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Arch Capital Group

Arch Capital GroupACGLEarnings & Financial Report

Nasdaq · Financials · Fire, Marine & Casualty Insurance

Arch Capital Group Ltd. is a Bermuda exempted public company which writes insurance, reinsurance and mortgage insurance on a worldwide basis, with a focus on specialty lines, the segment of the insurance industry where the more difficult and unusual risks are written. The company is headquartered in Bermuda and operates globally in 60 offices in North America, Europe, Asia and Australia.

What changed in Arch Capital Group's 10-K — 2023 vs 2024

Top changes in Arch Capital Group's 2024 10-K

709 paragraphs added · 676 removed · 547 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

243 edited+95 added−61 removed357 unchanged
For a discussion of our risk management policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Summary of Critical Accounting Estimates—Ceded Reinsurance” and “Risk Factors—Risks Relating to Our Industry, Business and Operations—The failure of any of the loss limitation methods we employ could have a material adverse effect on our financial condition or results of operations.” Claims Management.
For a discussion of our risk management policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Summary of Critical Accounting Estimates—Ceded Reinsurance” and “Risk Factors—Risks Relating to Our Industry, Business and Operations—The failure of any of the loss limitation methods we employ could have a material adverse effect on our financial condition or results of operations.” Claims Management.
RESERVES Reserves for losses and loss adjustment expenses (“Loss Reserves”) represent estimates of what the insurer or reinsurer ultimately expects to pay on claims at a given time, based on facts and circumstances then known, and it is probable that the ultimate liability may exceed or be less than such estimates.
RESERVES Reserves for losses and loss adjustment expenses (“Loss Reserves”) represent estimates of what the insurer or reinsurer ultimately expects to pay on claims at a given time, based on the facts and circumstances then known, and it is probable that the ultimate liability may exceed or be less than such estimates.
On an annual basis, the Group is required to file Group statutory financial statements, a Group statutory financial return, a Group capital and solvency return, audited Group financial statements, a Group Solvency Self-Assessment (“GSSA”), and a financial condition report with the BMA.
On an annual basis, the Group is required to file the Group statutory financial statements, a Group statutory financial return, a Group capital and solvency return, audited Group financial statements, a Group Solvency Self-Assessment (“GSSA”), and a financial condition report with the BMA.
Ireland . Each of Arch Re Europe, Arch Insurance (EU) and Arch Underwriters Europe is incorporated and resident in Ireland for corporation tax purposes and will be subject to Irish corporate tax on worldwide profits, including the profits of the branches of Arch Re Europe, Arch Insurance (EU) and Arch Underwriters Europe.
Each of Arch Re Europe, Arch Insurance (EU) and Arch Underwriters Europe is incorporated and resident in Ireland for corporation tax purposes and will be subject to Irish corporate tax on worldwide profits, including the profits of the branches of Arch Re Europe, Arch Insurance (EU) and Arch Underwriters Europe.
At the expiration of the transition period from January 31, 2020 until December 31, 2020 (the “Transition Period”), during which time the U.K. remained in the EU customs union and single market, the European Union (Withdrawal) Act 2018, as amended, has transposed all applicable direct EU legislation into domestic U.K. law, thus ensuring the continuing application of Solvency II under the U.K.’s financial services regulatory regime.
At the expiration of the transition period from January 31, 2020 until December 31, 2020 (the “Transition Period”), during which time the U.K. remained in the EU customs union and single market, the EU (Withdrawal) Act 2018, as amended, has transposed all applicable direct EU legislation into domestic U.K. law, thus ensuring the continuing application of Solvency II under the U.K.’s financial services regulatory regime.
GDPR however does explicitly require that controllers notify personal data breaches under certain circumstances. Artificial Intelligence. The U.K. has adopted a “soft law” approach to AI regulation meaning it has not adopted formal legislation to regulate AI but has adopted soft law guidelines in the form of a White Paper published on March 29, 2023.
GDPR however does explicitly require that controllers notify personal data breaches under certain circumstances. Artificial Intelligence. The U.K. has adopted a (primarily) “soft law” approach to AI regulation meaning it has not adopted formal legislation to regulate AI but has adopted soft law guidelines in the form of a White Paper published on March 29, 2023.
