What changed in this filing

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Item 1A. Risk Factors

2025-02-21 compared with 2024-02-23 · 25 added, 23 removed, 366 unchanged (12% of the section changed)

14 unchanged sentences

• social and economic patterns;

• litigation, judicial and regulatory trends.

• litigation, judicial and regulatory trends (e.g., increased litigation, higher jury awards and third-party litigation funding, among others).

These variables are affected by both internal and external events that could increase our exposure to losses, and we continually monitor our reserves using new information on reported claims and a variety of statistical techniques.

10 unchanged sentences

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

See also "—Adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity could result in the sale of fewer policies than expected or an increase in frequency or severity of claims and premium defaults or both, which, in turn, could affect our growth and profitability."

See also "—Adverse economic factors, including recession, inflation, periods of high unemployment or lower economic activity could result in the sale of fewer policies than expected or an increase

in frequency or severity of claims and premium defaults or both, which, in turn, could affect our growth and profitability."

• If claims were to become more frequent, even if we had no liability for those claims, the cost of evaluating such potential claims could escalate beyond the amount of the reserves we have established.

3 unchanged sentences

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

Future loss experience substantially in excess of established reserves could also have a material adverse effect on our future earnings and liquidity and our financial rating.

Future loss experience substantially in excess of established reserves could also have a material adverse effect on our future earnings, liquidity and our financial rating.

For further discussion of our reserve experience, please see "Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates — Reserves for Unpaid Losses and Loss Adjustment Expenses."

5 unchanged sentences

These estimates, models, data and scenarios may not produce accurate predictions and consequently, we could incur losses both in the risks we underwrite and to the value of our investment portfolio.

We use third-party vendor analytic and modeling capabilities to provide us with objective risk assessment relating to other risks in our reinsurance portfolio.

We use third-party vendor models to provide us with objective risk assessment relating to other risks in our reinsurance portfolio.

We use these models to help us control risk accumulation, inform management and other stakeholders of capital requirements and to improve the risk/return profile or minimize the amount of capital required to cover the risks in each of our reinsurance contracts.

1 unchanged sentence

Small changes in assumptions, which depend heavily on our judgment and foresight, can have a significant impact on the modeled outputs.

For example, catastrophe models that simulate loss estimates based on a set of assumptions are important tools used by us to estimate our PMLs.

For example, catastrophe models that simulate loss estimates based on a set of assumptions are important tools used to estimate our PMLs.

These assumptions address a number of factors that impact loss potential including, but not limited to, the characteristics of a given natural catastrophe event;

10 unchanged sentences

• The models may not accurately reflect the true frequency of events;

• The models may not accurately reflect a risk's vulnerability or susceptibility to damage for a given event characteristic;

• The models may not accurately represent loss potential to insurance or reinsurance contract coverage limits, terms

and conditions;

• The models may not accurately reflect a risk's vulnerability or susceptibility to damage for a given event

characteristic;

• The models may not accurately represent loss potential to insurance or reinsurance contract coverage limits, terms and conditions;

• The models may not accurately reflect the impact on the economy of the area affected or the financial, judicial, political, or regulatory impact on insurance claim payments during or following a catastrophe event.

15 unchanged sentences

As industry practices and legal, judicial, social and other environmental conditions change, unexpected and unintended issues related to claims and coverage may emerge.

Three examples of unanticipated risks that have adversely affected the insurance industry are:

Examples of unanticipated risks that have adversely affected the insurance industry are:

• Asbestos liability applied to manufacturers of products and contractors who installed those products.

1 unchanged sentence

• Court decisions, such as the 1995 Montrose decision in California, that read policy exclusions narrowly so as to expand coverage, thereby requiring insurers to create and write new exclusions.

• An increase in class action lawsuits and cases assigned to Multi-District Litigation (MDL), which often lengthens claim duration and increases legal expenses.

These issues may adversely affect our business by either broadening coverage beyond our underwriting intent or by increasing the number or size of claims.

In some instances, these changes may not become apparent until sometime after we have issued insurance contracts that are affected by the changes.

In some instances, these changes may not become apparent until sometime after

we have issued insurance contracts that are affected by the changes.

As a result, the full extent of liability under our insurance contracts may not be known for many years after a contract is issued.

8 unchanged sentences

Many reinsurance companies have begun to exclude certain coverages from, or alter terms in, the reinsurance contracts we enter into with them.

Some exclusions are with respect to risks that we cannot exclude in policies we write due to business or regulatory constraints.

Some exclusions relate to risks that we cannot exclude due to business or regulatory constraints.

In addition, reinsurers often impose terms, such as lower per-occurrence and aggregate limits, on direct insurers that do not wholly cover the risks written by these direct insurers.

15 unchanged sentences

While policy terms and conditions in the lines of business we write preclude coverage for virus-related claims, court decisions and governmental actions may challenge the validity of any exclusions or our interpretation of how such terms and conditions operate.

We are closely monitoring the impact of the COVID-19 pandemic and the related economic impact on all aspects of our business, including its impact on premium volume, the fair value of our investment portfolio and loss reserves, as well as the potential for delayed reporting and settlement of claims.

Global climate change may have a material adverse effect on our financial results.

