What changed in this filing

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Item 1. Business

2022-03-01 compared with 2021-02-26 · 227 added, 257 removed, 903 unchanged (35% of the section changed)

12 unchanged sentences

When we do write property insurance, we buy reinsurance to significantly mitigate our risk.

We have structured our reinsurance arrangements so that our modeled net pre-tax loss from a 1/1000 year probable maximum loss ("PML") event would not exceed $10.0 million on a group-wide basis.

We have structured our reinsurance arrangements so that our modeled net pre-tax loss from a 1/1000 year probable maximum loss ("PML") event would not exceed 2.5% of shareholders’ equity on a group-wide basis.

We report our business in four segments:

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We frequently include risk mitigating features in our working layer excess of loss treaties, such as paid reinstatements.

These risk mitigation features allow the ceding company to capture a greater percentage of the profits should the business prove more profitable than expected, or alternatively, provide us with additional premiums should the business incur higher than expected losses.

We believe these structures best align our interests with the interests of our cedents.

On a premium volume basis, treaties with loss mitigation features, including sliding scale ceding commissions, represented 58.9% of the net premiums written by our Casualty Reinsurance segment during 2021.

We typically do not assume large individual risks in our Casualty Reinsurance segment, nor do we write property catastrophe

We typically do not assume large individual risks in our Casualty Reinsurance segment, nor do we write property catastrophe reinsurance.

Most of the underlying policies assumed by our Casualty Reinsurance segment have a $1.0 million per occurrence limit, and we typically assume only a portion of that exposure.

We believe this structure reduces volatility in our underwriting results.

We do not assume stand-alone third-party property business at our Casualty Reinsurance segment, but we do have a small amount of assumed business with ancillary property exposure.

72.1% of premiums written by our Casualty Reinsurance segment during 2020 were general liability accounts.

We do not assume stand-alone third-party property business at our Casualty Reinsurance segment, but we do have a small amount of assumed business

with ancillary property exposure.

65.7% of gross premiums written by our Casualty Reinsurance segment during 2021 were general liability accounts.

The Casualty Reinsurance segment writes third party business through one entity, JRG Reinsurance Company Ltd.

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We exclude the effects of intercompany reinsurance agreements from the presentation of our segment results, consistent with the way we manage the Company.

At December 31, 2020, 43.7% of our invested assets were held at JRG Re, which benefits from a favorable operating environment, including an absence of corporate income or investment taxes.

At December 31, 2021, 41.2% of our invested assets were held at JRG Re.

The Corporate and Other segment consists of the management and treasury activities of our holding companies, equity compensation for the group, and interest expense associated with our debt.

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Best Company (“A.M.

Best”) financial strength rating for our group’s regulated insurance subsidiaries is “A” (Excellent).

Best”) financial strength rating for our group’s regulated insurance and reinsurance subsidiaries is “A-” (Excellent) with a stable outlook.

This rating reflects A.M.

Best’s evaluation of our insurance subsidiaries’ financial strength, operating performance and ability to meet obligations to policyholders and is not an evaluation directed towards the protection of investors.

Best’s evaluation of our insurance and reinsurance subsidiaries’ financial strength, operating performance and ability to meet obligations to policyholders and is not an evaluation directed towards the protection of investors.

The rating for our operating insurance and reinsurance companies of “A-” (Excellent) is the fourth highest rating of the thirteen ratings issued by A.M.

Best and is assigned to insurers that have, in A.M.

Best’s opinion, an excellent ability to meet their ongoing obligations to policyholders.

The financial strength ratings assigned by A.M.

Best have an impact on the willingness of brokers and agents to submit applications for insurance and reinsurance to our regulated subsidiaries and on the risk profiles of the submissions for insurance that our subsidiaries receive.

The “A” (Excellent) ratings assigned to our insurance and reinsurance subsidiaries are consistent with our business plans and we believe allow our subsidiaries to actively pursue relationships with the agents and brokers identified in their marketing plans.

In 2002, a group of experienced insurance executives with a history of starting and operating profitable specialty insurance operations created James River Group, Inc.

Best have an impact on the ability of our regulated subsidiaries to attract and retain agents and brokers and on the risk profiles of the submissions for insurance that our subsidiaries receive.

We believe the “A-” (Excellent) ratings assigned to our insurance and reinsurance subsidiaries allow our subsidiaries to actively pursue relationships with the agents and brokers identified in their marketing plans.

Recent Developments

Issuance of Series A Preferred Shares

On February 24, 2022, we entered into an Investment Agreement with GPC Partners Investments (Thames) LP (“GPC Partners”), an affiliate of Gallatin Point Capital LLC, relating to the issuance and sale of 150,000 7% Series A Perpetual Cumulative Convertible Preferred Shares, par value $0.00125 per share (the “Series A Preferred Shares”), for an aggregate purchase price of $150.0 million, or $1,000 per share, in a private placement.

The closing of the transaction is expected to occur on March 1, 2022 (the “Closing Date”).

The Series A Preferred Shares rank senior to our common shares with respect to dividend rights and rights on the distribution of assets on any liquidation, dissolution or winding up of the affairs of the Company, upon which the holders of Series A Preferred Shares would receive the greater of the $1,000 liquidation preference per share plus accrued and unpaid dividends, or the amount they would have received if they had converted all of their Series A Preferred Shares to common shares immediately before such liquidation, dissolution or winding up.

Holders of the Series A Preferred Shares are entitled to a dividend at the initial rate of 7% of the $1,000 per share liquidation preference per annum, paid in cash, in-kind in common shares or in Series A Preferred Shares, at our election.

the five-year anniversary of the Closing Date, and each five-year anniversary thereafter, the dividend rate will reset to a rate equal to the five-year U.S.

treasury rate plus 5.2%.

Dividends will accrue quarterly and will be payable on March 31, June 30, September 30 and December 31 of each year, commencing June 30, 2022.

The Series A Preferred Shares are convertible at the option of the holders thereof at any time into common shares at a conversion price set forth in the Certificate of Designations designating the Series A Preferred Shares (the “Certificate of Designations”), which is subject to anti-dilution adjustments.

We may also require the Series A Preferred Shares to convert to common shares under certain circumstances.

The holders of the Series A Preferred Shares may require us to repurchase their shares upon the occurrence of certain change of control events.

Holders of the Series A Preferred Shares are entitled to vote with the holders of the common shares on an as-converted basis, and are entitled to a separate class vote with respect to certain actions specified in the Certificate of Designations.

The Series A Preferred Shares held by GPC Partners, together with any common shares received on conversion of Series A Preferred Shares or as dividends with respect to Series A Preferred Shares, may not vote in excess of 9.9% of the aggregate voting power of our voting securities on an as converted basis.

In addition, unless and until we obtain the shareholder approval required by Nasdaq Listing Standard Rule 5635, if such rule is applicable, GPC Partners will be subject to a 19.9% cap on voting power and beneficial ownership of our outstanding voting securities.

GPC Partners and any transferees will also be subject to the voting limitations imposed on all U.S.

persons contained in our bye-laws to the extent such restrictions are applicable.

Until GPC Partners and its permitted transferees no longer beneficially own Series A Preferred Shares and/or common shares issued or issuable upon conversion of such Series A Preferred Shares that represent in the aggregate at least 50% of the number of common shares beneficially owned by them, on an as-converted basis, as of the Closing Date, GPC Partners will be entitled to designate one candidate for nomination to our Board of Directors.

Until required regulatory approvals are obtained, such individual will have observer status.

GPC Partners is obligated to comply with certain standstill provisions and transfer restrictions, and is entitled to customary registration rights for the common shares issuable on conversion of, or payable as dividends on, the Series A Preferred Shares.

Loss Portfolio Transfer Retrocession Agreement

On February 23, 2022, JRG Reinsurance Company, Ltd.

(“JRG Re”), the Company’s property/casualty reinsurance subsidiary, entered into a Loss Portfolio Transfer Retrocession Agreement (the “Retrocession Agreement”) with Fortitude Reinsurance Company, Ltd.

The Retrocession Agreement will close upon receipt of regulatory approval by FRL and satisfaction of other customary closing conditions (the date on which all closing conditions are satisfied, the “Retrocession Closing Date”).

Pursuant to the Retrocession Agreement, JRG Re will (a) cede to FRL all existing and future claims for losses arising under certain casualty reinsurance agreements with underlying insurance companies with treaty inception dates ranging from 2011 to 2020 (the “Subject Business”), in each case net of third-party reinsurance and other recoveries, up to an aggregate limit of $400.0 million;

(b) continue to manage and retain the benefit of other third-party reinsurance on the Subject Business;

(c) pay FRL a reinsurance premium of $335.0 million, $310.0 million of which JRG Re will credit to a notional funds withheld account (the “Funds Withheld Account”) and $25.0 million of which JRG Re will pay in cash to FRL;

and (d) pay FRL a 2% per annum crediting rate on the Funds Withheld Account balance on a quarterly basis.

The total premium, Initial Funds Withheld Account credit, and aggregate limit will be adjusted for claims paid from October 1, 2021 to the Retrocession Closing Date.

In 2002, a group of experienced insurance executives created James River Group, Inc.

(“James River Group”).

James River Group was listed on the NASDAQ Stock Market (symbol:

JRVR) in 2005 and consistently produced attractive underwriting results.

JRVR) in 2005.

James River Group had two insurance company subsidiaries, James River Insurance and Stonewood Insurance Company (“Stonewood Insurance”).

Both of these subsidiaries as well as James River Group remain subsidiaries of ours.

In 2007, James River Group’s management team decided to enhance James River Group’s long-term profitability by combining the earnings power of James River Group with the efficiency of an affiliated Bermuda domiciled reinsurer.

A group of investors acquired James River Group, at which point it ceased trading as a public company.

In 2007, a group of investors acquired James River Group, at which point it ceased trading as a public company.

Simultaneously, the investors and management founded and capitalized JRG Re, and we began the process of building our present company.

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We believe we have the following competitive strengths:

Proven and Strong Management Team Whose Financial Interests are Aligned with Shareholders.

The Company's Non-Executive Chairman of the Company’s Board of Directors (the “Board”), J.

Adam Abram, has a history of forming and managing profitable specialty insurance companies.

He was a founder of the Company and our predecessor company.

Our Chief Executive Officer, Frank D'Orazio, has significant experience in the insurance and reinsurance industries in both the United States and Bermuda.

D'Orazio has held senior positions in operations and underwriting of several different insurance and reinsurance companies over the course of his career.

Our Chief Operating Officer, Robert P.

Myron, who has served in various capacities with our group since 2010, has a history of working in a senior management capacity in the insurance and reinsurance industries in both the United States and Bermuda.

Myron has significant experience working in operations, finance and underwriting of several different insurance and reinsurance companies over the course of his career.

Our Chief Financial Officer, Sarah C.

Doran, joined our group in January 2017.

She has significant experience with capital markets and corporate development related to the insurance and financial services industry.

Doran has a history of working in a senior capacity in finance and advisory both within the insurance and reinsurance industry and for various investment banks.

