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Item 1A. Risk Factors

2025-02-27 compared with 2024-03-07 · 296 added, 396 removed, 858 unchanged (45% of the section changed)

Risk Factors Summary

Our business is subject to a number of risks, including risks that could prevent us from achieving our business objectives or financial goals or that otherwise could adversely affect our business, results of operations, financial condition and liquidity, that you should carefully consider.

These risks are discussed more fully in “ Risk Factors ” below.

These risks include the following:

• challenges from competitors, including those arising from industry consolidation and technological advancements;

• unpredictable catastrophic events, global climate change and/or emerging claim and coverage issues;

• our ability, or those of the third parties on which we rely, to ensure reserves are adequate to cover actual losses and to accurately evaluate underwriting risk, models, assessments and/or pricing of risks;

• our ability to defend our intellectual property rights, including our proprietary technology platforms, to comply with our obligations under our license and technology agreements or to license rights to technology or data on reasonable terms;

• the impact of risks associated with human error, fraud, model uncertainties, cybersecurity threats such as cyber-attacks and security breaches and our reliance on third-party IT systems that can fail or need replacement;

• our ability to secure necessary credit facilities, or additional types of credit, on favorable terms or at all;

• our limited financial and operating flexibility due to the covenants in our existing credit facilities;

• our exposure to the credit risk of the intermediaries on which we rely;

• our failure to pay claims in a timely manner or the need to sell investments under unfavorable conditions to meet liquidity requirements;

• downgrades, potential downgrades or other negative actions by rating agencies;

• our ability to manage risks associated with macroeconomic conditions resulting from geopolitical and global economic events, including current or anticipated military conflicts, public health crises, terrorism, sanctions, rising energy prices, inflation and interest rates and other global events;

• the cyclical nature of the insurance and reinsurance business, which may cause the pricing and terms for our products to decline;

• our results of operations potentially fluctuating significantly from period to period and not being indicative of our long-term prospects;

• our ability to execute our strategy and to modify our business and strategic plan without shareholder approval;

• our dependence on key executives, including the potential loss of Bermudian personnel, and our ability to attract qualified personnel, particularly in very competitive hiring conditions;

• foreign operational risk such as foreign currency risk and political risk;

• our ability to identify and execute opportunities for growth, to complete transactions as planned or realize the anticipated benefits of any acquisitions or other investments;

• our management of alternative reinsurance platforms on behalf of investors in entities managed by Hamilton Strategic Partnerships;

• our inability to control the allocations to, and/or the performance of, the TS Hamilton Fund investment portfolio and our limited ability to withdraw our capital accounts;

• the impact of risks from conflicts of interest among the Managing Member, Two Sigma and their respective affiliates affecting our business;

• the historical performance of Two Sigma not being indicative of the future results of the TS Hamilton Fund’s investment portfolio and/or of our future results;

• the impacts of risks associated with our investment strategy, including that such risks are greater than those faced by our competitors;

• our potentially becoming subject to U.S.

federal income taxation, Bermuda taxation or other taxes as a result of a change of tax laws or otherwise;

• the potential characterization of us and/or any of our subsidiaries as a PFIC;

• our potentially becoming subject to U.S.

withholding and information reporting requirements under FATCA provisions;

• our ability to compete effectively in a heavily regulated industry in light of new domestic or international laws and regulations, including accounting practices, and the impact of new interpretations of current laws and regulations;

• the suspension or revocation of our subsidiaries’ insurance licenses;

• significant legal, governmental or regulatory proceedings;

• our insurance and reinsurance subsidiaries’ ability to pay dividends and other distributions to us being restricted by law;

• challenges related to compliance with the applicable laws, rules and regulations related to being a public company, which is expensive and time consuming;

• the limited ability of investors to influence corporate matters due to our multiple class common share structure and the voting provisions of our Bye-laws;

• the risk that anti-takeover provisions in our Bye-laws could discourage, delay, or prevent a change in control, even if the change in control would be beneficial to our shareholders;

• the difficulties investors may face in protecting their interests and serving process or enforcing judgments against us in the United States;

• our current strategy does not include paying cash dividends on our Class B common shares in the near term.

Investing in Hamilton involves risk.

In deciding whether to invest in Hamilton, you should carefully consider the following risk factors.

Any of these risk factors could have a significant or material adverse effect on our businesses, results of operations, financial condition or liquidity.

They could also cause significant fluctuations and volatility in the trading price of our securities.

Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect Hamilton.

These factors should be considered carefully together with the other information contained in this report, including our financial statements, and the other reports and materials filed by us with the SEC.

Further, many of these risks are interrelated and could occur under similar business and economic conditions, and the occurrence of certain of them may in turn cause the emergence or exacerbate the effect of others.

Such a combination of risks could materially increase the severity of the impact of these risks on our businesses, results of operations, financial condition and liquidity above and beyond a risk’s singular impact.

The risk factors described below are not necessarily presented in order of importance.

This Annual Report also contains forward-looking statements and estimates that involve risks and uncertainties.

Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below.

See “Special Note Regarding Forward-Looking Information.”

Risks Related to Our Business and Industry

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New entrants or existing competitors, which may include government-sponsored funds or other vehicles, may attempt to replicate all or part of our business model and provide further competition in the markets in which we participate.

We will also need to continue to invest significant time and resources in new technologies and new ways to deliver our products and services in order to maintain our competitive position.

The tax policies of the countries where our customers operate, as well as government-sponsored or -backed insurance companies and catastrophe funds, may also affect demand for reinsurance, sometimes significantly.

The tax policies of the countries where our customers operate, as well as government-sponsored or -backed insurance companies and catastrophe funds, may also affect the demand for insurance and reinsurance, sometimes significantly.

Along with increased competition, there has also been significant consolidation in the insurance and reinsurance industry over the last several years, including among our competitors, customers and brokers.

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If competitive pressures decrease the prices for our products, we would generally expect to reduce our future underwriting activities, resulting in lower premium volume and profitability.

Reinsurance intermediaries may also continue to consolidate, potentially adversely impacting our ability to access business and distribute our products.

Insurance and reinsurance intermediaries may also continue to consolidate, potentially adversely impacting our ability to access business and distribute our products.

As the insurance industry consolidates, we expect competition for customers to become more intense, and sourcing and properly servicing each customer to become even more important.

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Any of the foregoing could adversely affect our business or results of operations.

Modern innovation is also leading to increased competition, with traditional insurance companies and newer market participants increasingly focusing on the use of technological and digital advancements (including AI, digital platforms and data analytics) to optimize underwriting, claims processing, customer engagement and risk management.

If our competitors adopt or develop technologies, including the application of AI in our industry, more effectively or efficiently than we do, they may be able to offer more competitive pricing, faster claims handling, and superior customer experiences, gaining significant market share at our expense.

We will also need to continue to invest significant time and resources in new technologies and new ways to deliver our products and services in order to maintain a competitive position, which may divert management’s attention from other business concerns and lead to significant costs associated with such an investment.

There is also no guarantee that such an investment will result in the anticipated cost savings, revenue growth, or any competitive advantages.

We also derive a significant portion of our business through a limited number of insurance and reinsurance intermediaries, such as managing general agents, general agents and reinsurance brokers.

Some of our competitors have higher financial strength ratings, offer a larger variety of products, set lower prices for insurance coverage, offer higher commissions and/or have had longer-term relationships with the brokers we use than we have.

This may adversely impact our ability to attract and retain brokers to sell our insurance products or brokers may increasingly promote products offered by other companies.

The failure or inability of brokers to market our insurance products successfully, or the loss of all or a substantial portion of the business provided by these brokers, could have a material adverse impact on our business, financial condition and results of operations.

Our losses and loss expense reserves may be inadequate to cover our actual losses.

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• When a claim is received, it may take considerable time to appreciate fully the extent of the covered loss suffered by the insured, and consequently, estimates of loss associated with specific claims can increase over time as new information emerges, which could cause the reserves for the claim to become inadequate;

• New theories of liability are enforced retroactively from time to time by courts;

• Court enforcement of new theories of liability;

• Changing jury sentiment;

• Volatility in the financial markets, economic events and other external factors may result in an increase in the number of claims and/or severity of the claims reported.

• Deterioration or volatility in the financial markets, economic events, general economic conditions and other external factors may result in an increase in the number of claims and/or severity of the claims reported.

In addition, elevated inflationary conditions would, among other things, cause loss costs to increase;

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As we enter new lines of business, or as a result of new theories of claims, we may encounter an increase in claims frequency and greater claims handling costs than we had anticipated.

In addition to the Company’s internal reserving process, an independent actuarial review is carried out semi-annually by a leading independent actuarial consulting firm in order to provide additional insight into the reserving process, specific industry trends and the overall level of the Company’s loss reserves.

Management reviews the information provided in the independent actuarial review in determining its own best estimate of reserves.

If any of our reserves should prove to be inadequate, we will be required to increase our reserves resulting in a reduction in our net income and shareholders’ equity in the period in which the deficiency is identified.

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Mainland Earthquakes is in California, while our exposure to Atlantic Hurricanes is material in many regions, including Florida, other Gulf Coast states, as well as the Mid-Atlantic and Northeastern regions of the U.S.

The current and ongoing conflict in Israel is an unpredictable man-made disaster, which has the potential to escalate into an event that could impact our cash flows and results of operations as well as those for the industry.

The full extent of the impacts of the ongoing Ukraine conflict on the reinsurance industry and on our business, financial condition and results of operations, including in relation to claims under our reinsurance policies, are uncertain and remain unknown.

and global markets are currently experiencing volatility and disruption following the ongoing Ukraine conflict.

In response to this invasion, the North Atlantic Treaty Organization (“NATO”) deployed additional military forces to eastern Europe.

The United States, the United Kingdom, the European Union (“E.U.”) and other countries have announced various economic and trade sanctions, export controls and other restrictive actions against Russia, Belarus and related individuals and entities.

