What changed in this filing

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Item 1. Business

2025-03-03 compared with 2024-04-01 · 65 added, 76 removed, 377 unchanged (27% of the section changed)

10 unchanged sentences

we distribute through multiple channels;

we write multiple lines of business, including general liability, excess liability, professional liability (including cyber insurance), commercial auto, group accident and health, property, agriculture, surety and workers’ compensation;

we write multiple lines of business, including general liability, excess liability, professional liability (including cyber and media liability insurance), commercial auto, group accident and health, property, agriculture, credit, surety and workers’ compensation;

we insure both short and medium duration liabilities;

and our business mix is balanced between E&S and admitted markets.

and our business mix is principally primary insurance and balanced between E&S and admitted markets.

A small portion of our business is specialty reinsurance (principally agriculture and credit) which is similarly focused on attractive specialty classes where we believe it is more efficient to approach these classes through reinsurance given factors such as cost of entry, including the costs of geographic expansion.

All of these factors enable us to respond to market opportunities and dislocations by deploying capital where we believe we can consistently earn attractive risk-adjusted returns.

We believe this diversification, combined with our underwriting and claims expertise, will produce strong growth and consistent profitability across P&C insurance pricing cycles.

We believe this diversification, which includes businesses not typically aligned with traditional P&C pricing cycles, combined with our underwriting and claims expertise, will more consistently produce strong growth and profitability across all insurance pricing cycles.

We are led by an entrepreneurial executive management team with decades of insurance leadership experience spanning multiple aspects of the global P&C industry.

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Best Company (“A.M.

Best”) with positive outlook.

Best”) with stable outlook.

Our Business and Our Strategy

We have one reportable segment through which we offer a broad array of insurance coverages to a number of market niches.

Each of our eight distinct underwriting divisions, or “continuing business,” has dedicated underwriting leadership supported by high-quality technical staff with deep experience in their respective niches.

Each of our eight distinct underwriting divisions has dedicated underwriting leadership supported by high-quality technical staff with deep experience in their respective niches.

We believe this structure and expertise allow us to serve the needs of our customers effectively and be a value-add partner to our distributors, while earning attractive risk-adjusted returns.

For the year ended December 31, 2024, 44% of our gross written premiums were written on an admitted basis and 56% were non-admitted.

The year ended 2023 marked a significant underwriting achievement for us as each of our eight underwriting divisions wrote over $100.0 million in gross written premiums.

Our Underwriting Divisions

Accident & Health :

Our Accident & Health (“A&H”) underwriting division provides a medical stop loss solution targeting organizations with less than 2,500 employees, as well as group and single-employer captive solutions.

Our Accident & Health (“A&H”) underwriting division provides medical stop loss to employers who self-insure their employee benefits, as well as covering group and single-employer captives.

Our approach for managing medical costs, combined with our claims oversight, enables us to partner with select distribution partners.

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By leveraging our underwriting, claims, technology, and analytical expertise across our Company, we are able to broaden our market reach and write additional profitable business with limited additional expense.

Our Captive underwriting division writes group A&H, property, general liability, commercial auto, excess liability, and workers’ compensation lines of business on an E&S and an admitted basis.

Our captive underwriting division

writes property, general liability, commercial auto, excess liability, and workers’ compensation lines of business on an E&S and an admitted basis.

We often administer this business through partnerships with third-party captive managers.

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Our Industry Solutions underwriting division includes three underwriting units that each provide multiple coverages to the businesses they serve:

Construction, Energy and Specialty Trucking.

Our Construction and Energy underwriting units provide general liability, excess liability, commercial auto, workers’ compensation, and inland marine solutions, written principally on an admitted basis, to a broad range of middle market construction and energy production and servicing customers.

Our Specialty Trucking unit writes on an E&S basis commercial auto and general liability solutions to mid-sized intermodal trucking companies.

construction, energy and inland marine.

Our construction and energy underwriting units provide general liability, excess liability, commercial auto, workers’ compensation, and adjacent inland marine solutions, written principally on an admitted basis, to a broad range of middle market construction and energy production and servicing customers, including many in the alternative/renewable energy fields.

Our inland marine underwriting unit focuses on logistics and other specialty property risk for assets that are constantly on the move.

The industry segments we seek to underwrite often have high severity exposures that our teams of skilled and experienced underwriters and claims professionals are able to address quickly and creatively, frequently with multi-line solutions.

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Our Professional Lines underwriting division includes three underwriting units:

Management Liability, Professional Liability (which includes cyber insurance), and Allied Health.

Professional Liability and Allied Health provide E&S primary and excess claims-made liability products distributed exclusively through wholesale brokers, while our Management Liability unit provides both E&S and admitted products distributed through both wholesale and retail brokers.

management liability, professional liability (which includes cyber and media liability insurance), and allied health (which includes life sciences).

Professional liability and allied health provide primary and excess claims-made liability products, on an E&S and admitted basis, distributed through both wholesale and retail brokers, depending on the product.

Our Programs underwriting division partners with program administrators focused on certain markets that align with our expertise and strategy.

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We principally focus on small to medium sized enterprises with aggregate bond programs up to approximately $75.0 million for contract and $100.0 million for commercial and transactional.

Our underwriting and claims professionals differentiate themselves through their technical capabilities and decision making speed.

We write this business on an admitted basis and distribute through retail agents and brokers.

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We fundamentally believe that every underwriting and claims decision can be augmented with the use of new types of risk data and advanced technology.

While our underwriting decisions are backed by reliable historical data and in-depth

evaluation of risks resulting from intentional investment in data collection and processing capabilities, we amplify our underwriting and claims prowess by combining this data with new forms of risk data and predictive analytics.

While our underwriting decisions are backed by reliable historical data and in-depth evaluation of risks resulting from intentional investment in data collection and processing capabilities, we amplify our underwriting and claims prowess by combining this data with new forms of risk data and predictive analytics.

We also utilize generative artificial intelligence in our underwriting and claims handling where doing so can aid in our effectiveness and efficiencies without sacrificing the necessary expertise of our employees.

Diversified business that allows us to respond to, and capitalize on, changes in market conditions across P&C cycles.

We have been successful in building a diversified group of underwriting divisions spanning multiple product lines, industries, geographies and distribution channels.

We have been successful in building a diversified group of underwriting divisions spanning multiple product lines, industries, geographies and distribution channels, including business that is not typically aligned with traditional P&C cycles.

We aim to evolve with, and adapt to, the market growing certain lines of business when market conditions are favorable and limiting our exposure to certain markets when conditions are less favorable.

We believe the diversity of our book allows us to respond to, and capitalize on, market opportunities and dislocations across P&C insurance market and pricing cycles resulting in a durable insurance franchise.

We believe the diversity of our book allows us to respond to, and capitalize on, market opportunities and dislocations across insurance market and pricing cycles resulting in a durable insurance franchise.

Attractive and winning culture.

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One such trend is the continued rise in demand for specialized insurance solutions because of increasing risks, as well as the complexity of risks, due to climate change/increased frequency of severe weather events, supply chain uncertainty, financial inflation risk, cyber risk, emergence of novel health risks, increased level of litigation, attorney involvement and jury awards, and healthcare delivery and cost.

Another such noticeable market trend is the emergence of

“micro cycles and micro dislocations” where different pockets of the P&C insurance market experience hardening and softening at different times.

We have demonstrated our ability to react quickly in response to these trends by launching new underwriting units, entering underserved markets, partnering with others with advanced technology, and launching new captive solutions.

Another such noticeable market trend is the emergence of “micro cycles and micro dislocations” where different pockets of the P&C insurance market experience hardening and softening at different times.

We have demonstrated our ability to react quickly in response to these trends by launching new underwriting units, including many not typically aligned with P&C cycles, entering underserved markets, partnering with others with advanced technology, and launching new captive solutions.

We believe our gross written premium growth and profitability is indicative of our momentum and provides a powerful reference for the positioning of our Company to continue to expand and grow in the markets we seek to serve.

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We believe this is imperative to maintain the confidence of customers, distribution partners, reinsurers, regulators, rating agencies and shareholders.

We have strengthened our claims case reserves practices with the aim to reserve to the expected ultimate loss within 90 days of the first notice of loss.

In addition, we increase the level of IBNR reserves held above our claims case reserves.

We believe our conservative reserve philosophy positions us well for consistently strong underwriting profitability in the future.

Our claims case reserves practices aim to reserve to the expected ultimate loss within 90 days of the first notice of loss.

In addition, our practice is to maintain a level of incurred but not reported reserves (“IBNR”) that, together with our case reserves, is above our actuarial central estimate.

We maintain loss reserves that represent our best estimate of ultimate losses.

Marketing and Distribution

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Within the eight divisions, we further specialize underwriting teams with a focus on specific niches within the markets the eight divisions serve.

Kirby Hill, our President of Industry Solutions, Captives and Programs underwriting divisions, has more than 30 years of experience spanning multiple facets of the insurance business, John Burkhart, our President of Specialty Lines overseeing the Professional Lines, Surety, Transactional E&S and A&H underwriting divisions, has approximately 30 years of underwriting experience, and Doug Davies, our Senior Vice President of the Global Property and Agriculture Underwriting Division, has approximately 20 years of underwriting experience.

Our underwriting approach is underpinned by hiring highly experienced, best-in-class and diverse teams of technical underwriters with established track records in specific specialty niche markets.

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Our underwriting data is captured in our business intelligence platform, SkyBI.

This comprehensive data repository forms the foundation of our reporting, analytics, and other data capabilities and is a key tool for our senior management team and business leaders.

comprehensive data repository forms the foundation of our reporting, analytics, and other data capabilities and is a key tool for our senior management team and business leaders.

See the section entitled “Technology” below for more information on SkyBI.

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In certain instances, we utilize Third Party Administrators (TPAs), to handle claims on Skyward’s behalf, when needed.

Specifically, we may utilize TPAs for programs, captives, occupational accident, workers compensation and Loss Portfolio Transfer (LPT) runoff claims.

Specifically, we may utilize TPAs for programs, captives, occupational accident, workers compensation and runoff claims.

We actively manage and oversee our TPAs and monitor their individual claims-handling activities, to be in accordance with our claims handling and reserving guidelines and general best practices.

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We are leveraging technology to gain efficiencies in the claims-handling process.

For example, we launched a technology solution to speed up the process of creating claims correspondence and to automate routine tasks behind the scenes, such as vendor payments.

Similarly, we are piloting the use of artificial intelligence to route claims to the best-suited claims handler based on likely severity.

We are also developing a Large Language Model to identify claims with early indicators for potential severity, unusual types of exposures or the propensity for legal representation by third party claimants.

For example, we created and implemented a Claims Development Severity Predictor.

This predictive model trains on key phrases to identify claims that are more likely to lead to large loss development, allowing early identification, proactive claims management and summarization to help us understand why development will occur.

This model has been integrated into our claims review and management workflow.

Additionally, we are always looking for opportunities to resolve our claims as efficiently and effectively as possible.

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This program involves deploying experienced investigators and other appropriate vendors to the scene of a reported auto accident, ideally within two hours of the accident, regardless of the location.

This quick response assists us in evaluating the facts and circumstances of the accident to begin our investigation as quickly as possible.

This quick response assists us in evaluating

the facts and circumstances of the accident to begin our investigation as quickly as possible.

If appropriate, our program aids us in resolving any third-party claims as quickly as possible.

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We developed SkyBI, our single, comprehensive enterprise-wide data repository, as our foundation for reporting, business intelligence, analytics, and other advanced data capabilities.