(“Arch LMI”) was authorized by the Australian Prudential Regulation Authority (“APRA”) to write lenders’ mortgage insurance on a direct basis in Australia. We expanded our presence in Australia in August 2021 by acquiring Westpac Lenders Mortgage Insurance Limited, another APRA approved writer of lenders’ mortgage insurance, which has since been renamed Arch Lenders Mortgage Indemnity Ltd. (“Arch Indemnity”).
(“Arch LMI”) was authorized by the Australian Prudential Regulation Authority (“APRA”) to write lenders’ mortgage insurance (“LMI”) on a direct basis in Australia. We expanded our presence in Australia in August 2021 by acquiring Westpac Lenders Mortgage Insurance Limited, another APRA approved writer of lenders mortgage insurance, which has since been renamed Arch Lenders Mortgage Indemnity Ltd. (“Arch Indemnity”).
Enterprise Risk Management (“ERM”) is a key element in our philosophy, strategy and culture. We employ an ERM framework that includes underwriting, reserving, investment, credit, group and operational risks. Risk appetite and exposure limits are set by our executive management team, reviewed with the Board and its committees and routinely discussed with business unit management.
ENTERPRISE RISK MANAGEMENT General. Enterprise Risk Management (“ERM”) is a key element in our philosophy, strategy and culture. We employ an ERM framework that includes underwriting, reserving, investment, credit, group and operational risks. Risk appetite and exposure limits are set by our executive management team, reviewed with the Board and its committees and routinely discussed with business unit management.
In late 2023, the NAIC adopted a model bulletin entitled “Use of Artificial Intelligence Systems by Insurers” that sets forth state insurance regulators’ expectations on how insurers should govern the use of advanced analytical and computational technologies used to make or support decisions impacting consumers.
In 2023, the NAIC adopted a model bulletin entitled “Use of Artificial Intelligence Systems by Insurers” that sets forth state insurance regulators’ expectations on how insurers should govern the use of advanced analytical and computational technologies used to make or support decisions impacting consumers.
Any foreign branch corporate tax payable is creditable against Arch Re Europe’s Irish corporate tax liability on the results of Arch Re Europe’s branches with the same principle applied to Arch Insurance (EU)’s branches and Arch Underwriters Europe’s branches. The current rate of Irish corporation tax applicable to such trading profits is 12.5%. Switzerland .
Any foreign branch corporate tax payable is creditable against Arch Re Europe’s Irish corporate tax liability on the results of Arch Re Europe’s branches with the same principle applied to Arch Insurance (EU)’s branches and Arch Underwriters Europe’s branches. The current rate of Irish corporation tax applicable to such trading profits is 12.5%.
The implementation of these reforms by the U.K. government and potential divergence between the U.K. and the EU may have an impact on whether the U.K. is granted Solvency II equivalence status by the EU in any of the three areas to which equivalence applies. Financial Services Compensation Scheme.
The implementation of these reforms and potential divergence between the U.K. and the EU may have an impact on whether the U.K. is granted Solvency II equivalence status by the EU in any of the three areas to which equivalence applies. Financial Services Compensation Scheme.
Our U.S. insurance group has five regional offices, and the executive in charge of each region is primarily responsible for all aspects of the marketing and distribution of our insurance group’s products, including the management of broker and other producer relationships in such executive’s respective region.
Our U.S. insurance group has five regional offices, and the executive in charge of each region is primarily responsible for all aspects of the marketing and distribution of our insurance group’s products, including the management of broker and other producer relationships, in the executive’s respective region.
The EU GDPR governs the collection, use, disclosure, transfer or other processing of personal data. Its scope extends to certain entities not established in the EEA if they process personal data or offer goods or services to, or monitor the behavior of, EEA data subjects.
The EU GDPR governs the collection, use, disclosure, transfer or other processing of personal data. Its scope extends to certain entities not established in the EEA if they offer goods or services to, or monitor the behavior of, EEA data subjects.
Our insurance underwriting platform initially consisted of our Bermuda and U.S. operations, followed by the establishment of our United Kingdom-based carrier, Arch Insurance (U.K.) Limited (“Arch Insurance (U.K.)”) in 2004 and Canadian operations in 2005.