These include, among other measures, the removal of certain financial institutions from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) payment system, the imposition of comprehensive sanctions on certain persons and entities (including financial institutions) in Russia and Belarus and new export control restrictions targeting Russia and Belarus (including measures that restrict the movement of U.S.-regulated aircraft into or within Russia).

The Ukraine conflict and the resulting measures that have been taken, and could be taken in the future, by NATO, the United States, the United Kingdom, the European Union and other countries have created global security concerns that could have a lasting impact on regional and global economies.

Although the severity and duration of the ongoing Ukraine conflict is impossible to predict, the active conflict could lead to market disruptions, including significant and prolonged volatility in commodity prices, credit and capital markets, as well as supply chain interruptions.

Additionally, Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets.

Further, in December 2022, the members of the G7, including the United States and United Kingdom, joined the E.U.

in prohibiting regulated persons from providing a range of services, including issuing maritime insurance, related to the maritime transport of crude oil of Russian Federation origin, unless purchasers bought the oil at or below a price cap.

We will consider providing insurance for future shipments of seaborne Russian crude oil, in compliance with these restrictions and all other applicable economic and trade sanctions.

Although we take measures designed to maintain compliance with applicable sanctions in connection with our activities, we cannot guarantee that we will be effective in preventing violations or allegations of violations.

Violations, or allegations of violations of applicable sanctions, could result in the imposition of civil and criminal penalties, including fines, against the Company or responsible employees and managers, and create negative publicity or cause reputational harm.

Due to the widespread impact of the ongoing Ukraine conflict, which extends economically, geographically and financially, it is likely to directly or indirectly impact the markets in which we operate and some of the lines of business we write.

It is possible that the conflict will create a domino effect, affecting the entirety of our business, including the ultimate premiums and costs of policies, through cost of materials and labor.

The impact of some of or all these factors could cause significant disruption to our operations and materially impact our financial performance.

We have already identified business lines which could suffer losses resulting from the ongoing sanctions.

In light of the evolving nature of the Ukraine conflict, there are a number of complexities and implications that will need to be evaluated and determined on an ongoing basis.

Any of the above mentioned factors, or any other negative impact on the global economy, capital markets or other geopolitical conditions resulting from the Ukraine conflict and subsequent sanctions, could have a material adverse effect on our business, financial condition and results of operations.

The extent and duration of the Ukraine conflict, resulting sanctions and any related market disruptions are impossible to predict, but could be substantial, particularly if current or new sanctions continue for an extended period of time or if geopolitical tensions result in expanded military operations on a global scale.

Most of the significant factors arising out of the ongoing Ukraine conflict are beyond our control and any such disruptions may also have the effect of heightening many of the other risks described in these “Risk Factors”.

If these disruptions or other matters of global concern continue for an extended period of time, our business, financial condition and results of operations may be materially adversely affected.

In terms of man-made catastrophe exposure, we have experienced losses related to the conflict between Russia and Ukraine and the ongoing conflict in the Middle East has the potential to continue to escalate into an event that could impact our cash flows and results of operations.

Global climate change may have a material adverse effect on our operating results and financial condition if we do not adequately assess and price for any increased frequency and severity of catastrophes resulting from these environmental factors.

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E&S business lines, where there may be more limited historical claims and underwriting data than in admitted insurance markets.

Specific risks around accumulating events for natural and non-natural perils are discussed in further detail within this section.

Aside from this, an inadequate assessment of underwriting risk could arise from an incorrect estimation of past and/or future inflationary trends, claims practices, or other factors, including social factors.

Aside from the specific risks around accumulating events for natural and non-natural perils discussed above, an inadequate assessment of underwriting risk could arise from an incorrect estimation of past and/or future inflationary trends, claims practices, or other factors, including social factors.

We underwrite many lines of business across all underwriting platforms where the volume of relevant claims data is insufficient to accurately estimate the cost of future claims, and therefore underwriting and/or actuarial judgment is frequently applied.

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We use many models to simulate possible claims outcomes within our business, including pricing models, reserving models, accumulation models, natural catastrophe models and man-made catastrophe models.

For natural catastrophe risk, similar to our peers, we use third-party vendor analytic and modeling capabilities, including global property catastrophe models from Verisk, and Risk Management Solutions Inc., or RMS, and our own proprietary models, including our catastrophe modeling and portfolio management platform, known as HARP to calculate expected probable maximum losses, or PML, from various natural catastrophe scenarios.

The models are dependent upon many broad economic and scientific assumptions, with examples including storm surge (the water that is pushed toward the shore by the force of a windstorm), demand surge (the localized increase in prices of goods and services that often follows a catastrophe) and zone density (the percentage of insured perils that would be affected in a region by a catastrophe).

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As a result of this reliance on ceding companies, our operating results and financial condition may be materially adversely affected.

The insurance and reinsurance business is historically cyclical and the pricing and terms for our products may decline, which would affect our profitability and ability to maintain or grow premiums.