The President and Chief Executive Officer of our Excess and Surplus Lines segment, Richard Schmitzer, who has been with our group since July 2009, has a history of working in a senior management capacity in the E&S lines industry.

Schmitzer has significant experience working in underwriting and operations of several different insurance companies over the course of his career.

The President and Chief Executive Officer of our Specialty Admitted Insurance segment, Terry McCafferty, has extensive experience as an insurance underwriter, operator and executive, and has deep experience and industry knowledge to continue to build out our business initiatives in the fronting and specialty admitted risk business.

The President and Chief Executive Officer of our Casualty Reinsurance segment, Daniel Heinlein, has significant experience as a broker and underwriter of specialty reinsurance risks, particularly in the small account market where we concentrate.

All members of our executive management and senior management own our common shares and have equity grants that we believe help align their interests with those of our long-term shareholders.

Broad Underwriting Expertise.

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We underwrite many classes of insurance and invest in many types of assets.

We actively seek to avoid underwriting business or making investments that expose us to an unacceptably high risk of large losses.

We believe we have minimal exposure to material property risks and did not have material losses from property risks during 2021.

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Investment grade fixed maturity securities make up the majority of our investment portfolio, and we are comfortable allocating a portion of our assets to non-traditional investments.

We consider non-traditional investments to include investments that are (1) unrated bond

or fixed income securities, (2) non-listed equities or (3) investments that generally have less liquidity than rated bond or fixed income securities or listed equities.

Non-traditional investments represented 8.8% of our total invested assets at December 31, 2020, consisting of syndicated bank loans (6.7%) and other invested assets (2.1%) that include interests in limited liability companies that invest in renewable energy opportunities, limited partnerships that invest in debt or equity securities, notes receivable for renewable energy projects, and a private debt security.

We consider non-traditional investments to include investments that are (1) unrated bond or fixed income securities, (2) non-listed equities or (3) investments that generally have less liquidity than rated bond or fixed income securities or listed equities.

Non-traditional investments represented 8.9% of our total cash and invested assets (excluding restricted cash equivalents) at December 31, 2021, consisting of syndicated bank loans (6.7%) and other invested assets (2.2%) that include interests in limited liability companies that invest in renewable energy opportunities, limited partnerships that invest in debt or equity securities, notes receivable for renewable energy projects, and a private debt security.

While we are willing to make investments in non-traditional types of investments, we seek to avoid asset classes and investments that we do not understand.

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Our segment presidents all have extensive backgrounds and histories working in management capacities in specialty casualty insurance and reinsurance.

Our newly joined Chief Actuary, Chief Claims Officer and Chief Underwriting Officer also bring extensive backgrounds in operational leadership within specialty casualty insurance and reinsurance, including a deep focus on risk management.

Robust Technology and Data Capture.

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Since our inception, we have embraced technology to greatly reduce the cost of individually underwriting these accounts in our Excess and Surplus Lines and Specialty Admitted Insurance segments.

We are investing in technologies that may bring additional insights to our underwriters and allow them to refine and improve their risk selection and pricing.

We are investing in technologies that may bring additional insights to our underwriters and allow them to refine and improve their

risk selection and pricing.

We continue to have our underwriters make individual judgments regarding the underwriting and pricing of accounts.

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While we believe the insurance and reinsurance industry is generally overcapitalized at this time, we are successfully increasing rates in our Excess and Surplus Lines and Specialty Admitted Insurance segments.

Pricing on our E&S renewal book has increased for sixteen consecutive quarters.

Pricing on our E&S renewal book has increased for twenty consecutive quarters.

The E&S and Specialty Admitted segments combined represented 87.9% of our gross written premiums and 78.6% of our net written premiums for the twelve months ended December 31, 2021.

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For the year ended December 31, 2021, our expense ratio was 23%.

Additionally, our Bermuda domicile and operations can provide for flexibility and an efficient tax structure.

At December 31, 2020, 43.7% of our invested assets were held at JRG Re, which benefits from a favorable operating environment, including an absence of corporate income or investment taxes.

At December 31, 2021, 41.2% of our invested assets were held at JRG Re.

We believe our approach to our business will help us achieve our goal of generating compelling returns on tangible equity while limiting volatility in our financial results.

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We do not hesitate to increase loss estimates when we determine that it is appropriate.

Our proactive approach is exemplified by the Company's decision in October 2019 to deliver a notice of early cancellation, effective December 31, 2019, of all insurance policies issued to our largest customer, Rasier LLC and its affiliates (collectively, “Rasier”) .

The decision, coming after careful deliberation and a thorough review, was made due to a number of factors including changes in the risk, unsatisfactory underwriting profits from the Rasier business, and a desire to refocus on the Company's growing Core E&S lines of business where the Company has experienced many years of profitable underwriting results.

Manage Capital Actively.

We seek to make “both sides” of our balance sheet generate better than average risk-adjusted returns.

We invest and manage our capital with a goal of consistently increasing tangible equity for our shareholders and generating attractive returns on tangible equity.

We intend to expand our premium volume and capital base to take advantage of opportunities to earn an underwriting profit or to reduce our premium volume and capital base if attractive underwriting opportunities are not available.

We expect to finance our future operations with a combination of debt and equity and do not intend to raise or retain more capital than we believe we can profitably deploy in a reasonable time frame.

We expect to finance our future operations with a combination of debt and equity and do not intend to raise or retain more capital than we believe we can profitably deploy in a reasonable time frame or that is reasonably necessary to bolster the capital positions of our regulated insurance entities.

We may not, however, always be able to raise capital when needed.

We declared dividends to our shareholders of $37.1 million ($1.20 per share) during 2020, $36.8 million ($1.20 per share) in 2019 and $36.3 million ($1.20 per share) in 2018.

While we have declared a special dividend in the past, we continue to find what we believe are attractive opportunities to earn a compelling return on our capital in the businesses that we target and therefore did not declare a special dividend in 2018, 2019, or 2020.

Our ratings from A.M.

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Excess and Surplus Lines Segment

We underwrite non-admitted business through our subsidiaries, James River Insurance Company and James River Casualty Company, from offices in Richmond, Virginia;

We underwrite non-admitted E&S business through our subsidiaries, James River Insurance Company and James River Casualty Company (together, “James River,” which comprises our Excess and Surplus Lines segment), from offices in Richmond, Virginia;

Scottsdale, Arizona;

and Atlanta, Georgia.

James River Insurance is our largest subsidiary as measured by gross written premiums (55.6% of consolidated gross written premiums for the year ended December 31, 2020 came from our Excess and Surplus Lines segment) and has been engaged in E&S insurance for 18 years.

James River Insurance has had a consistent record of underwriting profitably since its second year of operation.

The Excess and Surplus Lines segment is our largest segment, representing 55.3% of consolidated gross written premiums for the year ended December 31, 2021.

James River has been engaged in the E&S insurance market for 19 years.

The E&S industry focuses on insuring commercial insureds that may be unable to purchase insurance from standard lines insurers typically due to perceived risk related to their products or operations.

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We utilize a network of authorized wholesale brokers and general agents throughout the United States.

In 2021, our Excess and Surplus Lines segment’s gross written premiums increased by 19.2% over 2020.

In 2020, our Excess and Surplus Lines segment’s gross written premiums shrank by 24.2% relative to 2019 due to the early cancellation in late 2019 of a large commercial auto account.

Gross written premiums for our Core E&S business, which excludes our commercial auto division, grew by 29.5% over 2019.

The Excess and Surplus Lines segment produced an average combined ratio of 90.1% from 2011 through 2020.

Gross written premiums for our Core E&S business, which excludes our commercial auto division, grew by 19.4% and 29.5% in 2021 and 2020, respectively.

The Excess and Surplus Lines segment produced a weighted-average combined ratio of 95.2% from 2012 through 2021.

Companies that underwrite on an E&S lines basis operate under a different regulatory structure than standard market carriers.

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However, as E&S carriers, our insurance subsidiaries in the Excess and Surplus Lines segment are not backed by any state’s guarantee fund, and in most states these subsidiaries may only write coverage for an insured after they have been denied coverage by the standard market and signed declarations stating that the insured is aware that it will not have access to any state guarantee funds should these subsidiaries be unable to satisfy their obligations.

Our Excess and Surplus Lines segment underwrites coverage for a wide range of businesses and does not write personal lines insurance.

Our Excess and Surplus Lines segment underwrites coverage for a wide range of commercial businesses and does not write personal lines insurance.

Applications for insurance are presented to us by authorized wholesale brokers who are typically engaged by retail agents after their clients have been rejected by standard markets.

In late 2017, the Excess and Surplus Lines segment started a binding contract unit (as part of our Small Business underwriting division) where limited authority for underwriting is delegated to a select, but growing, group of agents on a limited number of General Liability classes through a company designed online portal.

All claims for business written by the Excess and Surplus Lines segment are managed by its internal claims department although we use independent adjusters for inspection and payment of certain claims.

All claims for business written by the Excess and Surplus Lines segment are managed by our internal claims department although we use independent adjusters for inspection and payment of certain claims.

The chart below identifies the Excess and Surplus Lines segment’s divisions and sets forth the amount of gross written premiums by each division.

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Manufacturers and Contractors 139,720 16.8 % 122,880 105,096 79,160 85,719

Energy 51,109 7.3 % 45,442 33,942 29,704 29,709

Excess Property 47,241 5.7 % 37,332 31,606 16,963 14,447

Energy 46,216 5.5 % 51,109 45,442 33,942 29,704

Life Sciences 35,935 4.3 % 35,163 24,462 16,636 12,981

Commercial Auto 30,029 4.3 % 405,565 322,126 247,960 110,050

Allied Health 35,192 4.2 % 26,918 26,713 30,450 19,181

Commercial Auto 34,630 4.2 % 30,029 405,565 322,126 247,960

Small Business 32,593 3.9 % 24,790 19,725 14,808 11,307

Environmental 17,050 2.0 % 17,753 16,539 10,499 7,920

Professional Liability 6,881 1.0 % 6,441 5,916 6,326 8,361

Sports and Entertainment 9,442 1.1 % 6,118 4,212 3,685 3,021

Professional Liability 8,104 1.0 % 6,881 6,441 5,916 6,326

Medical Professionals 1,844 0.2 % 1,700 1,733 1,774 2,297

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Manufacturers and Contractors writes primary general liability coverage for a variety of classes, including manufacturers of consumer, commercial, and industrial products and general and trade contractors.

Typically, we issue a $1.0 million per occurrence limit in this division and we retain the entire $1.0 million limit.

Typically, we issue a $1.0 million per

occurrence limit in this division and we retain the entire $1.0 million limit.

The individual overseeing this division has 39 years of industry experience.

Energy writes risks engaged in the business of energy production, distribution or mining, and the manufacture of equipment used in the energy business segment.

Examples of classes underwritten by this division include oil and gas exploration companies, oil or gas well drillers, oilfield consultants, oil or gas lease operators, oil well servicing companies, oil or gas pipeline construction companies, fireworks manufacturing, mining-related risks, utilities, and utility contractors.

