GREENLIGHT CAPITAL RE, LTD. 10-K

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our financial instruments are subject to a variety of market risks. The term market risk refers to the risk of loss arising from adverse changes from: • equity price; • commodity price; • foreign currency; and • interest rate (including credit spreads). We performed a sensitivity analysis below to estimate the effects that market risk exposure could have on the future earnings, fair values or cash flows of our financial instruments. These represent forward-looking statements of market risk assuming certain adverse market conditions occur. Actual results in the future may differ materially from these projected results due to actual developments in the global financial markets. Equity Price Risk At December 31, 2023, 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. Generally, market prices of common equity securities are subject to fluctuation, which could cause the amount to be realized upon closing a position to differ significantly from its current reported value. This risk is partly mitigated by the presence of both long and short equity securities as part of our investment strategy. At December 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 $12.3 million (2022: $8.1 million) unrealized loss in our investment in SILP. Commodity Price Risk Generally, market prices of commodities are subject to fluctuation. SILP’s investments periodically include long or short investments in commodities or derivatives directly impacted by fluctuations in the prices of commodities. At December 31, 2023, SILP’s investments incorporate unhedged exposure to changes in gold, uranium, and crude oil prices. 72 Link to Table of Contents The following table summarizes the net impact that a 10% movement in commodity prices would have on the fair value of SILP’s investment portfolio. The below table excludes the indirect effect that changes in commodity prices might have on equity securities in the SILP’s investment portfolio. 10% increase in commodity prices 10% decrease in commodity prices At December 31, 2023 ($ in millions) Gold $ 3.8 $ (3.8) Uranium 0.8 (0.8) Crude oil 1.6 (1.5) Total $ 6.2 $ (6.1) 10% increase in commodity prices 10% decrease in commodity prices At December 31, 2022 ($ in millions) Gold $ 3.6 $ (3.6) Silver 0.3 (0.3) Uranium 0.3 (0.3) Crude oil 0.2 (0.2) Total $ 4.4 $ (4.4) Foreign Currency Risk Underwriting Related Certain of our reinsurance contracts are denominated in foreign currencies, whereby premiums are receivable and losses are payable in foreign currencies. 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. 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. Certain cedents, particularly the Lloyd’s syndicates, report to us in foreign currencies even though some or all of the underlying exposure is denominated in U.S. dollars . Our consolidated statements of operations may report a foreign exchange gain or loss associated with this exposure when reported by the cedents. 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. GAAP. See Note 2 of the accompanying consolidated financial statements for further information regarding our accounting treatment of foreign currency transactions. We monitor our foreign currency-denominated assets and liabilities on an “underlying exposure” basis without distinguishing between monetary and non-monetary balances. The following table summarizes the net impact of a hypothetical 10% currency rate movement relating to our primary foreign denominated reinsurance net assets or liabilities (including balances held at Lloyd's): At December 31, 2023 Net Asset (Liability) Exposure 10% increase in currency rate 10% decrease in currency rate GBP £ 25,337 $ (3,228) $ 3,228 Euro € (13,975) 1,543 (1,543) Total foreign exchange gain (loss) $ (1,685) $ 1,685 73 Link to Table of Contents At December 31, 2022 Net Asset (Liability) Exposure 10% increase in currency rate 10% decrease in currency rate GBP £ 5,235 $ (633) $ 633 Euro € (10,526) 1,126 (1,126) Total foreign exchange gain (loss) $ 493 $ (493) Investment in SILP We may also be exposed to foreign currency risk through SILP’s underlying cash, forwards, options, and investments in securities denominated in foreign currencies. At December 31, 2023, 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. At December 31, 2023 and 2022, a 10% increase or decrease in the value of the U.S. dollar against foreign currencies would have no meaningful impact on our investment in SILP. Interest Rate Risk The primary market risk exposure for any debt instrument is interest rate risk, including credit spreads. Most of our interest rate risk relates to interest rate derivatives held in SILP, and their value may fluctuate with changes in interest rates. At December 31, 2023, our investment in SILP includes interest-rate sensitive securities, such as corporate and sovereign debt instruments and interest rate derivatives. A 100 basis points (increase or decrease) in interest rates would result in a $1.6 million gain (2022: $4.4 million) or a $3.5 million (2022: $4.9 million) loss, respectively, to our investment in SILP. 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. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Information with respect to this Item is set forth under Part IV Item 15. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable.