Skyward Specialty Insurance Group, Inc. 10-Q

Item 1A. Risk Factors In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risks and uncertainties described under the heading “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 (our “2025 Form 10-K”), as supplemented by the below risk factor updates. There have been no other material changes in our risk factors in the three months ended March 31, 2026 from those disclosed in our 2025 Form 10-K. Increased public attention from regulators, policymakers, investors, and other stakeholders regarding environmental, social and governance matters may expose us to negative public perception, cause reputational harm, impose additional costs on our business or impact our stock price. Recently, more attention is being directed towards publicly traded companies regarding environmental, social and governance (“ESG”) matters. A wide variety of stakeholders, including institutional investors, regulators, and investor advocacy groups have become increasingly focused on companies’ ESG practices and disclosures, which has led to an environment of increased regulatory complexity and potentially conflicting directives. The heightened and sometimes conflicting stakeholder focus on ESG issues requires the continuous monitoring of evolving laws, regulations, standards and expectations, as well as associated reporting requirements. Regulators across various jurisdictions have adopted and could continue to adopt pro- or anti-ESG-related rules and guidance, which may conflict and impose additional compliance costs. A failure, or perceived failure, to respond to investor or customer expectations related to ESG concerns could cause harm to our business and reputation. Alternatively, there could be backlash by investors or customers relating to ESG related topics which could cause harm to our business and reputation. Damage to our reputation as a result of our provision of policies to certain insureds could result in decreased demand for our insurance products and could have a material adverse effect on our business, operational results and financial results, as well as require additional resources to rebuild our reputation, competitive position and brand strength. We are subject to extensive regulation, which may adversely affect our ability to achieve our business objectives. In addition, if we fail to comply with these regulations, we may be subject to penalties, including fines and suspensions, which may adversely affect our financial condition and results of operations. Our primary U.S. insurance subsidiaries, GMIC, HSIC and IIC, are subject to extensive regulation in Texas, their state of domicile, and to a lesser degree, the other states in which they operate. Most insurance regulations are designed to protect the interests of insurance policyholders, as opposed to the interests of investors or stockholders. These regulations generally are administered by a department of insurance in each state and relate to, among other things, capital and surplus requirements, investment and underwriting limitations, affiliate transactions, dividend limitations, changes in control, solvency and a variety of other financial and non-financial aspects of our business. Significant changes in these laws and regulations could further limit our discretion or make it more expensive to conduct our business. State insurance regulators also conduct periodic examinations of the affairs of insurance and reinsurance companies and require the filing of annual and other reports relating to financial condition, holding company issues and other matters. These regulatory requirements may impose timing and expense constraints that could adversely affect our ability to achieve some or all of our business objectives. Our U.S. insurance subsidiaries are part of an “insurance holding company system” within the meaning of applicable Texas statutes and regulations. As a result of such status, certain transactions between our insurance subsidiaries and one or more of their affiliates may not be affected unless the insurer has provided notice of that transaction to the Texas Department of Insurance. These prior notification requirements may result in business delays and additional business expenses. If our insurance subsidiaries fail to file a required notification or fail to comply with other applicable insurance regulations in Texas, we may be subject to significant fines and penalties and our working relationship with the Texas Department of Insurance may be impaired. In addition, state insurance regulators have broad discretion to deny or revoke licenses for various reasons, including the violation of regulations. In some instances, where there is uncertainty as to applicability, we follow practices based on our interpretations of regulations or practices that we believe generally to be followed by the industry. These practices may turn out to be different from the interpretations of regulatory authorities. If we do not have the requisite licenses and approvals or do not comply with applicable regulatory requirements, state insurance regulators could preclude or temporarily suspend us from carrying on some or all of our activities in their state or could otherwise penalize us. This 49 Table of Contents could adversely affect our ability to operate our business. Further, changes in the level of regulation of the insurance industry or changes in laws or regulations themselves or interpretations by regulatory authorities could interfere with our operations and require us to bear additional costs of compliance, which could adversely affect our ability to operate our business. Our insurance subsidiaries are subject to risk-based capital requirements, based upon the “risk based capital model” adopted by the NAIC, and other minimum capital and surplus restrictions imposed under Texas law. These requirements establish the minimum amount of risk-based capital necessary for a company to support its overall business operations. It identifies property and casualty insurers that may be inadequately capitalized by looking at certain inherent risks of each insurer’s assets and liabilities and its mix of net written premium. Insurers falling below a calculated threshold may be subject to varying degrees of regulatory action, including supervision, rehabilitation or liquidation. Failure to maintain our risk-based capital at the required levels could adversely affect the ability of our insurance subsidiary to maintain regulatory authority to conduct our business and our A.M. Best Rating. U.K. Regulations The laws and regulations of the jurisdictions and markets, including Lloyd’s may impose certain requirements on us or our subsidiaries that could have an impact on our business, including meeting solvency standards, maintaining minimum levels of statutory capital and liquidity, and potentially undergoing periodic examinations of their financial condition and compliance with underwriting and other regulations. Compliance with data protection, privacy, and cybersecurity laws exposes us to regulatory, operational, financial, and reputational risks. Our business involves the collection, use, storage, and transmission of sensitive personal, financial, and proprietary information of many parties, including policyholders, insureds, claimants, employees, and third-party service providers. We are subject to an increasingly complex and evolving framework of data protection, privacy, and information security laws and regulations in the U.S., U.K., and other jurisdictions in which we operate. These laws and regulations include U.S. federal and state privacy and cybersecurity requirements, such as state consumer privacy statutes, as well as sector-specific insurance regulations and, where applicable, non-U.S. data protection regimes. Many of these laws and regulations impose obligations regarding data governance, security controls, individual rights, incident response, vendor oversight, and cross-border data transfers. The interpretation and enforcement of these requirements are evolving, and regulatory guidance and expectations may change rapidly. Compliance with these laws and regulations requires significant and ongoing investment in people, systems, processes, and controls, and as we may be required to modify or enhance our security measures, monitoring systems, training programs, and contractual protections with third parties as these laws and regulations continue to evolve. These efforts may increase our operating costs and limit our ability to use data in ways that support operational efficiency, analytics, and product development. Failure, or perceived failure, to comply with applicable data protection or privacy requirements could result in investigations, fines, penalties, remediation obligations, restrictions on processing activities, contractual liability, and litigation, including class actions. Any of these developments could materially and adversely affect our business, results of operations, financial condition, and prospects. Failure to comply with corporate substance requirements could result in penalties, increased costs, and have an adverse impact on our business. We operate in multiple non-U.S. jurisdictions through our Apollo subsidiaries, including Bermuda, which has enacted minimum economic or corporate substance laws and regulations through the Bermuda Economic Substance Act 2018 (the “BES Act”). Apollo monitors its corporate substance, through its subsidiary Apollo Bermuda Limited, in Bermuda closely to ensure that it continues to meet these requirements. Compliance with the BES Act may require us to incur additional operating costs, including costs related to personnel, facilities, professional services, and internal controls, or to modify aspects of our organizational structure, business processes, or decision-making authority. Failure to comply with Bermuda’s economic substance rules can result in penalties, fines, or in extreme cases, deregistration. Lloyd’s has access to the EU market through Lloyd’s Insurance Company S.A., based in Belgium, and which has a third country branch in the U.K. In Belgium, the National Bank of Belgium has been silent regarding the European Insurance and Occupational Pensions Authority (“EIOPA”) Supervisory Statement. A ruling from the National Bank of Belgium on this topic could impact Lloyd’s Insurance Company S.A., and thus Apollo. 50 Table of Contents We are subject to economic sanctions, anti-bribery, and foreign corrupt practices laws and regulations in multiple jurisdictions, the violation of which could have a material adverse impact on our business. We conduct business subject to a variety of economic sanctions, anti-bribery, and anti-corruption laws and regulations, including those administered or enforced by authorities in the U.S., the U.K., and Bermuda. These laws include restrictions on dealings with certain sanctioned jurisdictions, entities, and individuals, as well as prohibitions on improper payments or other corrupt practices involving government officials and private parties. These legal regimes are complex, continue to evolve, and can be applied based on a broad range of jurisdictional connections, including the location of insured risks, counterparties, intermediaries, payments, banking relationships, employees, or business operations. Compliance with sanctions and anti-corruption laws requires significant diligence, monitoring, and controls, and although we have policies in place to guard against the possibility of violating these laws, these measures may not be fully effective in preventing violations, particularly in circumstances involving deliberate misconduct, circumvention of controls, or actions taken by third parties. Changes in sanctions programs or enforcement priorities, including those arising from geopolitical developments, could further increase compliance risks and limit our ability to underwrite certain risks, transact with certain counterparties, or operate in particular markets. Any failure, or alleged failure, to comply with applicable sanctions or anti-bribery and anti-corruption laws could materially and adversely affect our business, results of operations, financial condition, and reputation. Changes to the tax laws and implementation of new tax policies could have a significant negative impact on the overall economy and our business. New and proposed changes to tax laws could increase our corporate taxes. On July 4, 2025, new U.S. tax legislation was signed into law (known as the “One Big Beautiful Bill Act” or “OBBB Act”), which, among other provisions, makes permanent many of the tax provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. We do not expect the OBBB Act to have a material impact on our results of operations. New tax laws, in particular those enacted in response to proposals by the Organisation for Economic Co-operation and Development, could make substantive changes to the global international tax regime. Such changes could increase our global tax costs. We continue to monitor and assess the impact of such proposals. Finally, it is possible that tax laws will be further changed either in a technical corrections bill or entirely new legislation. It remains difficult to predict whether or when there will be any tax law changes or further guidance by the authorities in the U.S. or elsewhere in the world. New or proposed changes to tax laws may have a material adverse effect on our business, consolidated results of operations, liquidity and financial condition, as the impact of proposals on our business can vary substantially depending upon the specific changes or further guidance made and how the changes or guidance are implemented by the authorities. Applicable insurance laws may make it difficult to effect a change of control. Under applicable Texas insurance laws and regulations, no person may acquire control of a domestic insurer until written approval is obtained from the state insurance commissioner on the proposed acquisition. Such approval would be contingent upon the state insurance commissioner’s consideration of a number of factors including, among others, the financial strength of the proposed acquirer, the acquirer’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. Texas insurance laws and regulations pertaining to changes of control apply to both the direct and indirect acquisition of ten percent or more of the voting stock of a Texas-domiciled insurer. Accordingly, the acquisition of ten percent or more of our common stock would be considered an indirect change of control of Skyward Specialty and would trigger the applicable change of control filing requirements under Texas insurance laws and regulations, absent a disclaimer of control filing and its acceptance by the Texas Insurance Department. The acquisition of control over a U.K. authorized insurance company or Lloyd’s managing agent is subject to regulation in the United Kingdom by the Prudential Regulation Authority (“PRA”) and the Financial Conduct Authority (“FCA”) pursuant to the Financial Services and Markets Act 2000 (“FSMA”). A person will generally be regarded as having acquired “control” for UK regulatory purposes if that person, alone or together with persons acting in concert, directly or indirectly holds 10% or more of the shares or voting power of a U.K. authorized insurer, a Lloyd’s managing agent, or its parent undertaking, or is otherwise able to exercise significant influence over management. Any person proposing to acquire control of a PRA-authorized insurance company or Lloyd’s managing agent must provide prior notification to, and obtain approval from, the PRA, which consults with the FCA as part of the review process. The PRA typically has up to 60 working days to assess a proposed acquisition, subject to extension in certain circumstances. Acquiring control without the required regulatory clearance may result in supervisory or enforcement action. In addition, a person who already exercises control over a U.K. authorized insurance company or Lloyd’s managing agent must obtain further regulatory approval before increasing its level of control above specified thresholds, generally 20%, 30% and 50%. Similar approval requirements apply to changes in control of UK-authorized insurance intermediaries, although such approvals are granted by the FCA rather than the PRA. Where the transaction involves a Lloyd’s managing 51 Table of Contents agent or Lloyd’s entity, the Council of Lloyd’s must also approve the change of control. Lloyd’s applies control concepts and suitability standards that broadly align with those under FSMA and typically coordinates its consent process with the PRA’s review. Under the Insurance Act 1978 of Bermuda, ownership and control of a Bermuda-registered insurer or reinsurer, or its parent company, are subject to regulatory oversight by the Bermuda Monetary Authority (“BMA”). Where the shares of a registered insurer or its parent are publicly traded on a recognized stock exchange, a person who becomes a shareholder controller is required to notify the BMA in writing within specified time periods. For these purposes, a shareholder controller generally includes any person who, directly or indirectly, acquires or holds 10% or more of the shares or voting power of a registered insurer or its parent, or who is otherwise able to exercise significant influence over the management of such insurer or parent company. Notification obligations are triggered at ownership or voting thresholds of 10%, 20%, 33% and 50%, and similar notification requirements apply where a shareholder controller reduces or disposes of its interest such that its holdings fall below one of those thresholds. The BMA has the authority to object to a person acquiring or continuing to hold a shareholder controller position if it determines that such person does not meet applicable fitness and propriety standards. Where the BMA raises an objection, it may require the shareholder to reduce its ownership interest, restrict the exercise of voting rights, or take other actions deemed necessary to protect the insurer and its policyholders. Failure to comply with a BMA direction may constitute an offense and subject the affected party to regulatory enforcement measures. The requirements of each of these jurisdictions may discourage potential acquisition proposals and may delay, deter or prevent a change of control of Skyward Specialty, including through transactions that some or all of the stockholders of Skyward Specialty might consider to be desirable. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds None. Item 3. Defaults Upon Senior Securities None. Item 4. Mine Safety Disclosures None.