We provide policy limits up to $11.0 million, with typical limits between $1.0 million and $5.0 million per occurrence, retaining up to $1.0 million in limit net on either a primary or excess basis.

The underwriter leading this division has more than 35 years of experience in the business.

Excess Property writes property risks providing limits in various layers above the primary coverage layer for a variety of classes, including apartments, condominiums, resorts, shopping centers, offices and general commercial properties.

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The underwriter leading our Excess Property division has 33 years of experience in the industry.

nutrition and herbal supplements), human clinical trials, pharmaceuticals (mainly generics and over-the-counters) and medical devices.

Energy writes risks engaged in the business of energy production, distribution or mining, and the manufacture of equipment used in the energy business segment.

We provide policy limits up to $11.0 million, with typical limits between $1.0 million and $5.0 million per occurrence, retaining up to $1.0 million in limit net on either a primary or excess basis.

The underwriter leading this division has more than 39 years of experience in the business.

Life Sciences underwrites general liability, products liability and/or professional liability coverage for manufacturers, distributors and developers of biologics (antibodies & vaccines used for the prevention of disease), nutraceuticals (health, nutrition and herbal supplements), human clinical trials, pharmaceuticals (mainly generics and over-the-counters) and medical devices.

This division also writes a book of various types of business engaged in the medical and adult-use cannabis industry.

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The underwriter at the head of this division has 39 years of experience in the industry.

Commercial Auto underwrites primarily the hired and non-owned auto liability exposures for a variety of industry segments including package delivery services, food delivery services and livery service organizations, and has developed a particular niche for insuring organizations' operating networks connecting independent contractors with customers (transportation network companies and similar usage-based networks).

On December 31, 2019, we terminated coverage for our largest commercial auto insured (Rasier) which comprised $374.2 million of gross written premiums, representing 40.6% of the Excess and Surplus Lines segment’s gross written premiums and 25.4% of our consolidated gross written premiums for the year ended December 31, 2019.

The head underwriter in this division has 33 years of experience.

Limits assumed are retained by the Company, in some cases subject to self-insured retentions of the insureds.

Allied Health underwrites casualty insurance for allied health and social service types of risks, such as long-term care facilities, independent living apartments, group homes, half-way houses and shelters, drug rehabilitation, home health care and medical staffing enterprises.

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We believe this policy form significantly reduces our long-term exposure in this complicated class of business.

Small Business concentrates on accounts with annual primary liability insurance premiums of less than $10,000.

Commercial Auto underwrites primarily the hired and non-owned auto liability exposures for a variety of industry segments including package and food delivery services.

On December 31, 2019, we terminated coverage for our largest commercial auto insured (Rasier) which comprised $374.2 million of gross written premiums in 2019, representing 40.6% of the Excess and Surplus Lines segment’s gross written premiums and 25.4% of our consolidated gross written premiums for the year ended December 31, 2019.

The underwriter leading this division has 35 years of experience.

Limits assumed are retained by the Company, in some cases subject to self-insured retentions of the insureds.

Small Business concentrates on brokerage accounts with annual primary liability insurance premiums of less than $10,000.

For these smaller risks, we limit flexibility in coverage options and pricing to facilitate quick turnaround and efficient processing.

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We provide policy limits up to $11.0 million, with typical limits between $1.0 million and $5.0 million per occurrence, retaining up to $1.0 million in limit net on a primary or excess basis.

Sports and Entertainment underwrites primary liability coverage for sports and entertainment related risks, including special events, family entertainment centers, tourist attractions, health clubs and sport teams, leagues and complexes.

Typical limits offered are up to $1.0 million per occurrence, and we retain the entire $1.0 million limit.

The underwriter at the head of this division has 35 years of experience in the industry.

Professional Liability writes professional liability coverage for accountants, architects, engineers, lawyers and certain other professions.

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All of our professional liability coverage is written on a claims-made and reported basis.

Typical limits offered are up to $1.0 million per occurrence, and we retain the entire $1.0 million limit.

The underwriter at the head of this division has 33 years of experience in the industry.

Medical Professionals underwrites non-standard physicians’ professional liability for individuals or small groups.

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The following table identifies the top producing states by amount of gross written premium for our Excess and Surplus Lines segment for the year ended December 31, 2021 and the amount of gross written premium produced by such states for the years ended December 31, 2020, 2019, 2018 and 2017.

The table also shows the percentage of each states’ gross written

premium to total gross written premium in the Excess and Surplus Lines segment for the years ended December 31, 2020, 2019 and 2018.

The table also shows the percentage of each states’ gross written premium to total gross written premium in the Excess and Surplus Lines segment for the years ended December 31, 2021, 2020 and 2019.

2021 2020 2019 2018 2017

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California $ 147,677 17.7 % $ 136,532 19.5 % $ 368,488 40.0 % $ 213,729 $ 153,340

New York 108,778 15.6 % 89,680 9.7 % 54,417 8.3 % 47,585 39,407

Florida 137,880 16.5 % 104,120 14.9 % 67,700 7.3 % 47,918 55,502

Texas 128,312 15.4 % 79,338 11.4 % 51,978 5.6 % 31,604 29,567

Pennsylvania 19,008 2.7 % 16,206 1.8 % 8,562 1.3 % 12,041 8,666

New Jersey 17,621 2.5 % 13,425 1.5 % 12,147 1.9 % 17,486 11,150

New York 101,820 12.2 % 108,778 15.6 % 89,680 9.7 % 54,417 47,585

Washington 22,778 2.7 % 16,407 2.4 % 16,573 1.8 % 17,329 13,697

New Jersey 22,131 2.7 % 17,621 2.5 % 13,425 1.5 % 12,147 17,486

Pennsylvania 22,055 2.6 % 19,008 2.7 % 16,206 1.8 % 8,562 12,041

Illinois 19,010 2.3 % 16,243 2.3 % 14,491 1.6 % 20,893 25,853

Louisiana 13,968 2.0 % 16,001 1.7 % 12,654 1.9 % 8,508 6,584

Massachusetts 16,682 2.0 % 13,762 2.0 % 34,494 3.7 % 19,758 13,587

Arizona 16,544 2.0 % 12,782 1.8 % 9,023 1.0 % 5,160 8,302

Louisiana 15,723 1.9 % 13,968 2.0 % 16,001 1.7 % 12,654 8,508

Georgia 15,522 1.9 % 11,934 1.7 % 10,936 1.2 % 9,120 15,787

Missouri 10,080 1.4 % 14,628 1.6 % 9,424 1.4 % 5,729 3,572

Ohio 13,156 1.6 % 9,210 1.3 % 10,537 1.1 % 13,043 8,283

Virginia 8,932 1.3 % 23,563 2.6 % 15,532 2.4 % 10,741 6,534

Missouri 11,967 1.4 % 10,080 1.4 % 14,628 1.6 % 9,424 5,729

North Carolina 10,060 1.2 % 7,957 1.1 % 9,950 1.1 % 10,305 8,199

All other states 132,340 15.9 % 121,403 17.4 % 178,210 19.3 % 170,475 106,654

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The segment does not grant its brokers underwriting or claims authority.

The segment does delegate limited authority under several programs underwritten by exclusive General Agents as well as a growing number of General Agents underwriting small-account commercial risks through our online contract binding portal.

The segment does delegate limited authority under several programs underwritten by exclusive General Agents as well as a growing but still limited number of General Agents underwriting small-account commercial risks through our online contract binding portal.

Our Excess and Surplus Lines segment selects its brokers based upon management’s review of the experience, knowledge and business plan of each broker.

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Brokers unable to produce consistently profitable business, or who produce unacceptably low volumes of business, may be terminated.

Our Excess and Surplus Lines segment’s underwriters regularly visit with brokers in their offices to discuss the products that we offer and the needs of the brokers.

Our Excess and Surplus Lines segment’s underwriters visit brokers regularly to discuss the products that we offer and the needs of the brokers.

We believe the personal relationships we foster with individual brokers and our ability to respond to a wide variety of risks placed by these brokers make us an important market for them.

Our Excess and Surplus Lines segment’s three largest brokers produced $568.9 million of gross written premiums for the year ended December 31, 2021, representing approximately 68.2% of the Excess and Surplus Lines segment’s gross written premiums and 37.7% of consolidated gross written premiums for 2021.

The three largest brokers produced $165.8 million (Truist Insurance Holdings), $157.5 million (AmWins Group), and $128.9 million (Ryan Specialty Group) of gross written premiums for the year ended December 31, 2020, respectively, representing 23.7%, 22.5%, and 18.4% of the Excess and Surplus Lines segment’s gross written premiums and 13.2%, 12.5%, and 10.3% of consolidated gross written premiums for 2020, respectively.

The three largest brokers produced $239.1 million (Ryan Specialty Group), $197.3 million (AmWins Group), and $132.5 million (Truist Insurance Holdings) of gross written

premiums for the year ended December 31, 2021, respectively, representing 15.9%, 13.1%, and 8.8% of consolidated gross written premiums and 28.7%, 23.7%, and 15.9% of the Excess and Surplus Lines segment’s gross written premiums for 2021, respectively.

In 2021 and 2020, our Excess and Surplus Lines segment paid an average commission to producers of 16.6% and 15.1%, respectively, of gross written premiums.

This difference in commission reflects the change in our mix of business resulting from the termination of our Commercial Auto program with Rasier effective December 31, 2019.

Our Excess and Surplus Lines segment’s staff includes over 200 individuals directly employed in underwriting policies as of December 31, 2021.

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Our claims staff also contributes to our underwriting operations through communication of claims information to our underwriters.

The Senior Vice President and Chief Claims Officer heads our forms committee, which reviews and develops all policy forms and exclusions, and is also a member of the underwriting review committee.

Members of our Claims management team participate on our forms committee, which reviews and develops all policy forms and exclusions, and are also members of the underwriting review committee.

Approximately 92% of all claims received are closed within five years in the Excess and Surplus Lines segment.

The calendar year net loss ratios for the Excess and Surplus Lines segment for the last ten years were:

The 2020, 2019, 2018, and 2017 calendar year loss ratios for the Excess and Surplus Lines segment were impacted by adverse reserve development of $91.4 million, $57.4 million, $20.7 million and $38.7 million, respectively, in the commercial auto line of business.

The adverse development was primarily related to the 2016, 2017, and 2018 contract years with Rasier.

The calendar year loss ratios for 2017 through 2021 were impacted by adverse reserve development of $38.7 million, $20.7 million, $57.4 million, $91.4 million, and $200.1 million, respectively, in the commercial auto line of business that was primarily related to a former insured, Rasier LLC and its affiliates (“Rasier”).

The loss ratio for 2021 also includes $5.0 million of net catastrophe losses related to Hurricane Ida in the Excess Property line of business.

On September 27, 2021, James River entered into a loss portfolio transfer reinsurance transaction with Aleka Insurance, Inc.

(“Aleka”), a captive insurance company affiliate of Rasier, to reinsure substantially all of the Excess and Surplus Lines segment's legacy portfolio of commercial auto policies previously issued to Rasier for which James River is not otherwise indemnified by Rasier.

Under the terms of the transaction, effective as of July 1, 2021, James River ceded to Aleka approximately $345.1 million of commercial auto liabilities relating to Rasier policies written in the years 2013-2019, which amount constituted the reinsurance premium.

The reinsurance coverage is fully collateralized, not subject to an aggregate limit, and subject to certain exclusions.

Specialty Admitted Insurance Segment

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This decision was based upon a wide range of factors, including ability to exceed internal performance metrics, regulations regarding pricing and cost containment, and our agent relationships.

For the year ended December 31, 2020, approximately 34% of our retail produced workers’ compensation direct written premiums were in North Carolina, 18% were in Georgia, 14% were in Virginia, and 12% were in Missouri.

For the year ended December 31, 2021, approximately 36% of our retail produced workers’ compensation direct written premiums were in North Carolina, 17% were in Georgia, 17% were in Missouri, and 12% were in Virginia.

Building trades represented approximately 32% of the direct premiums in force in our retail produced workers’ compensation book in 2021.

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Due to our broad licensure and product filings, we are positioned to support this business on a broad basis throughout the United States.

Because of the limited capital allocation required to support it, we believe the fronting business represents an efficient use of capital, and we continued to expand this business in 2020.

Because of the more limited capital allocation required to support it, we believe the fronting business represents an efficient use of capital, and we continued to expand this business in 2021.

Two fronting agencies produced $124.1 million (Atlas General Insurance Services) and $89.5 million of gross written premiums in 2021, representing 8.2% and 5.9% of consolidated gross written premiums and 25.2% and 18.2% of the Specialty Admitted Insurance segment's gross written premiums, respectively.

Our fronting business saw growth related to eight new fronting relationships added in 2020 that generated $35.0 million of gross written premium in the year ended December 31, 2020.

Our objective over time is to utilize the combination of fee income and underwriting profits from our Specialty Admitted Insurance segment to leverage our capital and enhance returns on tangible equity.

Additionally, we expect that this fee income,

which was $19.3 million in 2020, $15.8 million in 2019, and $14.8 million in 2018, will be increasingly material in future periods and provide us with a steady revenue stream.

Our fronting business saw growth related to new fronting relationships added since January 1, 2020 that generated $105.2 million and $35.0 million of gross written premium in the years ended December 31, 2021 and 2020, respectively.

Our objective over time is to utilize the combination of fee income and underwriting profits from our Specialty Admitted Insurance segment to leverage our capital and improve returns on tangible equity.

Additionally, we expect that this fee income, which was $22.7 million in 2021, $19.3 million in 2020, and $15.8 million in 2019, may be increasingly material in future periods and provide us with a steady revenue stream.

In a fronting arrangement, we give selected MGAs authority to act on our behalf to produce, underwrite and administer policies that meet our strict underwriting and pricing guidelines.

We enter into these arrangements selectively with agents who have significant experience and market presence in specialty classes of property-casualty and automobile risks.

We enter into these arrangements selectively with agents who have significant experience and market presence in specialty classes of property-casualty risks.

Underwriting, claims and financial performance is subject to regular review by our staff.

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Our fronting business is distributed primarily through MGAs and program managers.

Excluding our Atlas program, we have fifteen active fronting arrangements as of December 31, 2020.

Excluding our Atlas program, we have seventeen active fronting arrangements as of December 31, 2021.

During 2021, these arrangements represented 62.4% of the segment’s gross written premium.

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We report our business of writing reinsurance for third party insurance companies in our Casualty Reinsurance segment (representing 12.1% of consolidated gross written premiums for the year ended December 31, 2021).

We participate in the reinsurance business through our Bermuda domiciled reinsurance subsidiary, JRG Re, which is a Class 3B reinsurer.

We participate in the reinsurance business through our Bermuda domiciled reinsurance subsidiary, JRG Re, which is licensed as a Class 3B reinsurer by the Bermuda Monetary Authority.

JRG Re provides proportional and working layer excess of loss treaty reinsurance to third parties and, through December 31, 2017, also to our U.S.-based insurance subsidiaries.

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We typically structure our reinsurance treaties as quota share arrangements with loss and risk mitigating features that align our interest with that of the ceding companies.

On a premium volume basis, treaties with loss mitigation features including sliding scale ceding commissions represented 68.3% of the third-party net written premiums during 2020 and treaties written as “proportional” arrangements represented 94.8%.

We purchase very little retrocessional coverage in this segment.

On a premium volume basis, treaties written as “proportional” arrangements represented 95.5% of the third-party net written premiums during 2021 and treaties with loss mitigation features including sliding scale ceding commissions represented 58.9%.

We purchase very little retrocessional

coverage in this segment.

Almost all of the segment’s premiums are for casualty lines of business.

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Corporate and Other Segment

Our Chief Executive Officer, President and Chief Operating Officer, Chief Financial Officer and other holding company employees are part of the Corporate and Other segment.

Our Chief Executive Officer and Chief Financial Officer and other holding company employees are part of the Corporate and Other segment.

This is where we set and direct strategy for the group as a whole as well as high level objectives for each of the three operating segments.

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We routinely purchase reinsurance for our Excess and Surplus Lines and Specialty Admitted Insurance segments and, less frequently purchase retrocessional coverage for our Casualty Reinsurance segment.

The purchase of reinsurance reduces

volatility by limiting our exposure to large losses and provides capacity for growth.

The purchase of reinsurance reduces volatility by limiting our exposure to large losses and provides capacity for growth.

In a reinsurance transaction, an insurance company transfers, or cedes, all or part of its exposure in return for a portion of the premium.

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The ability to collect on reinsurance or retrocessional reinsurance is subject to many factors, including the solvency of the counterparty and their interpretation of contract language and other factors.

As of December 31, 2020, we have no material, ongoing disputes with any reinsurer or retrocessionaire, and we are not aware of any credit quality issues with any of our reinsurers or retrocessionaires at December 31, 2020.

As of December 31, 2021, we have no material, ongoing disputes with any reinsurer or retrocessionaire, and we are not aware of any credit quality issues with any of our reinsurers or retrocessionaires.

Purchased Property Reinsurance

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In our Casualty Reinsurance segment, we believe that our maximum loss from a catastrophic event is approximately $2.0 million and, as a result, we do not currently purchase retrocessional reinsurance coverage for property-catastrophe risks.

We believe our pre-tax group-wide PML from a 1 in 1,000 year catastrophic event is approximately $10.0 million, inclusive of reinstatement premiums payable.

We believe our pre-tax group-wide PML from a 1 in 1,000 year catastrophic event would not exceed 2.5% of shareholders’ equity, inclusive of reinstatement premiums payable.

Purchased Casualty Reinsurance

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For our fronting and program business, we purchase proportional reinsurance and excess of loss reinsurance to limit our exposure to no more than $500,000 per occurrence.

For both our Excess and Surplus Lines segment and our Specialty Admitted Insurance segment, we purchase a clash and contingency reinsurance treaty that covers all casualty business for $10.0 million in excess of $2.0 million per occurrence.

For both our Excess and Surplus Lines segment and our Specialty Admitted Insurance segment, we purchase a contingency clash reinsurance treaty that covers all casualty business for $10.0 million in excess of $2.0 million per occurrence.

This coverage is intended to respond in a situation where we have multiple insured losses from the same event as well as extra contractual obligations or excess policy limits on an individual occurrence basis.

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Swiss Reinsurance America Corporation $ 324,982 A+

Aleka Insurance Company 256,452 Unrated (1)

Berkley Insurance Company 125,424 A+

Safety National Casualty 47,916 A++

Hannover Ruck SE 35,848 A+

Aioi Nissay Dowa Insurance Company 47,341 A+

Hannover Ruck SE 47,335 A+

Endurance Assurance Corporation 36,843 A+

Munich Reinsurance America 34,612 A+

North Carolina Reinsurance Facility 28,355 Unrated (2)

American European Insurance Company 34,349 B (2)

Endurance Assurance Corporation 27,626 A+

Partner Reinsurance Company 22,267 A+

North Carolina Reinsurance Facility 26,995 Unrated (3)

Top 10 Total 982,249

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Total $ 1,348,628

(1) This reinsurer is unrated.

All material reinsurance amounts from this reinsurer are collateralized.

(2) This reinsurer is below A-.

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(3) The North Carolina Reinsurance Facility is a residual market mechanism for automobile insurance in North Carolina.

Amounts Recoverable from an Indemnifying Party

The Company previously issued a set of insurance contracts to Rasier under which the Company pays losses and loss adjustment expenses on the contracts.

The Company has indemnity agreements with Rasier (non-insurance entities) and is contractually entitled to receive reimbursement for a significant portion of the losses and loss adjustment expenses paid on behalf of Rasier and other expenses incurred by the Company.

Rasier is required to collateralize all amounts currently due to the Company and to provide additional collateral sufficient to cover the amounts that may be recoverable under the indemnity agreements, including, among other things, case loss and loss adjustment expense reserves, IBNR loss and loss adjustment expense reserves, extra contractual obligations and excess of policy limits liabilities.

The collateral is provided through a collateral trust arrangement established in favor of the Company by a captive insurance company affiliate of Rasier.

As permitted under our indemnification agreements with Rasier and the associated trust agreement, we have withdrawn the collateral posted to the trust account.

At December 31, 2020, the Company held collateral funds of $859.9 million.

The funds withdrawn from the trust account, currently invested in short term U.S.

Treasury securities and included in restricted cash equivalents on the Company's consolidated balance sheet, will be used to reimburse the Company for the losses and loss adjustment expenses paid on behalf of Rasier and other related expenses incurred by the Company to the extent not paid as required under the indemnity agreements.

The Company has ongoing exposure to estimated losses and expenses on these contracts growing at a faster pace than growth in our collateral balances.

In addition, we have credit exposure if our estimates of future losses and loss adjustment expenses and other amounts recoverable, which are the basis for establishing collateral balances, are lower than actual amounts paid or payable.

Amounts Recoverable from an Indemnifying Party and Reinsurer on Legacy Commercial Auto Book

James River previously issued a set of commercial auto insurance contracts to Rasier (the “Rasier Commercial Auto Policies”) under which James River pays losses and loss adjustment expenses on the contracts.

James River has indemnity agreements with Rasier (non-insurance entities) (collectively, the “Indemnity Agreements”) and is contractually entitled to reimbursement for the portion of the losses and loss adjustment expenses paid on behalf of Rasier under the Rasier Commercial Auto Policies and other expenses incurred by James River.

On September 27, 2021, James River entered into a loss portfolio transfer reinsurance agreement (the “LPT Agreement”) with Aleka to reinsure substantially all of the Rasier Commercial Auto Policies for which James River is not otherwise indemnified by Rasier under the Indemnity Agreements.

Under the terms of the LPT Agreement, effective as of July 1, 2021, James River ceded to Aleka approximately $345.1 million of commercial auto liabilities relating to Rasier Commercial Auto Policies written in the years 2013-2019, which amount constituted the reinsurance premium.

Each of Rasier and Aleka are required to post collateral under the Indemnity Agreements and the LPT Agreement, respectively:

• Pursuant to the Indemnity Agreements, Rasier is required to post collateral for the amounts recoverable or that may be recoverable under the Indemnity Agreements, including, among other things, case loss and loss adjustment expense reserves, IBNR loss and loss adjustment expense reserves, extra contractual obligations and excess policy limits liabilities.

The collateral is provided through a collateral trust arrangement (the “Indemnity Trust”) in favor of James River by Aleka.

In connection with the execution of the LPT Agreement, James River returned $691.3 million to the Indemnity Trust, representing the remaining balance of the amount withdrawn in October 2019, as was permitted under the indemnification agreements with Rasier and the associated trust agreement.

At December 31, 2021, the balance in the Indemnity Trust was $584.6 million, and, together with the balance of the Loss Fund Trust (as defined below) attributable to the Indemnity Agreements as described below, the total balance of collateral securing Rasier’s obligations under the Indemnity Agreements was $653.7 million.

• Pursuant to the LPT Agreement, Aleka is required to post collateral equal to 102% of James River's estimate of Aleka's obligations under the LPT Agreement, calculated in accordance with statutory accounting principles.

The collateral is provided through a collateral trust arrangement (the “LPT Trust”) established in favor of James River by Aleka.

At December 31, 2021, the balance in the LPT Trust was $251.7 million, and, together with the balance of the Loss Fund Trust (as defined below) attributable to the LPT Agreement as described below, the total balance of collateral securing Aleka’s obligations under the LPT Agreement was $279.9 million.

At December 31, 2021, the total reinsurance recoverables under the LPT Agreement was $272.3 million (including $256.5 million of unpaid recoverables and $15.9 million of paid recoverables).

In connection with the execution of the LPT Agreement, James River and Aleka entered into an administrative services agreement (the “Administrative Services Agreement”) with a third party claims administrator (the “Administrator”) pursuant to which the Administrator handles the claims on the Rasier Commercial Auto Policies for the remaining life of those claims.

The claims paid by the Administrator are reimbursable by James River, and pursuant to the Administrative Services Agreement, James River established a loss fund trust account for the benefit of the Administrator (the “Loss Fund Trust”) to collateralize its claims payment reimbursement obligations.

James River funds the Loss Fund Trust using funds withdrawn from the Indemnity Trust, funds withdrawn from the LPT Trust, and its own funds, in each case in an amount equal to the pro rata portion of the required Loss Fund Trust balance attributable to the Indemnity Agreements, the LPT Agreement and James River’s existing third party reinsurance agreements, respectively.

At December 31, 2021, the balance in the Loss Fund Trust was $102.0 million, including $69.2 million of which represented collateral supporting Rasier’s obligations under the Indemnity Agreements and $28.2 million of which represented collateral supporting Aleka’s obligations under the under the LPT Agreement.

Funds posted to the Loss Fund Trust are classified as restricted cash equivalents on the Company's balance sheet.

While the LPT Agreement brings economic finality to substantially all of the Rasier Commercial Auto Policies, the Company has credit exposure to Rasier and Aleka under the Indemnity Agreements and the LPT Agreement if the estimated losses and expenses of the Rasier Commercial Auto Policies grow at a faster pace than the growth in our collateral balances.

In addition, we have credit exposure if our estimates of future losses and loss adjustment expenses and other amounts recoverable under the Indemnity Agreements and the LPT Agreement, which are the basis for establishing the collateral balances, are lower than actual amounts paid or payable.

The amount of our credit exposure in any of these instances could be material.

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We seek to establish reserves that will adequately meet our obligations.

We have eight credentialed actuaries on staff, and we engage independent actuarial consultants to review our decisions regarding reserves.

We maintain reserves for specific claims incurred and reported, reserves for claims incurred but not reported (“IBNR”) and reserves for uncollectible reinsurance when appropriate.

Our ultimate liability may be greater or less than current reserves.

In the insurance industry, there is always the risk that reserves may prove inadequate.

We continually monitor reserves using new information on reported claims and a variety of statistical techniques and adjust our estimates as experience develops or new information becomes known.

Such adjustments (referred to as reserve development) are included in current operations.

All of our reserving actuaries are credentialed and our Chief Actuary has 37 years of industry experience.

We engage independent actuarial consultants to review our decisions regarding reserves.

Anticipated inflation is reflected implicitly in the reserving process through analysis of cost trends and the review of historical development.

We do not discount our reserves for losses and loss adjustment expenses to reflect estimated present value.

When setting our reserves, we use a blend of actuarial techniques that are chosen to reflect the nature of the lines of insurance we underwrite.

We seek to be consistent and transparent in establishing our reserves.

All of our methods to calculate net reserves include assumptions about estimated reinsurance recoveries and their collectability .

Reinsurance collectability is evaluated independently of the reserving process and appropriate allowances for uncollectible reinsurance are established.

We maintain reserves for specific claims incurred and reported and reserves for claims incurred but not reported (“IBNR”).

The process of establishing loss reserves is complex and inherently imprecise because it must take into consideration many variables that are subject to the outcome of future events .

As a result, informed subjective estimates and judgments about our ultimate exposure to losses are an integral component of our loss reserving process .

Given that loss reserve estimates depend on the outcome of future events , changes in prior year estimates are generally unavoidable in the insurance industry .

These changes are sometimes referred to as "prior year loss development" or " reserve development" and are included in current operations.

We continually monitor reserves using the most recent information on reported claims and a variety of statistical techniques and we adjust our estimates as experience develops or new information becomes known.

In many cases, several years may elapse between the occurrence of an insured loss, the reporting of the loss and our eventual payment of the loss.

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We also consider various factors such as:

• The product line and volume of business;

• Loss emergence and insured reporting patterns;

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These estimates are by their nature subjective and imprecise, and ultimate losses and loss adjustment expenses may vary from established reserves.

Our Reserve Committees consist of our Chief Actuary, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, and Chief Accounting Officer.

Our Reserve Committees consist of our Chief Actuary, Chief Executive Officer, Chief Financial Officer, and Chief Accounting Officer.

Additionally, the presidents, chief financial officers and chief actuaries of each of our three insurance segments are also members of the Reserve Committee for their respective segments.

The Reserve Committees meet quarterly to review the actuarial recommendations made by each chief actuary and use their best judgment to determine the best estimate to be recorded for the reserve for losses and loss adjustment expenses on our quarterly balance sheet.

The Company also engages an independent internationally recognized actuarial consulting firm to review the Company’s reserve estimates in the third and fourth quarters of each year.

The following table reflects our favorable (adverse) reserve development by segment during the calendar years 2021 to 2012 individually and in aggregate.

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2012 20,122 (4,898) (16,617) (9)

1,410 (4,692) 37,452

2012 20,122 (9)

(4,898) (16,617) (12)

2011 21,034 1,712 (2,835) 19,911

Cumulative Development $ (198,713) $ 30,763 $ (254,673) $ (422,623)

(1) Includes $200.1 million of adverse development in the commercial auto line of business that was primarily related to the 2019 and prior contract years with Rasier, partially offset by $9.4 million of favorable development from other divisions.

(2) Includes $91.4 million of adverse development in the commercial auto line of business that was primarily related to the 2018 and prior contract years with Rasier, partially offset by $32.0 million of favorable development from other divisions.

(3) Includes $57.4 million of adverse development in the commercial auto line of business that was primarily related to the 2016 and 2017 contract years with Rasier, partially offset by $6.2 million of favorable development from other divisions.

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(5) Includes $38.7 million of adverse development in the commercial auto line of business that was primarily related to the 2016 contract year with Rasier, partially offset by $18.6 million of favorable development from other divisions primarily from the 2014 through 2016 accident years.

(5) Includes $10.0 million of favorable development from the 2015 accident year, $10.7 million from the 2014 accident year and $4.5 million from the 2013 accident year.

(6) Includes $17.3 million and $10.5 million of favorable development from the 2014 and 2013 accident year, respectively.

(7) Includes $7.9 million of favorable development from the 2011 accident year, $4.2 million from the 2007 accident year and $5.0 million from the 2009 accident year.

(8) Includes $11.8 million of favorable development from the 2009 accident year, $7.3 million of favorable development from the 2007 accident year and $5.8 million of favorable development from the 2008 accident year.

(9) Includes $8.0 million of favorable development from the 2009 accident year, $4.3 million of favorable development from the 2008 accident year and $4.1 million of favorable development from the 2007 accident year.

(6) Includes adverse development primarily related to underwriting years 2014 through 2018.

This adverse development was mainly in the general liability and professional liability lines of business.

(7) Includes adverse development primarily related to accident years 2014 through 2018.

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This adverse development was mainly in the general liability and commercial auto lines of business.

(12) Includes $9.0 million of adverse development on assumed crop business almost entirely from the 2011 accident year and $7.6 million of adverse development on other assumed business.

Among the indicators of reserve strength that we monitor closely are the number of claims outstanding from a given year and the amount of IBNR reserves held on our balance sheet for claims that have been incurred but not yet reported to us.

As a general rule, every known claim has a specific case reserve established against it which management believes is adequate to resolve the claim and pay attendant expenses based on information available at the time.

A significant portion of reported claims from prior policy years were closed at December 31, 2020.

The table below sets forth the percentage of claims closed by policy year for our Excess and Surplus Lines and Specialty Admitted Insurance segments for the policy years indicated.

Percentage of Claims Closed at December 31, 2020

Policy Year Excess and

Surplus Lines

Segment Excluding

Auto Excess and

Surplus Lines

Auto Specialty

Risk Workers’

Comp Specialty

2004 100.0 % — 100.0 % —

2005 100.0 % — 100.0 % —

2006 99.9 % — 100.0 % —

2007 99.5 % — 100.0 % —

2008 99.7 % — 99.8 % —

2009 99.0 % — 99.9 % —

2010 99.5 % — 100.0 % —

2011 99.5 % — 99.8 % —

2012 97.9 % — 100.0 % —

2013 97.4 % 99.8 % 100.0 % 98.8 %

2014 94.8 % 99.8 % 100.0 % 98.5 %

2015 94.0 % 99.7 % 99.9 % 98.0 %

2016 89.6 % 99.4 % 99.3 % 95.6 %

2017 86.1 % 98.3 % 98.4 % 91.8 %

2018 88.6 % 96.5 % 92.3 % 87.9 %

2019 80.7 % 94.5 % 72.8 % 80.3 %

Another indicator of reserve strength that we monitor closely is the percentage of our gross and net loss reserves that are comprised of IBNR reserves.

(9) Includes $9.0 million of adverse development on assumed crop business and $7.6 million of adverse development on other assumed business.

Among the indicators of reserve strength that we monitor closely is the amount of IBNR reserves held on our balance sheet for claims that have been incurred but not yet reported.

The table below sets forth our IBNR, total gross reserves and the percentage that IBNR represents of the total gross reserves, in each case by segment and in the aggregate, at December 31, 2021.

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Total $ 901,223 $ 1,399,214 64.4 %

A significant portion of reported claims from prior policy years were closed at December 31, 2021 as shown below:

Percentage of Claims Closed at December 31, 2021

Policy Year Excess and

Surplus Lines

Segment Excluding

Auto Excess and

Surplus Lines

Auto Specialty

Risk Workers’

Comp Specialty

2016 91.8 % 100.0 % 99.8 % 97.7 %

2017 88.7 % 100.0 % 99.8 % 95.1 %

2018 90.3 % 99.9 % 98.2 % 92.2 %

2019 85.0 % 99.8 % 93.3 % 87.4 %

2020 71.5 % 87.5 % 75.3 % 80.3 %

Investment Strategy

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At December 31, 2021, 41.2% of our invested assets were held at JRG Re.

Our long term premium growth has allowed us to build our asset base.

Cash and invested assets, excluding restricted cash equivalents, represents 4.1 times our tangible equity as of December 31, 2020.

A summary of our investment portfolio at December 31, 2021 is as follows:

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We consider non-traditional investments to include investments that are (1) not rated fixed income securities (2) non-listed equities or (3) investments that generally have less liquidity than rated fixed income securities or listed equities.

Non-traditional investments held at December 31, 2020 and their respective percentage of our total invested assets at such date consist of syndicated bank loans (6.7%) and private investments (2.1%).

Non-traditional investments held at December 31, 2021 and their respective percentage of our total cash and invested assets (excluding restricted cash equivalents) at such date consist of syndicated bank loans (6.7%) and private investments (2.2%).

We will continue to actively review opportunities to invest in non-traditional assets and may invest in additional non-traditional assets in the future.

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In both our Excess and Surplus Lines and Specialty Admitted Insurance segments, we are experiencing growth in premiums driven by favorable rates as well as increases in policy count and exposures.

However, the growth in the Excess and Surplus Lines segment in 2020 was impacted by the termination of our insurance contracts with Rasier effective December 31, 2019.

The Rasier account generated $374.2 million of gross written premium in 2019 and $0 in 2020.

Excluding Rasier, E&S gross written premium increased 27.5% from $548.2 million in 2019 to $699.1 million in 2020.

The growth in the Excess and Surplus Lines segment was impacted by the termination of our insurance contracts with Rasier effective December 31, 2019.

The Rasier account generated $374.2 million of gross written premium in 2019, but none in 2020 and 2021.

Excluding Rasier, E&S gross written premium increased 27.5% in 2020, from $548.2 million in 2019 to $699.1 million in 2020.

The table below shows the changes in gross written premiums we have experienced in our operating segments from 2019 through 2021.

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primary operations has, at times, been subject to “soft” market conditions, reflected both in price decreases and reduced underlying exposures.

The recession in the United States from 2008 to 2010 was a significant driver of these soft market conditions.

Our Excess and Surplus Lines segment is the most sensitive to hard and soft markets.

We have, therefore, sought to diversify this business by geography, line of business and revenue stream.

From 2006 to 2010, we reduced the gross written premiums in this business from $249.1 million to $116.1 million, or 53.4%.

While we have been growing this business and achieving increasing or stable rates for several periods through December 31, 2021, there will likely be periods in the future where our growth moderates, stagnates or turns negative.

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We have a small team of seven people in Bermuda who underwrite and administer the business written by JRG Re in Bermuda.

Accordingly, our overhead is low and does not necessitate us growing this business from its current size.

We compete in a variety of markets against a variety of competitors depending on the nature of the risk and coverage being underwritten.

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Berkley, and other large national and multi-national insurance carriers.

In addition, in the last twelve months, there are several newly formed

or repurposed start-up companies that are focusing on writing Excess and Surplus lines insurance and we expect will be competing with us for this business.

In addition, in the last twelve months, there are several newly formed or repurposed start-up companies that are focusing on writing Excess and Surplus lines insurance and we expect will be competing with us for this business.

Specialty Admitted Insurance

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

Competitors in this segment include AXA XL, Axis Re, MS Amlin, Odyssey Re, Sompo International Re, Swiss Re, Transatlantic Re, various Lloyd's syndicates, and other carriers that underwrite U.S.

Competitors in this segment include AXA XL, Axis Re, MS Amlin, QBE Re, Renaissance Re, Sompo International Re, Swiss Re, Transatlantic Re, various Lloyd's syndicates, and other carriers that underwrite U.S.

casualty reinsurance.

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The Insurance Act distinguishes between insurers carrying on long-term business, insurers carrying on general business and insurers carrying on special purpose business.

There are seven classifications of insurers carrying on general business, ranging from Class 1 insurers (pure captives) to Class 4 insurers (large commercial underwriters).

There are several classifications of insurers carrying on general business, ranging from Class 1 insurers (pure captives) to Class 4 insurers (large commercial underwriters).

Carolina Re is licensed as a Class 3A insurer and JRG Re is licensed as a Class 3B insurer and each is regulated as such under the Insurance Act.

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For the purposes of the Insurance Act, the principal office of Carolina Re and JRG Re is located at Wellesley House, 2 nd Floor, 90 Pitts Bay Road, Pembroke, HM 08, Bermuda.

Carolina Re’s and JRG Re’s principal representative is Helen Gillis, the Chief Financial Officer of JRG Re and Carolina Re.

Without a reason acceptable to the BMA, an insurer may not terminate the appointment of its principal representative, and the principal representative may not cease to act as such, unless 30 days’ prior notice in writing to the BMA is given of the intention to do so.

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Within 14 days of such notification to the BMA, the principal representative must furnish the BMA with a written report setting out all the particulars of the case that are available to the principal representative.

Where there has been a significant loss which is reasonably likely to cause the insurer to fail to comply with its enhanced capital requirement, the principal representative must also furnish the BMA with a capital and solvency return reflecting an enhanced capital requirement prepared using post-loss data.

enhanced capital requirement prepared using post-loss data.

The principal representative must provide this within 45 days of notifying the BMA regarding the loss.

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A Class 3B insurer, not otherwise subject to group supervision, is required to prepare and file quarterly financial returns with the BMA on or before the last day of the months of May, August and November of each year.

The quarterly financial

returns consist of (i) quarterly unaudited financial statements for each financial quarter (which must minimally include a balance sheet and income statement and must also be recent and not reflect a financial position that exceeds two months), (ii) a list and details of material intra-group transactions that the Class 3B insurer is a party to and the Class 3B insurer’s risk concentrations that have materialized since the most recent quarterly or annual financial returns, details surrounding all intra-group reinsurance and retrocession arrangements and other intra-group risk transfer insurance business arrangements that have materialized since the most recent quarterly or annual financial returns and (iii) details of the ten largest exposures to unaffiliated counterparties and any other unaffiliated counterparty exposures exceeding 10% of the Class 3B insurer’s statutory capital and surplus.

The quarterly financial returns consist of (i) quarterly unaudited financial statements for each financial quarter (which must minimally include a balance sheet and income statement and must also be recent and not reflect a financial position that exceeds two months), (ii) a list and details of material intra-group transactions that the Class 3B insurer is a party to and the Class 3B insurer’s risk concentrations that have materialized since the most recent quarterly or annual financial returns, details surrounding all intra-group reinsurance and retrocession arrangements and other intra-group risk transfer insurance business arrangements that have materialized since the most recent quarterly or annual financial returns and (iii) details of the ten largest exposures to unaffiliated counterparties and any other unaffiliated counterparty exposures exceeding 10% of the Class 3B insurer’s statutory capital and surplus.

Public Disclosures

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No Class 3A insurer or Class 3B insurer may engage in non-insurance business unless that non-insurance business is ancillary to its insurance business.

Non-insurance business means any business other than insurance business and includes carrying on investment business, managing an investment fund as operator, carrying on business as a fund administrator, carrying on banking business, underwriting debt or securities or otherwise engaging in investment banking, engaging in commercial or industrial activities and carrying on the business of management, sales or leasing of real property.

carrying on banking business, underwriting debt or securities or otherwise engaging in investment banking, engaging in commercial or industrial activities and carrying on the business of management, sales or leasing of real property.

Minimum Liquidity Ratio

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The BSCR formula establishes capital requirements for ten categories of risk:

fixed income investment risk, equity

investment risk, interest rate/liquidity risk, currency risk, concentration risk, premium risk, reserve risk, credit risk, catastrophe risk and operational risk.

fixed income investment risk, equity investment risk, interest rate/liquidity risk, currency risk, concentration risk, premium risk, reserve risk, credit risk, catastrophe risk and operational risk.

For each category, the capital requirement is determined by applying factors to asset, premium, reserve, creditor, probable maximum loss and operation items, with higher factors applied to items with greater underlying risk and lower factors for less risky items.

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Any insurer which at any time fails to meet its MSM requirements must, upon becoming aware of such failure, immediately notify the BMA and, within 14 days thereafter, file a written report with the BMA containing particulars of the circumstances that gave rise to the failure and setting out its plan detailing specific actions to be taken and the expected timeframe in which the insurer intends to rectify the failure.

Any insurer which at any time fails to meet its applicable enhanced capital requirement shall, upon becoming aware of that failure or of having reason to believe that such a failure has occurred, immediately notify the BMA in writing and within 14 days of such notification file with the BMA a written report containing particulars of the circumstances leading to the failure, and a plan detailing the manner, specific actions to be taken and time within which the insurer intends to rectify the failure, and within 45 days of becoming aware of that failure or of having reason to believe that such a failure has occurred, furnish the BMA with (i) unaudited statutory economic balance sheets and unaudited interim statutory financial statements prepared in accordance with GAAP covering such period as the BMA may require;

Any insurer which at any time fails to meet its applicable ECR shall, upon becoming aware of that failure or of having reason to believe that such a failure has occurred, immediately notify the BMA in writing and within 14 days of such notification file with the BMA a written report containing particulars of the circumstances leading to the failure, and a plan detailing the manner, specific actions to be taken and time within which the insurer intends to rectify the failure, and within 45 days of becoming aware of that failure or of having reason to believe that such a failure has occurred, furnish the BMA with (i) unaudited statutory economic balance sheets and unaudited interim statutory financial statements prepared in accordance with GAAP covering such period as the BMA may require;

(ii) the opinion of a loss reserve specialist in relation to the total general business insurance technical provisions as set out in the economic balance sheet, where applicable;

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Under this system, all of the insurer’s capital instruments will be classified as either basic or ancillary capital which in turn will be classified into one of three tiers based on their “loss absorbency” characteristics.

Highest quality capital will be classified Tier 1 Capital, and lesser quality capital will be classified as either Tier 2 Capital or Tier 3 Capital.

Highest quality capital will be classified as Tier 1 Capital, and lesser quality capital will be classified as either Tier 2 Capital or Tier 3 Capital.

Under this regime, up to certain specified percentages of Tier 1, Tier 2 and Tier 3 Capital may be used to support the insurer’s MSM, ECR and TCL.

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Code of Conduct

The Insurance Code of Conduct (the “Insurance Code”) prescribes the duties, standards, procedures and sound business principles that must be complied with by all insurers registered under the Insurance Act.

The Insurance Code of Conduct (the “Insurance Code”) prescribes the duties, standards, procedures and sound business principles with which all insurers registered under the Insurance Act must comply.

The BMA will assess an insurer’s compliance with the Insurance Code in a proportional manner relative to the nature, scale and complexity of its business.