Our insurance underwriting platform initially consisted of our Bermuda and U.S. operations, followed by the establishment of our United Kingdom-based carrier, Arch Insurance (UK) Limited (“Arch Insurance (U.K.)”) in 2004 and Canadian operations in 2005.
Virgin Islands and Guam. Arch Specialty is an approved excess and surplus lines insurer in 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands and an authorized insurer in one state. Arch Indemnity Insurance is an admitted insurer in 50 states and the District of Columbia.
Arch Specialty is an approved excess and surplus lines insurer in 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands and an authorized insurer in one state. Arch Indemnity Insurance is an admitted insurer in 50 states and the District of Columbia.
As our Group supervisor, the BMA performs a number of functions including: (i) coordinating the gathering and dissemination of relevant or essential information for going concerns and emergency situations, including the dissemination of information which is of importance for the supervisory task of other competent authorities; (ii) carrying out supervisory reviews and assessments of our Group; (iii) carrying out assessments of our Group's compliance with the rules on solvency, risk concentration, intra-group transactions and good governance procedures; (iv) planning and coordinating through regular meetings held at least annually (or by other appropriate means) with other competent authorities, supervisory activities in respect of our Group; both as a going concern and in emergency situations (v) coordinating any enforcement action that may need to be taken against our Group or any Group members; and (vi) planning and coordinating meetings of colleges of supervisors in order to facilitate the carrying out of these functions.
As our Group supervisor, the BMA performs a number of functions including: (i) coordinating the gathering and dissemination of relevant or essential information for going concerns and emergency situations, including the dissemination of information which is of importance for the supervisory task of other competent authorities; (ii) carrying out supervisory reviews and assessments of our Group; (iii) carrying out assessments of our Group's compliance with the rules on solvency, risk concentration, intra-group transactions and good governance procedures; (iv) planning and coordinating through regular meetings held at least annually (or by other appropriate means) with other competent authorities, supervisory activities in respect of our Group; both as a going concern and in emergency situations (v) coordinating any enforcement action that may need to be taken against our Group or any Group member(s); and (vi) planning and coordinating meetings of colleges of supervisors in order to facilitate the carrying out of these functions.
Arch Re Underwriting ApS in Denmark (“Arch Re Denmark”) is an underwriting agency underwriting accident and health and other reinsurance business for Arch Re Europe. Arch Re Europe also has branches in the U.K. and Switzerland (“Arch Re Europe Swiss Branch”).
Arch Re Underwriting ApS in Denmark (“Arch Re Denmark”) is an underwriting agency underwriting accident and health and other reinsurance business for Arch Re Europe. Arch Re Europe also has branches in the U.K., France and Switzerland (“Arch Re Europe Swiss Branch”).
In addition, Arch Re Bermuda is prohibited from declaring or paying in any financial year dividends of more than 25% of its total statutory capital and surplus (as shown on its previous financial year’s statutory balance sheet) unless it files (at least seven days before payment of such dividends) with the BMA an affidavit stating that it will continue to meet the required margins.
In addition, each of Arch Re Bermuda and AGRL is prohibited from declaring or paying in any financial year dividends of more than 25% of its total statutory capital and surplus (as shown on its previous financial year’s statutory balance sheet) unless it files (at least seven days before payment of such dividends) with the BMA an affidavit stating that it will continue to meet the required margins.
These operations include providers which are also approved as eligible mortgage insurers by Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”), each a GSE.
These operations include providers which are approved as eligible mortgage insurers by Federal National Mortgage Association (“Fannie Mae”) and Federal Home Loan Mortgage Corporation (“Freddie Mac”), each a GSE.
Reporting obligations for other companies fulfilling certain criteria will commence in 2026 for financial years starting on or after January 1, 2025. In addition, the reporting standards under the CSRD, which provides in-scope companies with the technical detail on the information that will need to be disclosed and reported, were adopted by the European Commission in July 2023.
Reporting obligations for other companies fulfilling certain criteria will commence in 2026 for financial years starting on or after January 1, 2025. In addition, the reporting standards under the CSRD, which provide in-scope companies with the technical detail on the information that will need to be disclosed and reported, were adopted by the European Commission in July 2023.
