participate on.
−Removed: These syndicates invest a portion of the premiums withheld in fixed-income and variable-yield securities, which expose us to interest rate risk.
−Removed: At September 30, 2022, a 100 basis points increase or decrease in interest rates would result in an estimated $1.6 million loss or gain, respectively, which would be recorded in our condensed consolidated statements of operations under the captions “Other income (expense).”
−Removed: Our restricted cash and cash equivalents earn interest at rates that generally follow the movements of the short-term U.S.
−Removed: Treasury rates.
−Removed: At September 30, 2022, a 100 basis points increase or decrease in U.S.
−Removed: Federal Funds Rate would result in approximately $4.8 million, increase or decrease, respectively, in our interest income on an annualized basis.
−Removed: Our investment in SILP includes interest-rate sensitive securities, such as corporate and sovereign debt instruments and interest rate options.
−Removed: At September 30, 2022, a 100 basis points increase or decrease in interest rates would result in a $1.1 million gain or a $1.7 million loss, respectively, to our Investment Portfolio.
−Removed: 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.
−Removed: Credit risk relates to the uncertainty of a counterparty’s ability to make timely payments in accordance with terms of the instrument or contract.
−Removed: 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.
−Removed: We obtain collateral in the form of funds withheld, trusts, and letters of credit from our counterparties to mitigate this credit risk.
−Removed: We monitor our net exposure to each counterparty relative to the financial strength of our counterparties and assess the collectibility of these balances on a regular basis.
−Removed: See Note 2 of the accompanying condensed consolidated financial statements for further details on allowance for credit loss on reinsurance assets.
−Removed: In addition, the securities, commodities, and cash in SILP’s investment portfolio are held with several prime brokers and derivative counterparties, subjecting SILP, and indirectly us, to a significant concentration of credit risk.
−Removed: While we have no direct control over SILP, DME Advisors regularly monitors the concentration of credit risk with each counterparty and, if appropriate, transfers cash or securities between counterparties or requests collateral to diversify and mitigate this credit risk.
−Removed: Return to table of contents
−Removed: Political Risk
−Removed: Through our assumed reinsurance contracts, we currently provide a limited amount of political risk insurance coverage.
−Removed: We do not expect this exposure to have a materially adverse impact on our underwriting results.
−Removed: We are exposed to political risk to the extent that we underwrite business from entities located in foreign markets and to the extent that DME Advisors, on behalf of SILP and subject to our investment guidelines, trades securities listed on various U.S.
−Removed: and foreign exchanges and markets.
−Removed: The governments in any of these jurisdictions could impose restrictions, regulations, or other measures, which may have a material adverse impact on our underwriting operations and investment strategy.
−Removed: See “Item 1A.
−Removed: Risk Factors - We could face unanticipated losses from political instability which could have a material adverse effect on our financial condition and results of operations” included in our Form 10-K for the fiscal year ended December 31, 2021.
+Added: There was no material change in our exposure to interest rate risk at March 31, 2023 since December 31, 2022, except for our investment in SILP, which includes interest-rate sensitive securities, such as corporate and sovereign debt instruments and interest rate options.
+Added: At March 31, 2023, a 100 basis points increase or decrease in interest rates would result in a $7.5 million gain or a $5.8 million loss, respectively, to our Investment Portfolio.
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.