The insurance and reinsurance industry has historically been cyclical by product and market.

After experiencing a prolonged soft market cycle several years ago, we believe that the current insurance and reinsurance underwriting market is in a hard market phase for many lines of business, characterized by increasing prices and improving terms and conditions.

This shift has likely been caused by recent withdrawals of alternative capital, the number of catastrophic events in recent years and the continuation of adverse development from prior years.

We cannot assure investors that higher premium rates will continue, and rates may decrease in the future.

If demand for our products falls or the supply of competing capacity rises, our prospects for potential growth may be adversely affected.

In particular, we might lose existing customers or suffer a decline in business during shifting market cycles, which we might not regain when industry conditions improve.

We believe the hard/soft market cycle dynamic is likely to persist, and that we may return to soft market conditions in the future.

Additionally, it is possible that primary insurers’ increased access to capital, new technologies and other factors may reduce the duration of or eliminate or significantly lessen the impact of any current or future hard reinsurance underwriting market.

The cumulative impact of these risks could negatively impact our profitability and ability to maintain or grow premiums.

Our business is dependent upon insurance and reinsurance brokers and intermediaries, and the loss of important broker relationships could materially adversely affect our ability to market our products and services.

We market our insurance and reinsurance business worldwide primarily through insurance and reinsurance intermediaries, such as managing general agents, general agents and reinsurance brokers.

We derive a significant portion of our business from a limited number of insurance and reinsurance intermediaries.

This may adversely impact our ability to attract and retain brokers to sell our insurance products or brokers may increasingly promote products offered by other companies.

Emerging claim and coverage issues, or other litigation, could adversely affect us.

Unanticipated developments in the law as well as changes in social conditions could potentially result in unexpected claims for coverage under our insurance and reinsurance contracts.

These developments and changes may adversely affect us, perhaps materially so.

For example, we could be subject to developments that impose additional coverage obligations on us beyond our underwriting intent, or to increases in the number or size of claims to which we are subject.

Unanticipated developments in the law as well as changes in social conditions could potentially result in unexpected claims for coverage under our insurance and reinsurance contracts, such as those developments that impose additional coverage obligations on us beyond our underwriting intent, or to increases in the number or size of claims to which we are subject.

For example, we believe our property results have been adversely impacted over recent periods by increasing primary claims-level fraud and abuses, as well as other forms of social inflation, and that these trends may continue, particularly in certain U.S.

jurisdictions in which we focus, including Florida and Texas.

jurisdictions in which we focus, including California, Florida and Texas.

With respect to our casualty and specialty operations, these legal and social changes and their impact may not become apparent for some time after their occurrence.

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If any such agents exceed their authority or engage in fraudulent activities, our financial condition and results of operations could be materially adversely affected.

We may not be able to maintain our desired external financial strength credit ratings.

Third-party rating agencies assess and rate the claims-paying ability of insurers and reinsurers based upon criteria established by the rating agencies.

These ratings are often a key factor in the decision by an insured or a broker/intermediary whether to place business with a particular insurance or reinsurance provider.

Hamilton Group considers A.M.

Best to be the key rating agency for the insurance and reinsurance industries.

An “A-” (Excellent) financial strength rating from A.M.

Best has been the minimum rating required for access to key parts of Hamilton Group’s target market in the trading environment experienced in recent years.

Hamilton Group’s Financial Strength Rating from A.M.

Best is “A-” (Excellent) with a “Positive” outlook, as affirmed on May 26, 2023.

The business we write though our Lloyd’s syndicate benefits from the Financial Strength Rating of Lloyd’s of London, which is “A” (Excellent) with a “Stable” outlook, as affirmed on July 15, 2022.

Furthermore, we have a financial strength rating of “A” from KBRA with a “Positive” outlook, as affirmed on July 6, 2022.

We assume that these ratings from A.M.

Best will be maintained or improved in the future.

If this were not the case, and either Hamilton Group or Lloyd’s ratings from A.M.

Best were to fall to “A-” with a “Negative” outlook or below, we may not be able to execute our business plan until such ratings were improved, and this could have a material adverse effect on our business, financial condition, results of operations and prospects.

We may require additional capital in the future, which may not be available or may only be available on unfavorable terms.

Our future capital requirements depend on many factors, including our ability to write new business successfully and to establish premium rates and reserves at levels sufficient to cover losses.

To the extent that our available funds are insufficient to fund future operating requirements and cover claim losses, we may need to raise additional funds through financings or curtail our growth.

Many factors will affect the amount and timing of our capital needs, including our growth rate and profitability, our claims experience, and the availability of reinsurance, market disruptions, and other unforeseeable developments.

If we need to raise additional capital, equity or debt financing may not be available at all or may be available only on terms that are not favorable to us.

In the case of equity financings, dilution to our shareholders could result.

In the case of debt financings, we may be subject to covenants that restrict our ability to freely operate our business.

