What changed in this filing

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Item 1. Business

2021-02-25 compared with 2020-03-02 · 168 added, 99 removed, 449 unchanged (37% of the section changed)

10 unchanged sentences

We have significantly grown our business and have generated attractive returns.

During 2019, our gross written premiums increased over 40%, to $389.7 million for the year ended December 31, 2019.

During 2020, our gross written premiums increased by 41.9%, to $552.8 million for the year ended December 31, 2020.

Our return on equity and combined ratios were 18.0% and 86.7%, respectively, for the year ended December 31, 2020.

Our operating return on equity, a non-GAAP measure, was 15.9% for the year ended December 31, 2019.

Our operating return on equity, a non-GAAP financial measure, was 14.7% for the year ended December 31, 2020.

We believe that we are well positioned to continue to capitalize on attractive opportunities in our target market and to prudently grow our business.

See "Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reconciliation of Non-GAAP Financial Measures" for a reconciliation of return on equity to operating return on equity.

See "Management’s Discussion and Analysis of Financial Condition and Results of Operations — Reconciliation of Non-GAAP Financial Measures" for a reconciliation of net income to net operating earnings and calculations using net operating earnings (e.g., operating return on equity).

Kinsale Capital Group, Inc., a Delaware domiciled insurance holding company, was formed on June 3, 2009 for the purpose of acquiring and managing insurance entities.

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("Kinsale Real Estate"), as a wholly-owned subsidiary domiciled in Delaware, in order to acquire and hold real estate.

On December 3, 2018, we incorporated 2001 Maywill, LLC, as a wholly-owned subsidiary of Kinsale Real Estate, domiciled in Delaware, in order to acquire and hold real estate.

On December 3, 2018, we incorporated 2001 Maywill, LLC, as a wholly-owned subsidiary of Kinsale Real Estate, domiciled in Delaware, in order to acquire and hold our corporate headquarters.

We write a broad array of insurance coverages for risks that are unique or hard to place in the standard insurance market.

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In 2020, the percentage breakdown of our gross written premiums was 85.6% casualty and 14.4% property.

Our commercial lines offerings include construction, small business, excess casualty, commercial property, product liability, allied health, general casualty, professional liability, life sciences, energy, management liability, health care, environmental, inland marine, commercial insurance and public entity.

We also write a small amount of homeowners insurance in the personal lines market, which in aggregate represented 4.3% of our gross written premiums in 2019 and is included with our property division.

Our commercial lines offerings include construction, small business, excess casualty, commercial property, product liability, allied health, life sciences, general casualty, professional liability, management liability, energy, environmental, health care, inland marine, public entity and commercial insurance.

We also write a small amount of homeowners insurance in the personal lines market, which in aggregate represented 3.9% of our gross written premiums in 2020 and is included within our personal insurance division.

Our Competitive Strengths

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We believe that our proprietary technology platform coupled with our low-cost operation allow us to process policy quotes, underwrite policies and operate at a lower cost than our direct competitors.

In particular, our efficient platform allows us to provide a higher level of service to our brokers and to target smaller accounts which we believe are generally subject to less competition.

In particular, our efficient platform allows us

to provide a higher level of service to our brokers and to target smaller accounts which we believe are generally subject to less competition.

For the year ended December 31, 2020, our expense ratio was 22.8%.

1 unchanged sentence

We believe that actively managing our claims is an important aspect of keeping losses low, while accurately setting reserves.

We manage all of our claims in-house and do not delegate claims

management authority to third parties.

We manage all of our claims in-house and do not delegate claims management authority to third parties.

We promptly and thoroughly investigate all claims, generally through direct contact with the insured, and leverage both our systems and our underwriters to gather the relevant facts.

As necessary, we employ local counsel in defense of our policy holders and independent adjusters for task assignments.

When we believe claims are without merit, we vigorously contest payment.

We currently average 86 open claims per claims adjuster ( 84 open claims per claims adjuster excluding catastrophe claims), which we believe is significantly lower than industry average.

We currently average 104 open claims per claims adjuster (88 open claims per claims adjuster excluding catastrophe claims), which we believe is lower than industry average.

As of December 31, 2020, our reserves for claims incurred but not reported were approximately 84.9% of our total net loss reserves.

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We believe that automation also reduces human error in our underwriting, policy processing, accounting, collections, and claims adjusting processes.

Additionally, we are able to track quotes, monitor historical loss experience and reserve development, and measure other relevant metrics at a granular level of detail.

Additionally, we are able to track quotes, monitor historical loss experience and reserve development, and

measure other relevant metrics at a granular level of detail.

We believe that our technology is scalable and will allow us to maintain a low expense ratio as we continue to organically grow our business.

2 unchanged sentences

We have a robust process for setting our loss reserves and regularly reviewing our estimates.

In addition, we maintain a conservative investment

In addition, we maintain a conservative investment portfolio.

Our strong balance sheet allows us to maintain the confidence of our investors and other constituencies, and thereby position ourselves to better achieve our goals.

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Our underwriters regularly visit with brokers in their offices in order to market to these brokers and discuss the products we offer.

For the year ended December 31, 2019 , our largest brokers were R-T Specialty, LLC, which produced $47.2 million , or 12.1% , of our gross written premiums, and AmWINS Group, LLC, which produced $41.1 million , or 10.5% , of our gross written premiums.

For the year ended December 31, 2020, our largest brokers were R-T Specialty, LLC, which produced $72.1 million, or 13.0%, of our gross written premiums, AmWINS Group, LLC, which produced $63.8 million, or 11.5% of our gross written premiums, and CRC Commercial Solutions, which produced $56.5 million, or 10.2% of our gross written premiums.

No other broker accounted for more than 10% of our gross written premiums in the year ended December 31, 2020.

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In 2020, we paid an average commission to our brokers of 14.6% of gross written premiums.

We believe this is slightly lower than the average commission paid by our competitors.

We believe this is slightly lower than the

average commission paid by our competitors.

We believe that our specialization in hard-to-place risks, combined with our high degree of service, including our rapid speed-to-quote, permits us to manage our commission expense as part of our overall management of the underwriting process.

Additionally, we do not contract out our underwriting to program

managers or general agents which typically requires a higher commission level to compensate the third party for its work on behalf of the carrier.

Additionally, we do not contract out our underwriting to program managers or general agents which typically requires a higher commission level to compensate the third party for its work on behalf of the carrier.

We sell policies in all 50 states, the District of Columbia, the Commonwealth of Puerto Rico and the U.S.

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Year Ended December 31,

2020 % of Total 2019 % of Total 2018 % of Total

($ in thousands)

Gross written premiums by state:

California $ 128,448 23.3 % $ 95,889 24.6 % $ 71,645 26.0 %

Florida 78,412 14.2 % 48,473 12.4 % 32,414 11.8 %

Texas 63,312 11.5 % 48,829 12.5 % 40,102 14.6 %

New York 27,234 4.9 % 27,441 7.0 % 14,311 5.2 %

Washington 23,960 4.3 % 17,339 4.4 % 13,071 4.7 %

Colorado 19,600 3.5 % 11,732 3.0 % 6,395 2.3 %

New Jersey 16,823 3.0 % 11,887 3.1 % 6,890 2.5 %

Arizona 12,722 2.3 % 8,116 2.1 % 5,469 2.0 %

Pennsylvania 11,184 2.0 % 6,867 1.8 % 5,343 1.9 %

Georgia 11,014 2.0 % 6,431 1.7 % 4,807 1.7 %

All other states 160,105 29.0 % 106,690 27.4 % 75,091 27.3 %

$ 552,814 100.0 % $ 389,694 100.0 % $ 275,538 100.0 %

Our underwriting department consisted of approximately 160 employees as of December 31, 2020.

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If our underwriters cannot reasonably expect to bind coverage at the combination of premium and coverage that meets our standards, they are encouraged to quickly move on to another prospective opportunity.

For the year ended December 31, 2019 , we received approximately 380,000 new business submissions, issued approximately 234,000 new quotes and bound 25,000 new policies for a policy to new submission ratio of 6.6% .

For the year ended December 31, 2020, we received approximately 461,000 new business submissions, and of those submissions, we issued approximately 300,000 quotes and bound 31,000 policies for a new policy to new submission ratio of 6.7%.

We are careful to establish terms that are suited to the risk and the pricing of our policies.

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Our claims department consisted of approximately 40 claims professionals who had an average of 11 years of claims experience in the P&C industry as of December 31, 2020.

Our Chief Claims Officer has over 30 years of claims experience in large commercial and specialty insurance claims departments.

Our claims department is fully integrated

with our other functional departments.

Our Chief Claims Officer has over 30 years of litigation and claims experience in large commercial insurance claims departments.

Our claims department is fully integrated with our other functional departments.

We manage all of our claims in-house and do not delegate claims management authority to third parties.

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Our Chief Information Officer has over 30 years of experience in the technology field.

Our information technology staff utilizes an agile methodology to develop best-in-class software solutions and to attract and retain quality staff.

Our information technology staff utilizes an agile methodology and cloud strategy to develop best-in-class software solutions and to attract and retain quality staff.

We have built a proprietary technology platform that reflects the best practices our management team has learned from its extensive prior experiences.

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We believe the proprietary technology platform, which includes the data warehouse, is a competitive advantage for us.

We enter into various reinsurance contracts to limit our exposure to potential losses arising from large risks and to provide additional capacity for growth.

We enter into reinsurance contracts primarily to limit our exposure to potential large losses.

Reinsurance involves an insurance company transferring ("ceding") a portion of its exposure on a risk to another insurer, the reinsurer.

The reinsurer assumes the exposure in return for a portion of the premium.

The ceding of liability to a reinsurer does not legally discharge the primary insurer from its liability for the full amount of the policies on which it obtains reinsurance.

The primary insurer remains liable for the entire loss if the reinsurer fails to meet its obligations under the reinsurance agreement.

We use treaty reinsurance and, on a limited basis, facultative reinsurance coverage.

Treaty coverage refers to a reinsurance contract that is applied to a group or class of business where all the risks written meet the criteria for that class.

Our reinsurance is primarily contracted under quota-share reinsurance contracts and excess of loss contracts.

In quota-share reinsurance, the reinsurer agrees to assume a

specified percentage of the ceding company's losses arising out of a defined class of business in exchange for a corresponding percentage of premiums, net of a ceding commission.

In excess of loss reinsurance, the reinsurer agrees to assume all or a portion of the ceding company's losses, in excess of a specified amount.

Under excess of loss reinsurance, the premium payable to the reinsurer is negotiated by the parties based on their assessment of the amount of risk being ceded to the reinsurer because the reinsurer does not share proportionately in the ceding company's losses.

We also use facultative reinsurance coverage on a limited basis.

Facultative coverage refers to a reinsurance contract on individual risks as opposed to a group or class of business.

used for a variety of reasons, including supplementing the limits provided by the treaty coverage or covering risks or perils excluded from treaty reinsurance.

It is used for a variety of reasons, including supplementing the limits provided by the treaty coverage or covering risks or perils excluded from treaty reinsurance.

We renew our reinsurance treaties annually.

During each renewal cycle, there are a number of factors we consider when determining our reinsurance coverage, including (1) plans to change the underlying insurance coverage we offer, (2) trends in loss activity, (3) the level of our capital and surplus, (4) changes in our risk appetite and (5) the cost and availability of reinsurance coverage .

To manage our natural catastrophe exposure, we use computer models to analyze the risk of severe losses.

We measure exposure to these losses in terms of probable maximum loss ("PML"), which is an estimate of the amount of loss we would expect to meet or exceed once in a given number of years (referred to as the return period).

When managing our catastrophe exposure, we focus on the 100 year and the 250 year return periods.

Effective with the June 1, 2020 renewal, we entered into a new personal insurance quota-share treaty.

We used model results previously noted to stress test the completeness of our program and determined that over 70% of the modelled losses from catastrophes costing over $10 million came from our personal insurance business.

We determined that utilizing a personal lines quota-share treaty combined with a catastrophe treaty was a more efficient and cost-effective way to manage the total loss exposure on our property coverages.

The following is a summary of our significant reinsurance programs as of December 31, 2020:

Line of Business Covered

Company Policy Limit

Reinsurance Coverage

Company Retention

Property - per risk

Up to $10.0 million per risk

$8.0 million excess of $2.0 million

$2.0 million per occurrence

Property - catastrophe (1)

$77.5 million excess of $7.5 million

$7.5 million per catastrophe

Primary casualty (2)

Up to $10.0 million per occurrence

$8.0 million excess of $2.0 million

$2.0 million per occurrence

Excess casualty (3)

Up to $10.0 million per occurrence

Variable quota share

$2.0 million per occurrence except as described in note (3) below

Line of Business Covered Company Policy Limit Reinsurance Coverage Company Retention

Property - per risk (1) Up to $10.0 million per risk $8.0 million excess of $2.0 million $2.0 million per occurrence

Property - personal insurance (2) N/A 50% up to $47.5 million per catastrophe

50% of all personal property losses

Property - catastrophe (3) N/A $45.0 million excess of $10.0 million $10.0 million per catastrophe

Primary casualty (4) Up to $10.0 million per occurrence $8.0 million excess of $2.0 million $2.0 million per occurrence

Excess casualty (5) Up to $10.0 million per occurrence Variable quota share $2.0 million per occurrence except as described in note (5) below

(1) Our property per-risk reinsurance reduces the financial impact of a large loss on a single commercial property or inland marine policy.

This treaty includes a reinstatement provision which requires us to pay reinstatement premiums after a loss has occurred in order to preserve coverage.

(2) Our personal insurance quota-share reinsurance reduces the financial impact of property losses on our personal insurance policies.

(3) Our property catastrophe reinsurance reduces the financial impact of a catastrophe event involving multiple claims and policyholders.

Our property catastrophe reinsurance includes a reinstatement provision which requires us to pay reinstatement premiums after a loss has occurred in order to preserve coverage.

Including the reinstatement provision, the maximum aggregate loss recovery limit is $155 million and is in addition to the per-occurrence coverage provided by our facultative and other treaty coverages.

Including the reinstatement provision, the maximum aggregate loss recovery limit is $90 million and is in addition to the per-occurrence coverage provided by our facultative and treaty coverages.

(4) Reinsurance is not applicable to any individual policy with a per-occurrence limit of $2.0 million or less.

For policies with a per occurrence limit higher than $2.0 million, the quota-share ceding percentage varies such that the retention is always $2.0 million or less.

(5) For casualty policies with a per-occurrence limit higher than $2.0 million, the ceding percentage varies such that the retention is always $2.0 million or less.

For example, for a $4.0 million limit excess policy, our retention would be 50%, whereas for a $10.0 million limit excess policy, our retention would be 20%.

For policies for which we also write an underlying primary limit, the retention on the primary and excess policy combined would not exceed $2.0 million.

We renew our reinsurance treaties annually.

Reinsurance contracts do not relieve us from our obligations to policyholders.

Failure of the reinsurer to honor its obligation could result in losses to us, and if such an event occurred, we would establish an allowance for those amounts considered uncollectible.

Failure of the reinsurer to honor its obligation could result in losses to us, and therefore, we established an allowance for credit risk based on historical analysis of credit losses for highly rated companies in the insurance industry.

In formulating our reinsurance programs, we are selective in our choice of reinsurers and we consider numerous factors, the most important of which are the financial stability of the reinsurer, its history of responding to claims and its overall reputation.

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In addition, we continually monitor for rating downgrades involving any of our reinsurers.

At December 31, 2019 , all reinsurance contracts that our insurance subsidiary was party to were either with companies with A.M.

At December 31, 2020, all reinsurance contracts that our insurance subsidiary was party to were with companies with A.M.

Best ratings of "A" (Excellent) or better.

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We had reinsurance recoverables on unpaid losses of $83.7 million at December 31, 2020, and recoverables on paid losses of $9.5 million at December 31, 2020.

The following table provides a summary of our top five reinsurers, based on the amount recoverable, at December 31, 2019 :

Reinsurance Recoverable

The following table provides a summary of our top ten reinsurers, based on the amount recoverable, at December 31, 2020:

Reinsurers A.M.

Best Rating Reinsurance Recoverable

($ in thousands)

2 unchanged sentences

SCOR Reinsurance Co.

Arch Reinsurance Co.

Allied World Reinsurance Co.

Odyssey America Reinsurance Corp.

Total for Top Five

We did not have reinsurance recoverables greater than $3.0 million at December 31, 2019 from any individual reinsurer other than the five listed above.

Arch Reinsurance Co.

Hannover Ruck SE A+ 3,997

BF Re A+ 2,489

General Reinsurance Corp.

Partner Reinsurance Co.

of the US A+ 1,417

Total for Top Ten 89,078

All others 4,137

Total $ 93,215

We did not have reinsurance recoverables greater than $1.4 million at December 31, 2020 from any individual reinsurer other than the ten listed above.

To reduce credit exposure to reinsurance recoverable balances, we obtain letters of credit from certain reinsurers that are not authorized as reinsurers under U.S.

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We use computer models to analyze the risk of severe losses from natural catastrophes.

We measure exposure to these losses in terms of PML.

When managing our catastrophe exposure, we focus on the 100 year and the 250 year return periods.

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We seek to maximize investment returns using investment guidelines that stress prudent allocation among cash and cash equivalents, fixed-maturity securities and, to a lesser extent, equity securities.

Our cash and invested assets generally consist of fixed-maturity securities, short-term investments, cash and cash equivalents, exchange traded funds and preferred stock (classified as equity securities on the balance sheet).

Our fixed-maturity securities are classified as "available-for-sale" and are carried at fair value with unrealized gains and losses on those securities reported, net of tax, as a separate component of accumulated other comprehensive income (loss).

Our equity securities are carried at fair value.

Effective January 1, 2018, we adopted a new accounting standard ASU 2016-01, "Financial Instruments – Overall:

Recognition and Measurement of Financial Assets and Financial Liabilities," ("ASU 2016-01"), which eliminated the available-for-sale classification for equity securities and required changes in unrealized gains and losses in fair value of these investments to be recognized in net income.

Before the adoption of ASU 2016-01, o ur equity securities were classified as "available-for-sale" and are carried at fair value with unrealized gains and losses on these securities reported, net of tax, as a separate component of accumulated other comprehensive income (loss).

Fair value generally represents quoted market value prices for securities traded in the public market or prices analytically determined using bid or closing prices for securities not traded in the public marketplace.

Our equity securities are carried at fair value and changes in the fair value of these investments are recognized in net income.

Short-term investments, if any, are reported at cost and include investments that are both readily convertible to known amounts of cash and have maturities of 12 months or less upon acquisition by us.

Our cash and invested assets totaled $908.2 million at December 31, 2019 and $643.1 million at December 31, 2018 , and is summarized as follows:

December 31, 2019

December 31, 2018

% of Portfolio

Our cash and invested assets totaled $1.3 billion at December 31, 2020 and $908.2 million at December 31, 2019, and is summarized as follows:

December 31, 2020 December 31, 2019

Fair Value % of Portfolio Fair Value % of Portfolio

($ in thousands)

2 unchanged sentences

government agencies

$ — — % $ 112 — %

Obligations of states, municipalities and political subdivisions

230,906 17.9 % 172,893 19.0 %

Corporate and other securities 316,608 24.6 % 184,768 20.4 %

Commercial mortgage and asset-backed securities

Asset-backed securities 240,661 18.7 % 141,924 15.6 %

Commercial mortgage-backed securities 70,969 5.5 % 56,046 6.2 %

Residential mortgage-backed securities 222,656 17.3 % 173,789 19.1 %

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Cash and cash equivalents 77,093 6.0 % 100,408 11.1 %

Total $ 1,288,555 100.0 % $ 908,234 100.0 %

Our policy is to invest primarily in high quality fixed-maturity securities with a primary focus on preservation of capital and a secondary focus on maximizing our risk adjusted investment returns.

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Our investment policy also imposes restrictions on concentrations of securities by class and issuer.

December 31, 2019 , our fixed-maturity portfolio, including cash equivalents, had an average duration of 4.3 years and had an average rating of "AA."

As of December 31, 2020, our fixed-maturity portfolio, including cash equivalents, had an average duration of 4.3 years and had an average rating of "AA-."

The following table sets forth the composition of our portfolio of fixed-maturity securities by rating as of December 31, 2020:

AAA AA A BBB Below BBB Total

($ in thousands)

Treasury securities and obligations of U.S.

government agencies

Obligations of states, municipalities and political subdivisions

$ 18,665 $ 149,350 $ 60,895 $ 1,996 $ — $ 230,906

Corporate and other securities — 16,091 110,702 149,315 40,500 316,608

Commercial mortgage and asset-backed securities

Asset-backed securities 190,764 27,378 16,053 6,466 — 240,661

Commercial mortgage-backed securities 65,080 5,889 — — — 70,969

Residential mortgage-backed securities 38,212 183,466 320 — 658 222,656

2 unchanged sentences

December 31, 2020

Estimated % of

Fair Value Fair Value

($ in thousands)

3 unchanged sentences

Due after ten years 246,631 22.8 %

Commercial mortgage and asset-backed securities

Asset-backed securities 240,661 22.2 %

Commercial mortgage-backed securities 70,969 6.6 %

Residential mortgage-backed securities 222,656 20.6 %

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December 31, 2020

Industry Fair Value % of Total

($ in thousands)

Industrials and other $ 172,500 54.5 %

Financial 122,887 38.8 %

Utilities 21,221 6.7 %

Total $ 316,608 100.0 %

Approximately 8% of our total cash and investments were invested in exchange traded funds ("ETFs"), which provide low-cost diversification.

1 unchanged sentence

December 31, 2020

Fund Fair Value % of Total

($ in thousands)

1 unchanged sentence

Dividend yield equity fund 33,290 34.0 %

Total $ 98,050 100.0 %

Approximately 2% of our total cash and investments were invested in nonredeemable preferr ed stock.

1 unchanged sentence

December 31, 2020

Industry Fair Value % of Total

($ in thousands)

Financial $ 27,744 87.8 %

Utilities 3,034 9.6 %

Industrials and other 834 2.6 %

Total $ 31,612 100.0 %

The P&C insurance industry is highly competitive.

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Ratings for an insurance company are based on its ability to pay policyholder obligations and are not directed toward the protection of investors.

Today, our primary competitors in the E&S sector include Alleghany Corporation, Argo Group International Holdings, Ltd., James River Group Holdings, Ltd., Markel Corporation, ProSight Global, Inc., RLI Corp.

Today, our primary competitors in the E&S sector include Alleghany Corporation, Argo Group International Holdings, Ltd., James River Group Holdings, Ltd., the Lloyds of London syndicates, Markel Corporation, ProSight Global, Inc., RLI Corp.

Berkley Corporation.

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We are regulated by insurance regulatory authorities in the states in which we conduct business.

State insurance laws and regulations generally are designed to protect the interests of policyholders, consumers and claimants rather than

stockholders or other investors.

State insurance laws and regulations generally are designed to protect the interests of policyholders, consumers and claimants rather than stockholders or other investors.

The nature and extent of state regulation varies by jurisdiction, and state insurance regulators generally have broad administrative power relating to, among other matters, setting capital and surplus requirements, licensing of insurers and agents, establishing standards for reserve adequacy, prescribing statutory accounting methods, determining the form and content of statutory financial reports, regulating certain transactions with affiliates and prescribing types and amounts of investments.

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In recent years, the state insurance regulatory framework has come under increased federal scrutiny, and some state legislatures have considered or enacted laws that alter and, in many cases, increase, state authority to regulate insurance companies and insurance holding company systems.

Further, the National Association of Insurance Commissioners ("NAIC") and state insurance regulators are continually re-examining existing laws and regulations, specifically focusing on issues relating to the solvency of insurance companies, group capital requirements, interpretations of existing laws and the development of new laws.

Further, the National Association of Insurance Commissioners ("NAIC") and state insurance regulators are continually re-examining existing laws and regulations,

specifically focusing on issues relating to the solvency of insurance companies, group capital requirements, interpretations of existing laws and the development of new laws.

Although the federal government does not directly regulate the business of insurance, federal initiatives often affect the insurance industry in a variety of ways.

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Transactions between insurance subsidiaries and their parents and affiliates generally must be disclosed to the state regulators, and notice to or prior approval of the applicable state insurance regulator generally is required for any material or extraordinary transaction.

On December 9, 2020, the NAIC adopted the Group Capital Calculation (“GCC”) template and instructions, as well as corresponding amendments to NAIC model insurance holding company system laws.

The amendments require, subject to certain exemptions, that the ultimate controlling person of each insurance group file a GCC on an annual basis with such insurance group’s lead state commissioner.

The GCC uses a risk-based capital aggregation approach intended to provide regulators with an additional group supervisory tool.

Changes of control

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domestic insurer, prior written approval must be obtained from the insurance commissioner of the state where the insurer is domiciled.

Prior to granting approval of an application to acquire control of a domestic insurer, the domiciliary state insurance commissioner will consider a number of factors, which include the financial strength of the proposed acquiror, the acquiror’s plans for the future operations of the domestic insurer and any anti-competitive results that may arise from the consummation of the acquisition of control.

Prior to granting approval of an application to acquire control of a domestic insurer, the domiciliary state insurance commissioner will consider a number of factors, which include the

financial strength of the proposed acquiror, the acquiror’s plans for the future operations of the domestic insurer and any anti-competitive results that may arise from the consummation of the acquisition of control.

Generally, state insurance statutes provide that control over a domestic insurer is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, ten percent or more of the voting securities of the domestic insurer.

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insurance holding company groups.

Recent efforts by the NAIC to

establish group capital standards are consistent with this initiative.

State insurance holding company laws, including those in Arkansas, address "enterprise" risk - the risk that an activity, circumstance, event or series of events involving one or more affiliates of an insurer will, if not remedied promptly, be likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole - and require annual reporting of potential enterprise risk as well as access to information to allow the state insurance regulator to assess such risk.