Lloyd’s has also imposed ESG focused outcomes by way of the Principles with a particular focus on culture, investment and underwriting profitability. See “Lloyd’s Supervision” above for additional details. Russian Sanctions . Since the Russian invasion of Ukraine in February 2022, the U.K. government has instituted a new sanctions regime targeting Russia.
Lloyd’s has also imposed sustainability focused outcomes by way of the Principles with a particular focus on culture, investment and underwriting profitability. See “Lloyd’s Supervision” above for additional details. Russian Sanctions . Since the Russian invasion of Ukraine in February 2022, the U.K. government has instituted a new sanctions regime targeting Russia.
The sanctions imposed include prohibitions on providing financial services (including insurance and reinsurance) to persons connected with Russia in relation to certain restricted goods and services, and the freezing of assets owned or controlled by designated persons. The U.K., U.S. and EU often consult with each other with respect to their respective sanctions programs. Privacy and Cybersecurity.
The sanctions imposed include prohibitions on providing financial services (including insurance and reinsurance) to persons connected with Russia in relation to certain restricted goods and services, and the freezing of assets owned or controlled by designated persons. The U.K., U.S. and EU often consult with each other with respect to their respective sanctions programs.
Although, in doing so, they may be subject to the laws of such Member States with respect to the conduct of business in such Member State, company law registrations and other matters, they will remain subject to financial and operational supervision by the CBI only. Arch Insurance (EU) has branches in Italy and the U.K.
Although, in doing so, they may be subject to the laws of such Member States with respect to the conduct of business in such Member State, company law registrations and other matters, they will remain subject to financial and operational supervision by the CBI only. Arch Insurance (EU) has branches in Italy, France, Spain and the U.K.
By continuously working to offer a meaningful and inclusive employee experience, we not only seek to help people perform at their best among colleagues who care, but also aim to support our strategy of delivering specialty products and innovative solutions to our customers in each of our business segments.
By continuously working to offer a meaningful and engaging employee experience, we not only seek to help people perform at their best among colleagues who care, but also aim to support our strategy of delivering specialty products and innovative solutions to our customers in each of our business segments.
While a Class 4 insurer is not currently required to maintain its available statutory economic capital and surplus at this level, the target capital level serves as an early warning tool for the BMA, and failure to maintain statutory capital at least equal to the target capital level will likely result in increased regulatory oversight.
While a Class 3A and/or Class 4 insurer is not currently required to maintain its available statutory economic capital and surplus at this level, the target capital level serves as an early warning tool for the BMA, and failure to maintain statutory capital at least equal to the target capital level will likely result in increased regulatory oversight.
See Item 1, “ Business—Regulation , European Union – ESG Considerations.” Third Country Governance Arrangements. In September 2023, in response to a supervisory statement issued by EIOPA in February 2023 on the use of third country governance arrangements (such as branches) by EU authorized (re)insurers, the CBI published its formal views on the use of third country governance arrangements.
See Item 1, “ Business—Regulation , European Union – Sustainability Considerations.” Third Country Governance Arrangements. In September 2023, in response to a supervisory statement issued by EIOPA in February 2023 on the use of third country governance arrangements (such as branches) by EU authorized (re)insurers, the CBI published its formal views on the use of third country governance arrangements.
Climate Change and Financial Risks. U.S. state insurance regulators have increased their oversight of insurance company governance, reporting and disclosure relating to the potential risks presented by climate change and one or more states may adopt climate-change-related requirements that impact our insurance and reinsurance companies.
Some U.S. state insurance regulators have increased their oversight of insurance company governance, reporting and disclosure relating to the potential risks presented by climate change and one or more states may adopt climate-change-related requirements that impact our insurance and reinsurance companies.