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Where an insurer fails to meet its MSM or minimum liquidity ratio on the last day of any financial year, it will be prohibited from declaring or paying any dividends during the next financial year without the approval of the BMA.

In addition, a Class 3A insurer and a Class 3B insurer is prohibited from declaring or paying in any financial year dividends of more than 25% of its total statutory capital and surplus (as shown on its previous financial year’s statutory balance sheet), unless it files (at least seven days before payment of such dividends) with the BMA an affidavit signed by at least two directors (one of whom must be a Bermuda resident director if any of the insurer’s directors are resident in Bermuda) and the

principal representative stating that it will continue to meet its solvency margin and minimum liquidity ratio.

Where such an affidavit is filed, it shall be available for public inspection at the offices of the BMA.

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Insurance debt is defined as a debt to which an insurer is or may become liable pursuant to an insurance contract, excluding debts owed to an insurer under an insurance contract where the insurer is the person insured.

Insurance contract is defined as any contract of insurance, capital redemption contract or a contract that has been recorded as insurance business in the financial statements of the insurer pursuant to the Insurance Accounts 1981 or the Insurance Account Rules 2016, as applicable.

Insurance contract is defined as any contract of insurance, capital redemption contract or a contract that has been recorded as insurance business in the financial statements of the insurer pursuant to the Insurance Accounts Regulations 1980 or the Insurance Account Rules 2016, as applicable.

Fit and Proper Controller

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Upon receipt of the preliminary written notice, the person served may, within 28 days, file written representations with the BMA, which shall be taken into account by the BMA in making their final determination.

Any person who continues to be a controller of any description after having received a notice of objection shall be guilty of an

offense and shall be liable on summary conviction to a fine of $25,000 (and a continuing fine of $500 per day for each day that the offense is continuing) or, if convicted on indictment, to a fine of $100,000 and/or two years in prison.

Any person who continues to be a controller of any description after having received a notice of objection shall be guilty of an offense and shall be liable on summary conviction to a fine of $25,000 (and a continuing fine of $500 per day for each day that the offense is continuing) or, if convicted on indictment, to a fine of $100,000 and/or two years in prison.

Notification by Registered Person of Change of Controllers and Officers

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Notification of Cyber Reporting Events

Every insurer is required to notify the BMA forthwith on the insurer becoming aware, or where the insurer has reason to believe, that a cyber reporting event (as described in the Insurance Reporting Act) has occurred.

Every insurer is required to notify the BMA on it coming to the knowledge of the insurer, or where the insurer has reason to believe that a Cyber Reporting Event has occurred.

Within fourteen days of such notification, the insurer must also furnish the BMA with a written report setting out all the particulars of the Cyber Reporting Event that are available to it.

Group Supervision

The BMA may, in respect of an insurance group, determine whether it is appropriate for it to act as its group supervisor.

An insurance group is defined as a group of companies that conducts insurance business.

The BMA may make such determination where it ascertains that (i) the group is headed by a “specified insurer” (that is to say, it is headed by either a Class 3A, Class 3B or Class 4 general business insurer or a Class C, Class D or Class E long term insurer or another class of insurer designated by order of the BMA);

or (ii) where the insurance group is not headed by a “specified insurer”, where it is headed by a parent company which is incorporated in Bermuda or (iii) where the parent company of the group is not a Bermuda company, in circumstances where the BMA is satisfied that the insurance group is directed and managed from Bermuda or the insurer with the largest balance sheet total is a specified insurer.

Where the BMA determines that it should act as the group supervisor, it shall designate a specified insurer that is a member of the insurance group to be the designated insurer (the “Designated Insurer”) and it shall give to the Designated Insurer and other applicable insurance regulatory authority written notice of its intention to act as group supervisor.

Before the BMA makes a final determination whether or not to act as group supervisor, it shall take into account any written representations made by the Designated Insurer submitted within such period as is specified in the notice.

The BMA may exclude any company that is a member of an insurance group from group supervision on the application of the Designated Insurer, or on its own initiative, provided the BMA is satisfied that (i) the company is situated in a country or territory where there are legal impediments to cooperation and exchange of information, (ii) the financial operations of the company have a negligible impact on insurance group operations or (iii) the inclusion of the company would be inappropriate with respect to the objectives of group supervision.

The BMA may, on its own initiative or on the application of the relevant Designated Insurer, include within group supervision a company that is a member of the group that is not on the Register of Group Particulars (described below) if it is satisfied the financial operations of the company in question may have a material impact on the insurance group’s operations and its inclusion would be appropriate having regard to the objectives of group supervision.

Once the BMA has been designated as group supervisor, the Designated Insurer must ensure that the insurance group of which it is a member appoints (i) an individual approved by the BMA who is qualified as a group actuary to provide an opinion on the insurance group’s insurance technical provisions in accordance with the requirements of Schedule XIV “Group Statutory Economic Balance Sheet” of the Insurance (Prudential Standards) (Insurance Group Solvency Requirement) Rules 2011 and (ii) an auditor approved by the BMA to audit the financial statements of the group.

Pursuant to its powers under the Insurance Act, the BMA will maintain a register of particulars for every insurance group (the “Register of Group Particulars”) for which it acts as the group supervisor, detailing the names and addresses of (i) the Designated Insurer;

(ii) each member company of the insurance group falling within the scope of group supervision;

(iii) the principal representative of the insurance group in Bermuda;

(iv) other competent authorities supervising other member companies of the insurance group;

and (v) the insurance group auditors.

The Designated Insurer must immediately notify the BMA of any changes to the above details entered on the Register of Group Particulars.

As group supervisor, the BMA will perform a number of supervisory functions including (i) coordinating the gathering and dissemination of relevant or essential information for going concerns and emergency situations, including the dissemination of information which is of importance for the supervisory task of other competent authorities;

(ii) carrying out supervisory reviews and assessments of the insurance group;

(iii) carrying out assessments of the insurance group’s compliance with the rules on solvency, risk concentration, intra-group transactions and good governance procedures;

(iv) planning and coordinating through regular meetings held at least annually (or by other appropriate means) with other competent authorities, supervisory activities in respect of the insurance group, both as a going concern and in emergency situations;

(v) coordinating enforcement actions that may need to be taken against the insurance group or any of its members;

and (vi) planning and coordinating meetings of colleges of supervisors in order to facilitate the carrying out of the functions described above.

The BMA may, for the purposes of group supervision, make rules applying to Designated Insurers which take into account any activities of the insurance group of which they are members or of other members of the insurance group.

Such rules may make provision for the assessment of the financial situation of the insurance group;

the solvency position of the insurance group (including the imposition of prudential standards in relation to enhanced capital requirements, capital and solvency returns, insurance reserves and eligible capital that must be complied with by the Designated Insurers);

the system of governance and risk management of the insurance group;

intra-group transactions and risk concentrations;

and supervisory reporting and disclosure in respect of the insurance group.

A Cyber Reporting Event includes any act that results in the unauthorized access to, disruption, or misuse of electronic systems or information stored on such systems of an insurer, including breach of security leading to the loss or unlawful destruction or unauthorized disclosure of or access to such systems or information where there is a likelihood of an adverse impact to policyholders, clients or the insurer's insurance business, or an event that has occurred for which notice is required to be provided to a regulatory body or government agency.

Notification of Other Events

Every insurer is required to forthwith notify the BMA on it coming to the knowledge of the insurer, or where insurer has reason to believe that the insurer has failed to comply with a condition imposed upon it by the BMA or that the insurer, or a shareholder controller or officer of the insurer is involved in any criminal proceedings whether in Bermuda or abroad.

Supervision, Investigation, Intervention and Disclosure

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In connection therewith, the BMA may require every person who is or was a controller, officer, employee, agent, banker, auditor, accountant, barrister and attorney or insurance manager to make a report and produce such documents in his care, custody and control and to attend before the BMA to answer questions relevant to the BMA’s investigation and to take such actions as the BMA may direct.

The BMA may also enter any premises for the purposes

of carrying out its investigation and may petition the court for a warrant if it believes a person has failed to comply with a notice served on him, there are reasonable grounds for suspecting the completeness of any information or documentation produced in response to such notice, or that its directions will not be complied with or that any relevant documents would be removed, tampered with or destroyed.

If it appears to the BMA that the business of the registered insurer is being conducted in a way that there is a significant risk of the insurer becoming insolvent or being unable to meet its obligations to policyholders, or that the insurer is in breach of the Insurance Act or any conditions imposed upon its registration, or the minimum criteria stipulated in the Insurance Act is not or has not been fulfilled in respect of a registered insurer, or that a person has become a controller without providing the BMA with the appropriate notice or in contravention of a notice of objection, or the registered insurer is in breach of its ECR, or that a designated insurer is in breach of any provision of the Insurance Act or the regulations or rules applicable to it, the BMA may issue such directions as it deems desirable for safeguarding the interests of policyholders or potential policyholders of the insurer or the insurance group.

The BMA may also enter any premises for the purposes of carrying out its investigation and may petition the court for a warrant if it believes a person has failed to comply with a notice served on him, there are reasonable grounds for suspecting the completeness of any information or documentation produced in response to such notice, or that its directions will not be complied with or that any relevant documents would be removed, tampered with or destroyed.

designated insurer is in breach of any provision of the Insurance Act or the regulations or rules applicable to it, the BMA may issue such directions as it deems desirable for safeguarding the interests of policyholders or potential policyholders of the insurer or the insurance group.

The BMA may, among other things, direct an insurer, for itself and in its capacity as designated insurer of the insurance group of which it is a member, (i) not to take on any new insurance business, (ii) not to vary any insurance contract if the effect would be to increase the insurer’s liabilities, (iii) not to make certain investments, (iv) to realize certain investments, (v) to maintain in or transfer to the custody of a specified bank, certain assets, (vi) not to declare or pay any dividends or other distributions or to restrict the making of such payments, (vii) to limit its premium income, (viii) not to enter into specified transactions with any specified person or persons of a specified class, (ix) to provide such written particulars relating to the financial circumstances of the insurer as the BMA thinks fit, (x) as an individual insurer only, and not in its capacity as designated insurer, to obtain the opinion of a loss reserve specialist and submit it to the BMA, and/or (xi) to remove a controller or officer.

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Generally, it is not permitted without a special license granted by the Minister of Finance to insure Bermuda domestic risks or risks of persons of, in or based in Bermuda.

Each of Carolina Re and JRG Re is a

licensed insurer in Bermuda, and so it may carry on activities from Bermuda that are related to and in support of its insurance business.

Each of Carolina Re and JRG Re is a licensed insurer in Bermuda, and so it may carry on activities from Bermuda that are related to and in support of its insurance business.

Each of James River Group Holdings, Ltd., Carolina Re and JRG Re must comply with the provisions of the Companies Act regulating the payment of dividends and making distributions from contributed surplus.

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In addition, certain provisions of the Insurance Act will limit our ability to pay dividends.