Recent efforts by the NAIC to establish group capital standards are consistent with this initiative.

Under Arkansas insurance holding company laws, the ultimate controlling person of insurers subject to registration is required to file an annual enterprise risk report with the lead state commissioner, when applicable, of the insurance holding company system as determined by the procedures within the Financial Analysis Handbook adopted by the NAIC.

In 2012, the NAIC adopted the Risk Management and Own Risk and Solvency Assessment ("ORSA") Model Act, which requires domestic insurers to maintain a risk management framework and establishes a legal requirement for domestic insurers to conduct an ORSA in accordance with the NAIC’s ORSA Guidance Manual.

The ORSA Model Act provides that domestic insurers, or their insurance group, must regularly conduct an ORSA consistent with a process comparable to the ORSA Guidance Manual process.

In 2012, the NAIC adopted the Risk Management and Own Risk and Solvency Assessment ("ORSA") Model Act.

The ORSA Model Act, when adopted by state regulators requires domestic insurers to maintain a risk management framework and establishes a legal requirement for domestic insurers to conduct an ORSA.

The ORSA is a confidential internal assessment, appropriate to the nature, scale and complexity of an insurer, regarding the material and relevant risks identified by the insurer associated with an insurer’s current business plan and the sufficiency of capital resources to support those risks.

Effective July 2015, Arkansas adopted its version of the ORSA Model Act.

Our subsidiary, Kinsale Insurance, will be subject to the requirements of the ORSA Model Act adopted in Arkansas when its direct written premiums and unaffiliated assumed premiums, if any, exceed $500 million (Kinsale Insurance is currently exempt from such requirements based on the amount of its direct written premiums and unaffiliated assumed premiums).

Our subsidiary, Kinsale Insurance, is subject to the requirements of the ORSA Model Act adopted in its domicile of Arkansas.

Additionally, in response to the growing threat of cyber-attacks in the insurance industry, certain jurisdictions have begun to consider new cybersecurity measures, including the adoption of cybersecurity regulations which, among other things, would require insurance companies to establish and maintain a cybersecurity program and implement and maintain cybersecurity policies and procedures.

On October 24, 2017, the NAIC adopted its Insurance Data Security Model Law, intended to serve as model legislation for states to enact in order to govern cybersecurity and data protection practices of insurers, insurance agents, and other licensed entities registered under state insurance laws.

The New York Department of Financial Services (DFS) issued new regulations governing cybersecurity requirements for financial services companies, which became effective on March 1, 2017.

The regulations require insurance companies, among others, licensed in New York to assess their specific cyber risk profiles and design cyber security programs to address such risks.

The New York State Department of Financial Services (DFS) issued regulations governing cybersecurity requirements for financial services companies, which became effective on March 1, 2017, and requires insurance companies, among others, regulated in New York to assess their specific cyber risk profiles and design cyber security programs to address such risks.

We annually file our program compliance certifications pertaining to the DFS cybersecurity requirements in New York.

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Additionally, the FIO must publish a notice regarding the basis for the preemption in the Federal Register, allowing a reasonable opportunity for comments.

The FIO cannot preempt state antitrust laws governing rate making, underwriting, sales practices or coverage requirements.

The FIO cannot preempt state antitrust laws governing rate making, underwriting, sales practices or coverage

requirements.

No later than September 30th of each year, the FIO must submit an annual report to Congress explaining any use of the preemption authority during the prior year.

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On June 25, 2019, the NAIC adopted revisions to the Credit for Reinsurance Model Law and Regulation in order to satisfy the substantive and timing requirements of the Covered Agreement.

These amendments pave the way for state legislatures to bring their credit for reinsurance laws into compliance with the Covered Agreement's zero reinsurance collateral provisions by September 2022, thereby avoiding a potential federal preemption of these laws.

Trade practices

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and attempting to settle a claim for less than the amount to which a reasonable person would have believed such person was entitled.

We set business conduct policies and conduct training to make our employee-adjusters and other claims personnel aware of these prohibitions, and we require them to conduct their activities in compliance with these statutes.

We set business conduct policies and conduct training to make our employee-adjusters and other

claims personnel aware of these prohibitions, and we require them to conduct their activities in compliance with these statutes.

Credit for reinsurance

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The NAIC Insurance Regulatory Information System, or IRIS, is part of a collection of analytical tools designed to provide state insurance regulators with an integrated approach to screening and analyzing the financial condition of insurance companies operating in their respective states.