GDPR imposes obligations on controllers, including, among others: (i) accountability and transparency requirements, requiring controllers to demonstrate and record compliance with the GDPR and to provide detailed information to individuals regarding the processing of their personal data; (ii) requirements to process personal data lawfully including specific requirements for obtaining valid consent where consent is the legal basis for processing; (iii) obligations to consider data protection when any new products or services are developed and designed (e.g., to limit the amount of personal data processed); (iv) obligations to comply with individuals’ data protection rights including a right: (a) of access to, erasure of, or rectification of personal data, (b) to restriction of processing or to withdraw consent to processing, (c) to object to processing or to ask for a copy of personal data to be provided to a third party, and (d) not to be subject to solely automated decision-making; and (v) an obligation to report personal data breaches to: (i) the data protection supervisory authority without undue delay (and no ARCH CAPITAL 26 2023 FORM 10-K later than 72 hours) after becoming aware of the personal data breach, unless the personal data breach is unlikely to result in a risk to the data subjects’ rights and freedoms; and (ii) affected individuals, where the personal data breach is likely to result in a high risk to their rights and freedoms.
GDPR imposes obligations on controllers, including, among others: (i) accountability and transparency requirements, requiring controllers to demonstrate and record compliance with the GDPR and to provide detailed information to individuals regarding the processing of their personal data; (ii) requirements to process personal data lawfully including specific requirements for obtaining valid consent where consent is the legal basis for processing; (iii) obligations to consider data protection when any new products or services are developed and designed (e.g., to limit the amount of personal data processed); (iv) obligations to comply with individuals’ data protection rights including a right: (a) of access to, erasure of, or rectification of personal data, (b) to restriction of processing or to withdraw consent to processing, (c) to object to processing or to ask for a copy of personal data to be provided to a third party, and (d) not to be subject to solely automated decision-making; and (v) an obligation to report personal data breaches to: (i) the data protection supervisory authority without undue delay (and no later than 72 hours) after becoming aware of the personal data breach, unless the personal data breach is unlikely to result in a risk to the data subjects’ rights and freedoms; and (ii) affected individuals, where the personal data breach is likely to result in a high risk to their rights and freedoms.
In tandem with all of the above, EIOPA continues to engage with stakeholders in the (re)insurance sector and publish detailed guidelines, recommendations and expectations relating to ESG matters and how these should be managed and considered by the (re)insurance sector. Russian Sanctions.
In tandem with all of the above, EIOPA continues to engage with stakeholders in the (re)insurance sector and publish detailed guidelines, recommendations and expectations relating to sustainability matters and how these should be managed and considered by the (re)insurance sector. Russian Sanctions.
In addition, reporting obligations apply to in-scope companies regarding (1) the financial products they provide and (2) the environmental sustainability of an in-scope company's activities, which is to be disclosed in non-financial statements that are required under the NFRD and the CSRD. In February 2022, the European Commission adopted a proposal for the Corporate Sustainability Due Diligence Directive (“CSDD”).
In addition, reporting obligations apply to in-scope companies regarding (1) the financial products they provide and (2) the environmental sustainability of an in-scope company's activities, which is to be disclosed in non-financial statements that are required under the CSRD. In February 2022, the European Commission adopted a proposal for the Corporate Sustainability Due Diligence Directive (“CSDDD”).
Arch Mortgage Guaranty Company, which is licensed in all 50 states and the District of Columbia, insures mortgages that are not intended to be sold to the GSEs, and it is therefore not approved by either GSE as an eligible mortgage insurer. In 2019, Arch LMI was authorized by APRA to write lenders’ mortgage insurance.
AMG, which is licensed in all 50 states and the District of Columbia, insures mortgages that are not intended to be sold to the GSEs, and it is therefore not approved by either GSE as an eligible mortgage insurer. In 2019, Arch LMI was authorized by APRA to write lenders’ mortgage insurance.
New York and other states also require licensed insurers with countrywide premium written of at least $100 million to annually provide disclosure of their assessment and management of climate related risks.
New York and other states also require licensed insurers with countrywide premium written of at least $100 million to annually provide disclosure of their assessment and management of climate related risks. Other Federal Regulation .
Arch Re U.S. is also an admitted insurer in Guam. Our property facultative reinsurance operations are conducted primarily through Arch Re U.S. The property facultative reinsurance operations have offices throughout the U.S., Canada, Europe and the U.K.
Arch Re U.S. is also an authorized insurer in Guam. Our property facultative reinsurance operations are conducted primarily through Arch Re U.S. The property facultative reinsurance operations have offices throughout the U.S., Canada, Europe and the U.K.