It provides our organization information and performance metrics across the Company in an easy-to-consume visualized format.

It provides our organization with information and performance metrics across the Company in an easy-to-consume visualized format.

The data can be filtered by many categories, including distributor, customer segment, line of business, specific industry, individual underwriter, and specific risk feature among others.

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Core Transactional Platforms.

Our core operating platforms, including our policy administration, billing and claims systems, are intentionally designed to enable nimble scaling and expansion of our business.

Our core operating platforms, including our policy administration, underwriting workbench, billing and claims systems, are intentionally designed to enable nimble scaling and expansion of our business.

We generally use, third-party vendor developed core operating applications that we have customized for our company.

Our core platform organization is used for all business except for Accident & Health, Global Property and Surety as the unique features of these underwriting divisions require select dedicated core processing components.

Our core platform organization is used for all business except for accident & health, global property and agriculture and surety as the unique features of these underwriting divisions require select dedicated core processing components.

Data gathered from our core operating platforms from all divisions flows to our SkyBI platform with comparable data quality and granularity regardless of underwriting division.

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$1.00 million per occurrence

Cyber $2.69 million per occurrence

Excess Casualty (1)(2)

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We believe our current reinsurance program provides coverage well in excess of our theoretical losses from any recorded historical event.

In addition to our reinsurance programs for our continuing business, during 2020, we entered into a LPT retroactive reinsurance agreement with a third-party reinsurer domiciled in Bermuda for liabilities (including claim payments, allocated losses and LAE reserves and certain extra-contractual obligations) related to certain policies issued or assumed for policy years 2017 and prior so as to limit the volatility associated with the business written during those years.

For additional information about the LPT, see Item 7 of this Form 10-K, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Results of Operations - Losses and LAE.”

We seek to purchase reinsurance from reinsurers that are rated at least “A-” (“Excellent”) or better by A.M.

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Hence, failure of the reinsurer to honor its obligations could result in losses to us, and therefore, we establish allowances for amounts considered uncollectible.

At December 31, 2023 and 2022, our allowance for uncollectible reinsurance was $2.3 million and $0.0 million, respectively.

At December 31, 2024 and 2023, our allowance for uncollectible reinsurance was $2.3 million.

The following table sets forth our most significant reinsurers by amount of reinsurance recoverables, as well as the reinsurers A.M.

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Everest Reinsurance Co.

eCaptive PC1-IC (and PC2-IC), Inc (1)

121,805 Unrated

RGA Reinsurance Company 37,070 A+

eMaxx Captives (1)

Partner Reinsurance Co.

of the US 52,442 A+

Swiss Reinsurance America Corp 22,334 A+

General Reinsurance Corp 48,234 A++

Swiss Reinsurance America Corp 37,789 A+

ACE (Chubb Property & Casualty Ins Company) 36,527 A+

RGA Reinsurance Company 24,945 A+

Randall & Quilter (R&Q Bermuda (SAC) Ltd) (2)

20,859 Unrated

ACE (Chubb Property & Casualty Insurance Company) 16,003 A+

Aspen Insurance UK Limited 19,998 A

Munich Reinsurance America Inc.

Insurance Company of the West 18,112 A

Top 10 Total 559,087

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(1) This reinsurer facilitates our eMaxx captive.

we hold collateral in a statutory trust of $150.8 million on our reinsurance recoverables

(2) This reinsurer facilitates our LPT reinsurance agreement;

we maintain the right of offset of our recoverables for premiums we owe to the reinsurer, we held collateral in a statutory trust of $23.0 million on our net reinsurance recoverables.

At December 31, 2024, we held collateral in a statutory trust of $188.9 million on our net reinsurance recoverables.

(2) This reinsurer facilitated our LPT reinsurance agreement which was commuted effective January 31, 2025.

At December 31, 2024, we held collateral in a statutory trust of $22.7 million on our net reinsurance recoverables.

Enterprise Risk Management

Our enterprise risk management (“ERM”) is embedded in nearly every aspect of our company and guides our day-to-day activities.

At the highest level, our approach to ERM is to ensure we achieve an acceptable risk adjusted return for our shareholders;

At the highest level, our approach to ERM is to ensure we achieve an acceptable risk adjusted return for our shareholders while maintaining a strong foundation of trust and reliability for those we serve;

as such we are intentional in our underwriting and asset portfolio construction.

As an example, we aim to balance liability duration of our underwriting portfolio, and we use reinsurance to manage volatility from a single loss and for cumulative losses tied to a single event or series of events.

As an example, we aim to balance liability duration and market cyclicality of our underwriting portfolio, and we use reinsurance to manage volatility outside of our risk tolerances.

Our investment strategy is similarly set out to have a diversified target portfolio that balances portfolio yield, liquidity, volatility, and potential for principal loss.

Our Chief Risk Officer oversees several critical ERM processes as well as chairing our cross-functional corporate ERM Committee.

Our Senior Vice President (“SVP”) of Finance & ERM oversees several critical ERM processes as well as chairing our cross-functional corporate ERM Committee.

We formalize our own view of risk and solvency in terms of potential economic loss using our Economic Capital Model (“ECM”).

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More specifically, our ECM provides a probabilistic modeled view of earnings and capital loss that brings together the potential loss from catastrophes, reserving, underwriting, market, credit risk, strategic and operational risks.

Aside from maintaining our ECM and overseeing our risk tolerance framework, our Chief Risk Officer works with our ERM Committee to review and maintain a comprehensive risk register with accountabilities to ensure appropriate mitigations are in place and are monitored for any change.

The top 10 risks are further identified and quantified by the Chief Risk Officer and the ERM Committee and reviewed every quarter.

The Chief Risk Officer and the ERM Committee submit these reports to the Risk Committee on a regular basis.

Aside from maintaining our ECM and overseeing our risk tolerance framework, our SVP of Finance & ERM works with our ERM Committee to review and maintain a comprehensive risk register with accountabilities to ensure appropriate mitigations are in place and are monitored for any change.

The top 10 risks are further identified and quantified by the SVP of Finance & ERM and the ERM Committee and reviewed every quarter.

The SVP of Finance & ERM and the ERM Committee submit these reports to the Risk Committee on a regular basis.

We construct our operational processes and controls with a view to identify, assess and manage key risks on an ongoing basis.

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The Investment Committee of our Board of Directors reviews and approves our investment policy and strategy.

This committee meets on a regular basis to review and consider investment activities, tactics, and new investment opportunities as they arise.

This committee meets quarterly to review and consider investment activities, tactics, and new investment opportunities.

The portfolio is directed internally and includes both self-managed investments and portfolios managed by select third-party investment management firms.

Our opportunistic fixed income portfolio is managed by Arena Investors, LP (“Arena”), which is affiliated with The Westaim Corporation (“Westaim”), the Company’s largest shareholder.

For additional discussion regarding our investments, including the market risks related to our investment portfolio, see Item 7 of this Form 10-K, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Investments.”

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Tokio Marine Holdings, Inc.;

CNA Financial

CNA Financial Corporation;

Hiscox, Ltd.;

Intact Finance Corporation;

Kinsale Capital Group, Inc.;

and James River Group Holdings, Ltd.

and Kinsale Capital Group, Inc.

Our Structure

We conduct our operations principally through four insurance companies:

Houston Specialty Insurance Company (“HSIC”), our largest insurance subsidiary, underwrites multiple lines of insurance on a surplus lines basis in 50 states, the District of Columbia and select foreign countries.

Great Midwest Insurance Company (“GMIC”), our largest insurance subsidiary, underwrites multiple lines of insurance on an admitted basis in all 50 states and the District of Columbia and is a certified surety bond company listed with the Department of the Treasury.

Houston Specialty Company (“HSIC”), a subsidiary of GMIC, underwrites multiple lines of insurance on a surplus lines basis in 50 states, the District of Columbia and select foreign countries.

Imperium Insurance Company (“IIC”), a subsidiary of HSIC, underwrites on an admitted basis in all 50 states and the District of Columbia.

Great Midwest Insurance Company (“GMIC”), a subsidiary of IIC underwrites multiple lines of insurance on an admitted basis in all 50 states, the District of Columbia and is a certified surety bond company listed with the Department of the Treasury.

Oklahoma Specialty Insurance Company (“OSIC”), a subsidiary of GMIC, is an approved surplus lines company in 49 states and the District of Columbia.

Oklahoma Specialty Insurance Company (“OSIC”), a subsidiary of IIC, is an approved surplus lines company in 49 states and the District of Columbia.

Effective December 31, 2024, we restacked our insurance company subsidiaries into the aforementioned organizational structure, which allowed us to provide our growing surety business with the capital it needed to operate more effectively within the surety T-listing market.

The following table sets forth the geographic distribution of our gross written premiums for the year ended December 31, 2024:

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In addition to our primary insurance companies, we also own Skyward Re, a wholly-owned captive reinsurance company domiciled in the Cayman Islands that was incorporated on January 7, 2020.

Skyward Re was established to facilitate the LPT.

Skyward Underwriters Agency, Inc., a licensed agent, managing general agent and reinsurance broker, and Skyward Service Company, which provides various administrative services to our subsidiaries.

Skyward Re was established to facilitate the LPT which was commuted effective January 31, 2025.

We also operate three non-insurance companies:

Skyward Underwriters Agency, Inc., a licensed agent, managing general agent and reinsurance broker, Skyward Service Company, which provides various administrative services to our subsidiaries and Skyward Specialty No.

1 Limited Company, a UK company which is an authorized Lloyd’s corporate member.

Our organizational structure is set forth below.

1 unchanged sentence

Our insurance group, Skyward Specialty Insurance Group, Inc.

currently has a rating of “A-” (Excellent) with positive outlook from A.M.

currently has a rating of “A” (Excellent) with stable outlook from A.M.

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

Best currently assigns 16 ratings to insurance companies, which currently range from “A++” (Superior) to “F” (In Liquidation).

The “A-” (Excellent) rating is the fourth highest rating.

Best currently assigns 13 ratings to insurance companies, which currently range from “A++” (Superior) to “D” (Poor).

The “A” (Excellent) rating is the third highest rating.

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

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Regulation of insurance companies constantly changes as governmental agencies and legislatures react to real or perceived issues.

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.

In recent years, 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, as a protection against federal involvement.

Further, the National Association of Insurance Commissioners (“NAIC”) and some state insurance regulators are re-examining existing laws and regulations specifically focusing on issues relating to the solvency of insurance companies, 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.

In addition, the Federal Insurance Office (the “FIO”) was established within the U.S.

Department of the Treasury by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) in July 2010.

The FIO monitors all aspects of the insurance industry, including identifying issues or gaps in the regulation of insurers that could contribute to a systemic crisis in the insurance industry or the U.S.

financial system, although the FIO has no express regulatory authority over insurance companies or other insurance industry participants.

In addition, although the federal government does not directly regulate the business of insurance, federal initiatives often affect the insurance industry in a

variety of ways, such as treatment of federal subsidiaries, regulations of quasi-governmental entities and regulations issued by federal governmental departments.

Insurance Holding Company Regulation

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As such, we strive to create a culture committed to fostering a rich diversity of thought, background and perspective.

Diversity, Equity and Inclusion

We embrace diversity, equity and inclusion initiatives as a way to improve workplace culture and demonstrate the importance of valuing our employees as people, not just as workers.

We strive to cultivate an exceptional workforce to perpetuate our ownership culture and continue to achieve superior business results.

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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