IRIS is intended to assist state insurance regulators in targeting

resources to those insurers in greatest need of regulatory attention.

IRIS is intended to assist state insurance regulators in targeting resources to those insurers in greatest need of regulatory attention.

IRIS consists of two phases:

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In the statistical phase, the NAIC database generates key financial ratio results based on financial information obtained from insurers’ annual statutory statements.

The analytical phase is a review of the annual statements, financial ratios and other automated solvency tools.

The analytical phase is a review of the annual statements, financial ratios and

other automated solvency tools.

The primary goal of the analytical phase is to identify companies that appear to require immediate regulatory attention.

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Best, which rates insurance companies based on factors of concern to policyholders, rates our insurance subsidiary.

Our insurance subsidiary, Kinsale Insurance, has a rating of "A-" (Excellent) from A.M.

Best currently assigns 16 ratings to insurance companies, which currently range from "A++" (Superior) to "S" (Rating Suspended).

"A-" (Excellent) is the fourth highest rating.

Best assigns ratings to insurance companies, which range from "A++" (Superior) to "F" (In Liquidation) .

Our insurance subsidiary, Kinsale Insurance, has a rating of "A" (Excellent), which is the third highest rating.

In evaluating a company's financial and operating performance, A.M.

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These evaluations are not directed to purchasers of an insurance company's securities.

As of February 20, 2020, we had 275 employees, all of whom were employed by us through arrangements with Kinsale Management, Inc.

Human Capital

As of February 18, 2021, we had 323 full-time and 12 part-time employees, all of whom are employed by us through arrangements with Kinsale Management, Inc., and are located at our headquarters in Richmond, Virginia.

Our employees are not subject to any collective bargaining agreements, and we are not aware of any current efforts to implement such an agreement.

We consider our relationship with our employees to be good.

We believe our employees are key to achieving our business objectives.

During fiscal year 2020, the Company launched remote-working protocols due to the escalating COVID-19 outbreak and, as a result, over 90% of our employees worked from home for a portion of time during the eight months spanning from March through October.

Before our employees returned during the September to October time frame, we implemented COVID-19 protocols to minimize the spread of the virus in our workplace.

These protocols, which currently remain in place, meet or exceed the Centers for Disease Control, Virginia Department of Health, and Virginia Department of Labor and Industry guidelines and, where applicable, our state mandate.

Additionally, during the fourth quarter of 2020, we moved into a new headquarters building.

Our new building utilizes technological amenities which facilitates the health and wellness of our employees.

For example, our building’s heating, ventilation and air conditioning (“HVAC”) system monitors air quality and pulls air from the outside rather than simply recirculating it, which helps reduce indoor airborne contaminants.

Many of our building’s fixtures are touchless, such as restroom doors, lighting fixtures, wash basins and elevators.

We have also taken advantage of newer technologies to help sanitize the air, such as ultraviolet (“UV”) filters in our HVAC system.

We continue to evaluate health and wellness initiatives which are in the best interests of our employees and the stakeholders of our Company.

Compensation and Benefits

We believe that our employees are one of our most valuable assets and paying our employees well is the foundation of our performance-based culture.

In order to attract and retain talent, we offer and maintain market competitive compensation and benefit programs to all our employees.

Our compensation program includes base salary, performance-based cash awards and equity grants for some management level employees.

In 2020, the median pay of all our full-time employees was more than $97,000.

The mix of these rewards varies depending on the employee’s role at the Company and our longstanding pay-for-performance philosophy.

While all of our employees are eligible to participate in the variable compensation element of our program (annual cash bonus and equity awards), variable compensation becomes a larger portion of the total mix for employees at higher levels in the organization.

Our executives, who are responsible for the development and execution of our strategic and financial plans, have the largest portion of their compensation tied to equity-based incentives to ensure financial alignment with our stakeholders.

In addition to competitive compensation, we offer our employees comprehensive and flexible benefit options including:

• Company-matched 401(k) plan

• Educational assistance program

• Medical insurance, with one tier being zero cost

• Company-paid insurance benefits

• Health savings with large employer contributions and flexible spending accounts

• Paid time off, family leave, and employee assistance programs.

Diversity and Inclusion

We are committed to fostering a diverse and inclusive work environment free from discrimination of any kind and that supports the communities we serve.

We seek to recruit the best qualified employees regardless of gender, ethnicity or other protected traits and it is our policy to fully comply with all laws applicable to discrimination in the workplace.

Our diversity and inclusion principles are reflected in our employee training and policies.

Available Information

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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