U.K. insurance regulatory laws do not prohibit the payment of dividends, but the PRA or FCA, as applicable, requires that insurance companies, insurance intermediaries and other regulated entities maintain certain solvency margins and may restrict the payment of a dividend by Arch Insurance (U.K.) or AMAL, for example. European Union Considerations .
U.K. insurance regulatory laws do not prohibit the payment of dividends, but the PRA or FCA, as applicable, requires that insurance companies, insurance intermediaries and other regulated entities maintain certain solvency margins and may restrict the payment of a dividend by Arch Insurance (U.K.) or AMAL, for example. EU Considerations .
Our insurance group’s claims management function is performed by claims professionals, as well as experienced external claims managers (third party administrators), where appropriate. In addition to investigating, evaluating and resolving claims, members of our insurance group’s claims departments work with underwriting professionals as functional teams in order to develop products and services desired by the group’s clients.
Our insurance group’s claims management function is performed by claims professionals, as well as experienced external claims managers (third party administrators), where appropriate. In addition to investigating, evaluating and resolving claims, members of our insurance group’s claims departments work with underwriting professionals to develop products and services desired by the group’s clients.
In Australia, businesses which develop and use AI are subject to various Australian laws relating to privacy, corporations and anti-discrimination which apply across all sectors of the economy.
Artificial Intelligence. In Australia, businesses which develop and use AI are subject to various Australian laws relating to privacy, corporations and anti-discrimination which apply across all sectors of the economy.
If it has failed to meet its minimum solvency margins or minimum liquidity ratio on the last day of any financial year, Arch Re Bermuda will be prohibited, without the approval of the BMA, from declaring or paying any dividends during the next financial year.
If either Arch Re Bermuda and/or AGRL has failed to meet its minimum solvency margins or minimum liquidity ratio on the last day of any financial year, it will be prohibited, without the approval of the BMA, from declaring or paying any dividends during the next financial year.
For so long as the shares of Arch Capital are listed on the Nasdaq or another recognized stock exchange, any person who, directly or indirectly, becomes a holder of at least 10%, 20%, 33% or 50% of our common shares must notify the BMA in writing ARCH CAPITAL 17 2023 FORM 10-K within 45 days of becoming such a holder (or ceasing to be such a holder).
For so long as the shares of Arch Capital are listed on the Nasdaq or another recognized stock exchange, any person who, directly or indirectly, becomes a holder of at least 10%, 20%, 33% or 50% of our common shares must notify the BMA in writing within 45 days of becoming such a holder (or ceasing to be such a holder).
In general, the penalty tax is equivalent to an interest charge on taxes that are deemed due during the period the shareholder owned the shares, computed by assuming that the excess distribution or gain (in the case of a sale) with respect ARCH CAPITAL 38 2023 FORM 10-K to the shares was taxable in equal portions throughout the holder’s period of ownership.
In general, the penalty tax is equivalent to an interest ARCH CAPITAL 41 2024 FORM 10-K charge on taxes that are deemed due during the period the shareholder owned the shares, computed by assuming that the excess distribution or gain (in the case of a sale) with respect to the shares was taxable in equal portions throughout the holder’s period of ownership.
We offer competitive compensation and comprehensive benefits packages, including an employee share purchase plan, parental leave, contributions to retirement savings plans and programs to support employee mental and physical well-being. We recognize the financial burden of educational loans in the United States and have supported our employees with a student debt assistance program.
We offer competitive compensation and comprehensive benefits packages, including an employee share purchase plan, parental leave, contributions to retirement savings plans and programs to support employee mental and physical well-being. We recognize the financial burden of educational loans in the U.S. and have supported our employees with a student debt assistance program.
Without the approval of the BMA, Arch Re Bermuda is prohibited from reducing by 15% or more its total statutory capital as set out in its previous year’s financial statements and any application for such approval must include an affidavit stating that it will continue to meet the required margins.
Without the approval of the BMA, each of Arch Re Bermuda and AGRL are prohibited from reducing by 15% or more its total statutory capital as set out in its previous year’s financial statements and any application for such approval must include an affidavit stating that it will continue to meet the required margins.