Under the Companies Act, where a Bermuda company issues shares at a premium (that is, for a price above the par value), whether for cash or otherwise, a sum equal to the aggregate amount or value of the premium on those shares must be transferred to an account called “the share premium account.” The provisions of the Companies Act relating to the reduction of the share capital of a company apply as if the share premium account were paid up share capital of that company, except for certain matters such as:

to an account called “the share premium account.” The provisions of the Companies Act relating to the reduction of the share capital of a company apply as if the share premium account were paid up share capital of that company, except for certain matters such as:

(i) paying up unissued shares to be issued to members as fully paid bonus shares, (ii) writing off the preliminary expenses of the company or the expenses of, or the commission paid or discount allowed on any issue of shares or debentures of the company, or (iii) providing for the premiums payable on redemption of shares or of any debentures of the company.

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Economic Substance

Under the Economic Substance Act of 2018 (together with regulations promulgated thereunder, the "ESA"), each entity resident in Bermuda that carries on a "relevant activity" is required to comply with the economic substance requirements under the ESA, unless resident for tax purposes in a jurisdiction outside Bermuda that is not on the EU list of non-cooperative jurisdictions for tax purposes.

Under the Economic Substance Act 2018 and related regulations (collectively, the "ESA"), each entity resident in Bermuda that carries on a "relevant activity" is required to comply with the economic substance requirements under the ESA, unless resident for tax purposes in a jurisdiction outside Bermuda that is not on the EU list of non-cooperative jurisdictions for tax purposes.

Relevant activities include, inter alia , insurance and holding entity activities, as each is defined in the ESA.

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Entities in scope will also need to file an annual declaration form in respect of its relevant activity or activities.

In relation to carrying on the relevant activity of insurance, compliance with the ESA also requires compliance with requirements in the Companies Act relating to corporate governance and the requirements of the Insurance Act and other instruments (including the code of conduct) made thereunder.

The "Economic Substance Requirements for Bermuda Guidance Notes:

General Principles" issued on December 24, 2019, as revised on September 18, 2020, provide that entities licensed under the Insurance Act are generally considered to operate in Bermuda with adequate substance, and the Registrar will have regard to such entity's compliance with the Insurance Act and the Companies Act in his assessment of compliance with economic substance requirements.

However, insurers are still required to complete and file a declaration form, and the Registrar will also have regard to the information provided in the declaration form in making his assessment of compliance with economic substance requirements.

Holding entities are subject to minimum economic substance requirements comprising (in the case of an exempted company), compliance with the corporate governance requirements set forth in the Companies Act and the filing of a

declaration form.

The Bermuda Registrar of Companies (the "Registrar") will have regard to an insurer's compliance with the Insurance Act and the Companies Act in his assessment of compliance with economic substance requirements and on the basis that an insurer complies with such requirements, the insurer will generally be considered to operate in Bermuda with adequate substance.

An insurer will be required to complete and file a declaration form, and the Registrar will also have regard to the information provided in the declaration form in making his assessment of compliance with economic substance requirements.

The ESA also requires such a holding entity to have adequate people for holding and managing equity participations and have adequate premises in Bermuda.

Any entity that must satisfy economic substance requirements but fails to do so could face automatic disclosure to competent authorities in the EU of the information filed by the entity with the Bermuda Registrar of Companies in connection with the economic substance requirements and may also face financial penalties, restriction or regulation of its business activities and/or may be struck off as a registered entity in Bermuda.

Any entity that must satisfy economic substance requirements but fails to do so could face automatic disclosure to competent authorities in the EU of the information filed by the entity with the Registrar in connection with the economic substance requirements and may also face financial penalties, restriction or regulation of its business activities and/or may be struck off as a registered entity in Bermuda.

Bermuda Work Permit Considerations

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Standard work permits can be obtained for a one-, two-, three-, four- or five-year period.

Where a standard work permit is being applied for, it is a requirement that the job must be advertised for three days (within an eight-day period) in the local newspaper in addition to the Bermuda Government Job Board.

Where a standard work permit is being applied for, it is a requirement that the job must be advertised for three days (within an eight-day period) in the local newspaper and advertised for eight consecutive days on the Bermuda Government Job Board.

Should no Bermudian (or spouse of a Bermudian or holder of a permanent resident’s certificate) meet the minimum standards as stipulated in the advertisements, the employer may then apply for a standard work permit for the non-Bermudian.

Where such persons apply, employers must complete a Recruitment Disclosure Form, within the Standard Work Permit Application Form, and provide a summary of all applicants, including their qualifications.

Where such persons apply, employers must complete a Recruitment Disclosure Form, within the Standard Work Permit Application Form, and provide a summary of all applicants that are Bermudian, the spouse of the Bermudian or the holder of a permanent resident's certificate, including their qualifications.

The Department of Immigration will compare the qualifications and experience of any Bermudian applicants (or spouse of a Bermudian or holder of a permanent resident’s certificate) to that stipulated in the advertisements and to the non-Bermudian to be satisfied that the role could not have been filled by a Bermudian (or spouse of a Bermudian or holder of a permanent resident’s certificate).

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A temporary work permit can take up to 10 working days to process and a standard work permit takes four weeks to process.

Employers have the right to appeal to the Minister following any decision made by the Board or the Minister.

Appeals should be submitted on letter form to the Department for the attention of the Chief Immigration Officer, made within seven (7) working days of the date of the refusal letter.

Insurance Regulation

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In Virginia, the domiciliary state of James River Casualty Company, this limitation is the greater of statutory net income excluding realized capital gains of the preceding calendar year or 10% of the statutory surplus at the end of the preceding calendar year, provided that such dividends may only be paid out of unassigned surplus without obtaining regulatory approval.

In California, the domiciliary state of Falls Lake Fire and Casualty Company, this limitation is the greater of statutory net income for the preceding calendar year

or 10% of the statutory surplus at the end of the preceding calendar year, provided that such dividends may only be paid out of unassigned surplus without obtaining regulatory approval.

In addition, insurance regulators have broad powers to prevent reduction of statutory surplus to inadequate levels and could refuse to permit the payment of dividends calculated under any applicable formula.

In California, the domiciliary state of Falls Lake Fire and Casualty Company, this limitation is the greater of statutory net income for the preceding calendar year or 10% of the statutory surplus at the end of the preceding calendar year, provided that such dividends may only be paid out of unassigned surplus without obtaining regulatory approval.

In addition, insurance regulators have broad powers to prevent

reduction of statutory surplus to inadequate levels and could refuse to permit the payment of dividends calculated under any applicable formula.

Premium rate regulation varies greatly among jurisdictions and lines of insurance.

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Under state insurance guaranty fund laws, insurance companies doing business in a state can be assessed for certain obligations of insolvent insurance companies to such insolvent companies’ policyholders and claimants.

Maximum assessments

allowed in any one year generally vary between one percent and two percent of annual premiums written in that state, but it is possible that caps on such assessments could be raised if there are numerous or large insolvencies.

Maximum assessments allowed in any one year generally vary between one percent and two percent of annual premiums written in that state, but it is

possible that caps on such assessments could be raised if there are numerous or large insolvencies.

In most states, guaranty fund assessments are recoverable either through future policy surcharges or offsets to state premium tax liabilities.

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The following states have either adopted the NAIC Insurance Data Security Model Law or similar laws that govern the cybersecurity and data protection practices of insurers, insurance agents, and other licensed entities registered under state insurance laws:

Alabama, California, Connecticut, Delaware, Indiana, Lousiana, Michigan, Mississippi, New Hampshire, New York, Ohio, South Carolina and Virginia.

Alabama, California, Connecticut, Delaware, Indiana, Iowa, Louisiana, Maine, Michigan, Minnesota, Mississippi, New Hampshire, New York, North Dakota, Ohio, South Carolina, Tennessee, Virginia and Wisconsin.

We continue to monitor whether the other states in which we conduct business adopt the NAIC’s Insurance Data Security Model Law.

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Among the 98% of our employees who chose to disclose their race and ethnicity, approximately 14% identified as Black or African American, 3% as Hispanic or Latino, 6% as Asian, 2% as two or more races, less than 1% as Native Hawaiian or other Pacific Islander, and less than 1% as American Indian or Alaska Native.

In 2020, we created a Diversity, Equity and Inclusion (DEI) committee to bring awareness and focus to DEI topics throughout the company and in the locations where we operate.

The committee is both diverse and made of up employees from all segments, levels and office locations.

The primary objectives of the committee are to increase awareness of diversity and inclusion, provide education opportunities to all employees, improve understanding of how diversity and inclusion affect our Company goals, and identify and address potential roadblocks to diversity and equity in hiring, promotion, physical environment and professional development.

Over the last year, our Diversity, Equity and Inclusion (DEI) committee has made significant progress in bringing additional awareness and focus to DEI topics throughout the company and in the locations where we operate.

The committee is both diverse and made up of employees from all segments, levels and office locations.

The primary objectives of the committee are to increase awareness of diversity and inclusion, provide education opportunities to all employees, improve understanding of how diversity and inclusion affect our corporate objectives, and identify and address potential roadblocks to diversity and equity in hiring, promotion, physical environment and professional development.

We recognize the mutual benefits for our company and our employees to further their formal education and professional development.

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We offer a competitive benefits package that is designed to support the well-being of our employees.

Our benefits include medical, dental and vision insurance, employer-paid life and disability plans, contributions to employee retirement accounts through a company match with immediate vesting as well as paid parental leave and adoption assistance.

The health and safety of our employees is our number one priority.

In response to the global pandemic and spread of the COVID-19 virus, we made the decision to close all offices to non-essential staff and allow employees to work remotely.

Safety measures and procedures have been implemented throughout our offices to help ensure that essential staff working in the office remain safe.

Our benefits include medical, dental and vision insurance, a comprehensive employee assistance program to support the mental health of our employees and their families, employer-paid life and disability plans, contributions to employee retirement accounts through a company match with immediate vesting as well as paid parental leave and adoption assistance.

In July of 2021, after more than a year and a half of our offices being closed to all non-essential staff due to the COVID-19 pandemic, we reopened our offices on a voluntary basis.

We built a reopening plan that reflected the shared goals and needs of our employees and business, placing an emphasis on remaining safe, productive and connected.

Safety measures and procedures have been implemented throughout our offices to help ensure that all staff working in the office remain safe.

We value the opinions and diverse perspectives of our employees and utilize the feedback that we receive throughout the year to help develop many of our company programs, policies, and benefits.

We conduct an annual engagement survey followed by voluntary focus group sessions to better assess how motivated and engaged our employees are to perform their best each day.

In addition to the formal engagement survey, we collect valuable input through our Employee Suggestion Program where employees may express their feedback regarding any aspect of their employment with our company.

In late 2020, we also conducted a group-wide DEI survey which was conducted by a third party, for which the objective was to understand the current state of our group in this regard, as well as to help frame objectives and training for our DEI initiative.

New hire feedback is collected following an employee’s first 30 days of employment, which allows us to reflect upon and improve aspects of our recruitment and onboarding processes.

In addition to the formal surveys and feedback meetings, we collect valuable input through our Employee Suggestion Program where employees may express their feedback regarding any aspect of their employment with our company.

Intellectual Property

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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