If we cannot obtain adequate capital on favorable terms or at all, we may not have sufficient funds to implement our operating plans and our business, financial condition or results of operations could be materially adversely affected.

The covenants in our debt agreements limit our financial and operational flexibility, which could have an adverse effect on our financial condition.

We have incurred indebtedness and may incur additional indebtedness in the future.

Our indebtedness primarily consists of letters of credit and a revolving credit facility.

The agreements governing our indebtedness contain covenants that limit our ability and the ability of some of our subsidiaries to make particular types of investments or other restricted payments, sell or place a lien on our or their respective assets, merge or consolidate.

Some of these agreements also require us or our subsidiaries to maintain specific financial ratios or contain cross-defaults to our other indebtedness.

Under certain circumstances, if we or our subsidiaries fail to comply with these covenants or meet these financial ratios, the noteholders or the lenders could declare a default and demand immediate repayment of all amounts owed to them or, where applicable, cancel their commitments to lend or issue letters of credit or, where the reimbursement obligations are unsecured, require us to pledge collateral or, where the reimbursement obligations are secured, require us to pledge additional or a different type of collateral.

Operational risks, including human errors, the inherent uncertainty of models, and dependency on third party information technology systems and applications, which can fail or become unavailable or needs to be replaced, are inherent in our business.

Operational risks and losses can result from many sources, including fraud, errors by employees or third-party service providers, failure to document transactions properly or to obtain proper internal authorization, failure to comply with regulatory requirements or failures with respect to our or our service providers’ information technology systems.

We believe our modeling, underwriting and information technology and application systems are critical to our business and reputation.

Moreover, our technology and applications have been an important part of our underwriting process and our ability to compete successfully.

Such technology is and will continue to be a very important part of our underwriting process.

Instances of fraud, illegal acts, errors, failure to document transactions properly or to obtain proper internal authorization, misuse of customer or proprietary information or failure to comply with regulatory requirements or our internal policies may result in losses and/or reputational damage.

We also have licensed certain systems, data and technology from third parties.

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We are subject to cybersecurity risks, including cyber-attacks, security breaches and other similar incidents with respect to our and our service providers’ information technology systems, which could result in regulatory scrutiny, legal liability or reputational harm, and we may incur increasing costs to minimize those risks.

Cybersecurity threats and incidents have increased in recent years in frequency, levels of persistence, sophistication and intensity, and we may be subject to heightened cyber-related risks.

Cybersecurity threats and incidents have increased in recent years in frequency, levels of persistence, sophistication and intensity, heightening our cyber-related risks.

Our business depends on the proper functioning and availability of our information technology platform, including communications and data processing systems, our proprietary systems, and systems of our third-party service providers.

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In addition, we collect, store and otherwise process personal information (including sensitive personal information) of our clients, employees and service providers.

We have implemented and maintain what we believe to be reasonable security measures, but we cannot guarantee that the controls and procedures we or third parties have in place to protect or recover our respective systems and the information stored on such systems will be effective, successful or sufficiently rapid to avoid harm to our business.

Cybersecurity threats are evolving in nature and becoming increasingly difficult to detect, and may come from a variety of sources, including organized criminal groups, “hacktivists,” terrorists, nation states and nation state-supported actors.

Despite implementing what we believe to be reasonable security measures, we cannot guarantee that the controls and

procedures we or third parties have in place to protect or recover our respective systems and the information stored on such systems will be effective or sufficiently rapid to avoid harm to our business.

Cybersecurity threats are evolving in nature and becoming increasingly difficult to detect.

These threats come from various sources, including organized criminal groups, hackers, terrorists, nation states and their supporters.

These threats include, among other things, computer viruses, worms, malware, ransomware, denial of service attacks, defective software, credential stuffing, social engineering, phishing attacks, human error, fraud, theft, malfeasance or improper access by employees or service providers, and other similar threats.

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In addition, cybersecurity incidents, such as ransomware attacks, that impact the availability, integrity, confidentiality, reliability, speed, accuracy or other proper functioning of our systems could have a significant impact on our operations and financial results.

We may not be able to anticipate all cyber-attacks, security breaches or other similar incidents, detect or react to such incidents in a timely manner, or adequately remediate any such incident.

While management is not aware of any cyber-attack, security breach or other similar incident that has had a material effect on our operations, there can be no assurances that such an incident that could have a material impact on us will not occur in the future.

We may not anticipate, detect or adequately remediate all cyber-attacks, security breaches or other similar incidents in a timely manner.

While management is not aware of any cyber-attack, security breach or other similar incident that has had a material effect on our operations, financial condition or reputation, there can be no assurances that such an incident that could have a material impact on us will not occur in the future.

In addition to the risks posed by traditional cybersecurity threats, the growing use of AI-based solutions introduces new vulnerabilities, such as adversarial attacks, data poisoning and manipulation of automated decision-making models.

AI-based solutions are increasingly being used in the insurance industry, including by us, and we expect to use other systems and tools that incorporate AI-based technologies in the future.