Climate change could have a significant impact on longer-term natural weather trends, including increases in severe weather and catastrophic events.

The incidence and severity of catastrophes are inherently unpredictable.

While most catastrophes are restricted to fairly specific geographic areas, the extent of loss and damage for insurance purposes is a function of both the total amount of insured value in the area affected by the event and the severity of the event.

We attempt to manage this exposure through careful and disciplined underwriting, using sophisticated computer models to help assess our exposure to catastrophic events, purchasing extensive reinsurance protection from financially strong counterparties and limiting the concentration of property business by geographic area.

However, assessing the risk of loss

and damage and the range of approaches to address the adverse effects of climate change, including impacts related to extreme weather events and slow onset events, remains a challenge and may materially adversely impact our business, financial condition and results of operations.

However, assessing the risk of loss and damage and the range of approaches to address the adverse effects of climate change, including impacts related to extreme weather events and slow onset events, remains a challenge and may materially adversely impact our business, financial condition and results of operations.

Risks Related to Market Conditions and our Business Operations

45 unchanged sentences

We distribute the majority of our products through a select group of brokers.

Of our 2023 gross written premiums, 63.4%, or $994.6 million, were distributed through five of our approximately 187 brokers, three of which accounted for 49.8%, or $781.9 million, of our 2023 gross written premiums.

Of our 2024 gross written premiums, 62.3%, or $1.2 billion, were distributed through five of our approximately 197 brokers, three of which accounted for 48.4%, or $905.8 million, of our 2024 gross written premiums.

Our relationship with any of these brokers may be discontinued at any time.

43 unchanged sentences

Like other insurance companies, we rely on estimates and assumptions in setting our premium rates.

Establishing adequate premium rates is necessary, together with investment income, to generate sufficient revenue to offset losses, loss adjustment expenses and other underwriting costs and to earn a profit.

If we do not accurately assess the risks that we assume, we may not charge adequate premiums to cover our losses and expenses, which would adversely affect our results of operations and our profitability.

37 unchanged sentences

The failure of our information technology and telecommunications systems could materially adversely affect our business.

Our business depends on our information technology and telecommunications systems, including our browser-based underwriting system.

Our business depends on our information technology and telecommunications systems, including our web-based underwriting system.

Among other things, we rely on these systems to interact with brokers and insureds, to underwrite business, to prepare policies and process premiums, to perform actuarial and other modeling functions, to process claims and make claims payments and to prepare internal and external financial statements and information.

In addition, some of these systems include or rely on third-party systems not located on our premises or under our direct control.

In addition, some of these systems include or rely on third-party systems under our direct control.

Events such as natural catastrophes, terrorist attacks, industrial accidents, third-party system or network outages or computer malware may cause our systems to fail or be inaccessible for extended periods of time.

8 unchanged sentences

Our business relies on certain third-party software obtained under licenses from other companies.

We anticipate that we will continue to rely on such third-party software in the future.

Although we believe that there are commercially reasonable alternatives to the third-party software we currently license, this may not always be the case, or it may be difficult or costly to replace.

11 unchanged sentences

Either outcome could negatively impact our business.

We are aware that generative AI tools may respond with inaccurate or fabricated information, introduce bias or fail to provide traceability of source information and have taken steps to train employees on these issues as well to avoid using these tools as primary decision processes.

We will continue to look for opportunities to deploy these tools to aid in decision making processes but cannot guarantee that the risks will be completely eliminated.

Cloud provider service failure or control weakness could adversely affect our business.

1 unchanged sentence

As we use cloud-based services, we will rely on third-party cloud providers to maintain appropriate controls and safeguards to protect confidential information we receive, including personal, personally identifiable, sensitive, confidential or proprietary data, and the integrity and continuous operation of our proprietary technology platform.

While we conduct due diligence on these cloud providers with respect to their security and business controls, we may not have the visibility to effectively monitor the implementation and efficacy of these controls.

While we conduct due diligence on these cloud providers with respect to their security and business controls, these are point-in-time assessments, and we may not have the visibility to effectively monitor the continuous implementation and efficacy of these controls.

Outside parties may be able to circumvent controls or exploit vulnerabilities, resulting in operational disruption, data loss, defects or a security event.

Migrating to the cloud increases the risk of operational disruption should internet service be interrupted.

Operating in the cloud increases the risk of operational disruption should internet service be interrupted.

While we have implemented business contingency and other plans to facilitate continuous internet access, sustained or concurrent service denials or similar failures could limit our ability to write and process new and renewal business, provide customer service, pay claims in a timely manner or otherwise operate our business.

16 unchanged sentences

As is typical in our industry, we continually face risks associated with litigation of various types, including disputes relating to insurance claims under our policies as well as other general commercial and corporate litigation.

We could become involved in litigation with our customers, or become the target of class action lawsuits and other types of litigation, some of which involve claims for substantial or indeterminate amounts, and the outcomes of which are unpredictable.

The outcomes of litigation are inherently uncertain and can be influenced by evolving legal trends, including third-party litigation funding.

This litigation may be based on a variety of issues, including insurance and claim settlement practices.

82 unchanged sentences

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 1A. Risk Factors