Arch Capital has obtained from the Minister of Finance under the Exempted Undertakings Tax Protection Act 1966 of Bermuda an assurance that, in the event that Bermuda enacts legislation imposing tax computed on profits, income, any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance, the imposition of any such tax shall not be applicable to Arch Capital or to any of our operations or our shares, debentures or other obligations until March 31, 2035.
Arch Capital has obtained from the Minister of Finance under the Exempted Undertakings Tax Protection Act 1966 of Bermuda, as amended (“EUTP Act”) an assurance that, in the event that Bermuda enacts legislation imposing tax computed on profits, income, any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance, then the imposition of any such tax shall not be applicable to Arch Capital or to any of our operations or our shares, debentures or other obligations until March 31, 2035.
In 2019, Arch Insurance (EU), based in Dublin, Ireland, received authorization from the Central Bank of Ireland (“CBI”) to expand its authorized classes of business as part of our plan to address the U.K.’s departure from the European Union (“Brexit”).
Arch Insurance (EU), based in Dublin, Ireland, received authorization from the Central Bank of Ireland (“CBI”) to expand its authorized classes of business as part of our plan to address the U.K.’s departure from the EU (“Brexit”).
The reinsurance group’s property facultative operations write reinsurance on a facultative basis whereby they assume part of the risk under primarily single insurance contracts. Facultative reinsurance is typically purchased by ceding companies for individual risks not covered by their reinsurance treaties, for unusual risks or for amounts in excess of the limits on their reinsurance treaties.
The reinsurance group’s casualty facultative and property facultative underwriters write reinsurance on a facultative basis whereby they assume part of the risk under primarily single insurance contracts. Facultative reinsurance is typically purchased by ceding companies for individual risks not covered by their reinsurance treaties, for unusual risks or for amounts in excess of the limits on their reinsurance treaties.
As part of the underwriting process, our reinsurance group typically assesses a variety of factors, including: • adequacy of underlying rates for a specific class of business and territory; • the reputation of the proposed cedent and the likelihood of establishing a long-term relationship with the cedent, the geographic area in which the cedent does business, together with its catastrophe exposures, and our aggregate exposures in that area; • historical loss data for the cedent and, where available, for the industry as a whole in the relevant regions, in order to compare the cedent’s historical loss experience to industry averages; • projections of future loss frequency and severity; and • the perceived financial strength of the cedent.
As part of the underwriting process, our reinsurance group typically assesses a variety of factors, including: • adequacy of underlying rates for a specific class of business and territory; • the reputation of the proposed cedent and the likelihood of establishing a long-term relationship with the cedent, the geographic area in which the cedent does business, together with its catastrophe exposures, and our aggregate exposures in that area; • historical loss data for the cedent and, where available, for the industry as a whole in the relevant regions, in ARCH CAPITAL 8 2024 FORM 10-K order to compare the cedent’s historical loss experience to industry averages; • projections of future loss frequency and severity; and • the perceived financial strength of the cedent.
Under the relevant Code Section 302(b) tests, the redemption should be treated as a sale or exchange only if it (1) is substantially disproportionate, (2) constitutes a complete ARCH CAPITAL 36 2023 FORM 10-K termination of the holder's stock interest in us or (3) is “not essentially equivalent to a dividend.” In determining whether any of these tests are met, shares considered to be owned by the holder by reason of certain constructive ownership rules set forth in the Code, as well as shares actually owned, must generally be taken into account.
Under the relevant Code Section 302(b) tests, the redemption should be treated as a sale or exchange only if it (1) is substantially disproportionate, (2) constitutes a complete termination of the holder's stock interest in us or (3) is “not essentially equivalent to a dividend.” In determining whether any of these tests are met, shares considered to be owned by the holder by reason of certain constructive ownership rules set forth in the Code, as well as shares actually owned, must generally be taken into account.
The U.S. first imposed sanctions on the Russian Federation following its annexation of Crimea in 2014. Since February 2022, the U.S. has imposed additional sanctions on Russia in response to the Russian invasion of Ukraine and the ongoing hostilities.