The use of AI by our employees or third parties on which we rely could lead to the public disclosure of confidential information (including personal data or proprietary information) in contravention of our internal policies, data protection or other applicable laws, or contractual requirements.

The misuse of AI could also result in unauthorized access and use of personal data of our employees, customers or other third parties, thereby causing harm to our reputation, subjecting us to legal liability under laws that protect personal data and subject us to increasing costs, any of which could adversely affect our business, financial conditions and results of operations.

See " –––The use or anticipated use of AI technologies, including generative AI, by us or third parties, may increase or create new operational risks" below .

Although we maintain processes, policies, procedures and technical safeguards designed to protect the security and privacy of personal, proprietary and confidential information, we cannot eliminate the risk of human error or guarantee our safeguards against employee, service provider or third-party malfeasance.

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For example, we operate in a number of jurisdictions with strict cybersecurity, privacy, data protection and other related laws, regulations, rules and standards, which could be violated in the event of a significant cyber-attack, security breach or other similar incident affecting personal, proprietary or confidential information or in the event of noncompliance by our personnel with such obligations.

For more information on risks related to the cybersecurity, privacy and data protection regulatory environment, see the section titled “ ––Risks Related to the Regulatory Environment––Our business is subject to cybersecurity, privacy and data protection laws, regulations, rules, standards and contractual obligations in the jurisdictions in which we operate, which we can increase the cost of doing business, compliance risks and potential liability .”

For more information on risks related to the cybersecurity, privacy and data protection regulatory environment, see the section titled " ––Risks Related to Regulation––Our business is subject to cybersecurity, privacy and data protection laws, regulations, rules, standards and contractual obligations in the jurisdictions in which we operate, which can increase the cost of doing business, compliance risks and potential liability ."

We cannot ensure that any limitations of liability provisions in our agreements with clients, service providers and other third parties with which we do business would be enforceable or adequate or otherwise protect us from any liabilities or damages with respect to any particular claim in connection with a cyber-attack, security breach or other similar incident.

In addition, while we maintain insurance that would mitigate the financial loss under such scenarios, providing what we believe to be appropriate policy limits, terms and conditions, we cannot guarantee that our insurance coverage will be adequate for all financial and non-financial consequences from a cybersecurity event, that insurance will continue to be available to us on economically reasonable terms, or at all, or that our insurer will not deny coverage as to any future claim.

The use or anticipated use of AI technologies, including generative AI, by us or third parties, may increase or create new operational risks.

AI technologies offer numerous potential benefits, such as creating or increasing operational efficiencies, and we expect the use of AI and generative AI by us, third parties on our behalf, and other market actors, including our competitors, to increase.

However, the deployment of such technologies also poses certain risks, including that they may be misused, or the models or datasets on which the models are trained may be flawed or otherwise may function in an unexpected manner.

The relative newness of the technology, the speed at which it is being adopted, and the paucity of laws, regulations or standards expressly and specifically governing its use increases these risks.

Any such misuse could expose us to legal or regulatory risk, damage customer relationships or cause reputational harm.

We may fail, or be unable, to obtain, maintain, protect, defend or enforce our intellectual property rights, including for our proprietary technology platforms, data and brand, or we may be sued by third parties for alleged infringement, misappropriation or other violation of their intellectual property or proprietary rights.

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Our failure to secure, protect and enforce our intellectual property rights could adversely affect our brand and adversely impact our business and our competitiveness in the marketplace.

We do not currently own any registered trademarks and we have not filed any trademark applications to date.

While we may have unregistered rights in certain trademarks and trade names, it may be harder for us to rely on any such unregistered rights to prevent third parties from copying or using our trademarks or trade names without our permission.

Trademarks and trade names distinguish our products and services from the products and services of others.

We have identified unaffiliated third parties operating in the insurance industry using names that are similar to our name.

Although we have certain registered rights in connection with our brand, such as our domain name, www.hamiltongroup.com, we also have unregistered rights in certain trademarks and trade names and it may be harder for us to rely on any such unregistered rights to prevent third parties from copying or using our trademarks or trade names without our permission.

If we lose the ability to use trademarks or trade names, whether due to a trademark claim, the failure to renew the applicable registration, or any other cause, we may be forced to market our services under a new name, which could diminish our brand or cause us to incur significant expenses to purchase rights to the name in question.

We may also be unable to prevent third parties from acquiring and using names that are similar to ours or that otherwise decrease the value of our brand, and we have identified unaffiliated third parties operating in the insurance industry using names that are similar to our name.

If potential future customers are unable to distinguish our products and services from those of other companies, or if we are otherwise unable to establish brand recognition, we may not be able to compete effectively and our business may be adversely affected.

We have registered domain names we use in our business, such as www.hamiltongroup.com.

If we lose the ability to use a domain name, whether due to trademark claims, failure to renew the applicable registration, or any other cause, we may be forced to market our services under a new domain name, which could diminish our brand or cause us to incur significant expenses to purchase rights to the domain name in question.

We may be unable to prevent third parties from acquiring and using domain names that are similar to ours or that otherwise decrease the value of our brand.

Although we take steps to protect our intellectual property, we cannot be certain that the steps we have taken will be sufficient or effective to prevent the unauthorized access, use, copying, reverse engineering, infringement, misappropriation or other violation of our intellectual property, including by third parties who may use our intellectual property to develop products, services or technology that compete with ours.

While we take steps to protect our intellectual property, we cannot be certain that the steps we have taken will be sufficient or effective to prevent the unauthorized access, use, copying, reverse engineering, infringement, misappropriation or other violation of our intellectual property, including by third parties who may use our intellectual property to develop products, services or technology that compete with ours.

We also cannot guarantee that we have entered into confidentiality agreements with each party that may have or has had access to our trade secrets or proprietary technology or that we have executed adequate invention assignment agreements with all employees or third parties involved in the development of our intellectual property, including the proprietary technology used in certain parts of our business.

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In recent years, there has been an increased focus from shareholders, business partners, cedants, regulators, politicians, and the public in general on environmental, social and governance, or ESG, matters, including greenhouse gas emissions, carbon footprint and climate-related risks, renewable energy, fossil fuels, diversity, equity and inclusion, responsible sourcing and supply chain, human rights, and social responsibility.

Increasing attention is being directed towards publicly-traded companies in particular regarding sustainability matters.

A failure, or perceived failure, to respond to investor or customer expectations related to sustainability concerns, including negative perceptions regarding the scope or sufficiency and transparency of our sustainability approach and reporting on sustainability matters, could cause harm to our business and reputation.

Although attention is being directed towards publicly-traded companies regarding sustainability matters, the trend in this respect is somewhat uncertain.

Consequently, a failure, or perceived failure, to respond to investor or customer expectations related to sustainability concerns, including negative perceptions regarding the scope or sufficiency and transparency of our sustainability approach and reporting on sustainability matters, could cause harm to our business and reputation.

For example, our insureds and investment portfolio include a wide variety of industries, including potentially controversial industries.

Damage to our reputation as a result of our provision of policies to certain insureds or investments relating to certain industries could result in decreased demand for our insurance products and could have a material adverse effect on our business, operational results and financial results, as well as require additional resources to rebuild our reputation, competitive position and brand strength.

Additionally, while we strive to manage our invested capital in a manner consistent with publicly-established sustainability guidelines, we may not meet certain shareholders’ criteria for such investments or the performance of

such investments may be adversely impacted by laws (including certain U.S.

state laws) that limit or discourage government-affiliated asset managers from ESG-driven investments or differ from what it may have been if not managed in a manner consistent with sustainability guidelines.

state laws) that

limit or discourage government-affiliated asset managers from ESG-driven investments or differ from what it may have been if not managed in a manner consistent with sustainability guidelines.

Conversely, our focus on climate-related initiatives and sustainability strategies may divert significant resources and management attention from other core business activities, potentially impacting our financial performance and competitiveness and growth.

Excessive prioritization of climate goals could lead to increased capital expenditures, higher operational costs, or investment in unproven technologies.

Additionally, a rigid alignment with climate policies may reduce our flexibility to respond to other market demands or regulatory shifts, creating strategic imbalances.

If customer preferences, investor priorities, or regulatory frameworks evolve in ways that diminish the perceived importance of our climate efforts, or if expected benefits from sustainability investments do not materialize, our business, reputation, and profitability could be adversely affected.

We may not successfully alleviate risk through reinsurance arrangements.

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As part of our risk management, we are reliant on the purchase of reinsurance for our own account from third parties, including retrocession coverage (i.e., the reinsurance of reinsurance).

The availability and cost of reinsurance protection is subject to market conditions, which are outside of our control.

In addition, the coverage provided by our reinsurance arrangements may be inadequate to cover our future liabilities.

However, the availability and cost of reinsurance is subject to market conditions beyond our control.

As a result, we may not be able or willing to obtain sufficient reinsurance and are subject to the risk that the coverage provided by our reinsurance arrangements may be inadequate to cover our future liabilities.

As a result, we may not be able to successfully alleviate risk through these arrangements, which could have a material adverse effect on our results of operations and financial condition.

Purchasing reinsurance does not relieve us of our underlying obligations to policyholders or ceding companies, so any inability to collect amounts due from reinsurers could adversely affect our financial condition and results of operations.

The inability to collect amounts due from reinsurers can result from a number of scenarios, including (1) reinsurers choosing to withhold payment due to a dispute or other factors beyond our control;

and (2) reinsurers becoming unable to pay amounts owed to us as a result of a deterioration in their financial condition.

While we regularly review the financial condition of our reinsurers and currently believe their condition is strong, it is possible that one or more of our reinsurers will be adversely affected by future significant losses or economic events, causing them to be unable or unwilling to pay amounts owed to us.

In addition, due to factors such as the price or availability of reinsurance coverage, we sometimes decide to increase the amount of risk we retain by purchasing less reinsurance.

Such determinations have the effect of increasing our financial exposure to losses associated with such risks and, in the event of significant losses associated with a given risk, could have a material adverse effect on our financial condition and results of operations.

We face the risk of not collecting amounts due from reinsurers if they choose to withhold payment due to disputes or other factors beyond our control.

Additionally, reinsurers may become unable to pay amounts owed to us if their financial condition deteriorates.

While we regularly review the financial condition of our reinsurers and currently believe their condition is strong, it is possible that one or more of our reinsurers could be adversely affected by future significant losses or economic events, causing them to be unable or unwilling to fulfill their obligations to us.

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

Our results of operations may fluctuate significantly from period to period.

These fluctuations result from a variety of factors, including the fluctuations of the reinsurance and insurance market in response to supply and demand changes, the volume and mix of reinsurance and insurance products that we write, loss experience on our reinsurance and insurance liabilities, the performance of our investment portfolio and our ability to assess and implement our risk management strategy effectively.

In particular, we seek to underwrite products and make investments to achieve long-term results.

In addition, our premiums are prone to significant volatility due to various factors, including the timing of contract inception, as well as our differentiated strategy and capabilities which position us to pursue potentially non-recurring bespoke or large solutions for clients.

In addition, after a large catastrophic event or circumstance, we may record significant amounts of reinstatement premium, which can cause quarterly, non-recurring fluctuations in both our written and earned premiums.

Any of the foregoing may increase the volatility of our short-term, financial results relative to our long-term prospects.

The insurance and reinsurance business is historically cyclical and the pricing and terms for our products may decline, which would affect our profitability and ability to maintain or grow premiums.

The insurance and reinsurance industry has historically been cyclical by product and market.

We cannot assure investors that premium rates will not decrease in future, and if demand for our products falls or the supply of competing capacity rises, our prospects for potential growth may be adversely affected.

In particular, we might lose existing customers or suffer a decline in business during shifting market cycles, which we might not regain when industry conditions improve.

We may be adversely impacted by inflation.

Our operations, like those of other insurers and reinsurers, are susceptible to the effects of both economic and social inflation because premiums are established before the ultimate amounts of losses and loss adjustment expenses are known.

Although we consider the potential effects of inflation when setting premium rates, our premiums may not fully offset the effects of inflation and may essentially result in our underpricing the risks we insure and reinsure.

Our reserve for losses and loss adjustment expenses includes assumptions about future payments for settlement of claims and claims-handling expenses, such as the value of replacing property and associated labor costs for the property business we write and litigation costs.

To the extent inflation causes costs to increase above reserves established for claims, we will be required to increase our loss reserves with a corresponding reduction in our net income in the period in which the deficiency is identified, which may have a material adverse effect on our financial condition or results of operations.

Unanticipated higher inflation could also lead to higher interest rates, which would negatively impact the value of our fixed income securities and potentially other investments.

In recent years, we have experienced an increase in loss costs as a result of relatively high inflation in several locations in which we have exposure.

We have seen high inflation in many components of our claims payments, across all lines.

While we frequently analyze these trends based on the most relevant data available to us and adjust pricing, reserving and business assumptions accordingly, there is a risk that our inflation assumptions and forecasts prove to be insufficient, or that the impact of those inflation drivers upon our future claim payments is inconsistent with our assumptions, and this risk could negatively impact our future earnings.

Risks Related to Liquidity, Capital and Credit

Our external financial strength credit ratings could be downgraded.

Third-party rating agencies assess and rate the claims-paying ability of insurers and reinsurers based upon criteria established by the rating agencies.

Maintaining a strong credit rating with a reputable rating agency is critical to our business as these ratings are often a key factor in the decision by an insured or a broker/intermediary whether to place business with a particular insurance or reinsurance provider.

We consider A.M.

Best to be the key rating agency for the insurance and reinsurance industries and an “A-” (Excellent) financial strength rating from A.M.

Best has been the minimum rating required for access to key parts of Hamilton Group’s target market in recent years.

Hamilton Re holds an "A" (Excellent) rating with a "Stable" outlook from A.M.

Best, as upgraded on April 30, 2024, an "A" rating from KBRA with a "Stable" outlook, affirmed on July 23, 2024, and an "A-" (Strong) rating from Fitch with a "Stable" outlook, published on July 2, 2024.

HIDAC holds an "A" (Excellent) rating with a "Stable" outlook from A.M.

Best, as upgraded on April 30, 2024, and an "A-" (Strong) rating from Fitch with a "Stable" outlook, assigned on February 7, 2025.

Hamilton Select holds an "A-" (Excellent) rating with a "Stable" outlook from A.M.

Best, affirmed on March 14, 2024.

Any downgrades of our credit ratings, including related to changes in rating agency methodologies, could adversely affect our ability to sell products and services, make it more difficult for us to enter into new reinsurance contracts or obtain reinsurance on reasonable terms or otherwise execute our business plan.

As a result, any such downgrade could have a material adverse effect on our business, financial condition, results of operations and prospects.