The U.S. first imposed sanctions on the Russian Federation following its annexation of Crimea in 2014. Since February 2022, the U.S. has since imposed several new sanctions on Russia in response to the Russian invasion of Ukraine and the ongoing hostilities.
In the U.S., our master policies generally provide that within 60 days of the perfection of a primary insurance claim, we have the option of: • paying the insurance coverage percentage specified in the certificate of insurance multiplied by the loss amount; • in the event the property is sold pursuant to an approved prearranged sale, paying the lesser of (i) 100% of the loss amount less the proceeds of sale of the property, or (ii) the specified coverage percentage multiplied by the loss amount; or ARCH CAPITAL 11 2023 FORM 10-K • paying 100% of the loss amount in exchange for the insured’s conveyance to us of good and marketable title to the property, with us then selling the property for our own account.
In the U.S., our master policies generally provide that within 60 days of the perfection of a primary insurance claim, we have the option of: • paying the insurance coverage percentage specified in the certificate of insurance multiplied by the loss amount; • in the event the property is sold pursuant to an approved prearranged sale, paying the lesser of (i) 100% of the loss amount less the proceeds of sale of the property, or (ii) the specified coverage percentage multiplied by the loss amount; or • paying 100% of the loss amount in exchange for the insured’s conveyance to us of good and marketable title to the property, with us then selling the property for our own account.
Cash distributions, if any, made with respect to common shares or preferred shares held by a holder that is, for U.S. federal income tax purposes, an individual, corporation, estate or trust that is not a U.S. holder (a “Non-U.S. holder”) generally will not be subject to U.S. withholding tax (subject to certain exceptions that may apply if we were determined to be engaged in a trade or business in the United States and 25% or more of our gross ARCH CAPITAL 39 2023 FORM 10-K income were to be effectively connected to such U.S. trade or business).
Cash distributions, if any, made with respect to common shares or preferred shares held by a holder that is, for U.S. federal income tax purposes, an individual, corporation, estate or trust that is not a U.S. holder (a “Non-U.S. holder”) generally will not be subject to U.S. withholding tax (subject to certain exceptions that may apply if we were determined to be engaged in a trade or business in the United States and 25% or more of our gross income were to be effectively connected to such U.S. trade or business).
For a discussion of our risk management policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Summary of Critical Accounting Estimates—Ceded Reinsurance” and “Risk Factors—Risks Relating to Our Industry, Business and Operations—The failure of any of the loss limitation methods we employ could have a material adverse effect on our financial condition or results of operations.” Our mortgage group has ceded a portion of its premium on a quota share basis through certain reinsurance agreements and through aggregate excess of loss reinsurance agreements which provide reinsurance coverage for delinquencies on portfolios of in-force policies issued between certain periods.
For a discussion of our risk management policies, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Summary of Critical Accounting Estimates—Ceded Reinsurance” and “Risk Factors—Risks Relating to Our Industry, Business and Operations—The failure of any of the loss limitation methods we employ could have a material adverse effect on our financial condition or results of operations.” ARCH CAPITAL 11 2024 FORM 10-K Our mortgage group has ceded a portion of its premium through quota share and aggregate excess of loss reinsurance agreements which provide reinsurance coverage for delinquencies on portfolios of in-force policies issued between certain periods.
In Australia, Arch Indemnity provides lenders’ mortgage insurance on a flow basis to cover new originations and offers coverage through structured transactions to cover one or more portfolios of previously originated residential loans. • Reinsurance . Arch Re Bermuda provides quota share and excess of loss reinsurance covering U.S. and international mortgages. • Other credit risk-sharing products .
In Australia, Arch Indemnity provides lenders’ mortgage insurance on a flow basis to cover new originations and offers coverage through structured transactions to cover one or more portfolios of previously originated residential loans. • Reinsurance . Arch Re Bermuda provides quota share and excess of loss reinsurance covering U.S. and international mortgages.
GSE Eligible Mortgage Insurer Requirements. GSEs impose requirements on private mortgage insurers so that they may be eligible to insure loans sold to the GSEs, known as the Private Mortgage Insurer Eligibility Requirements (“PMIERs”). The PMIERs apply to our eligible mortgage insurers, but do not apply to Arch Mortgage Guaranty Company, which is not GSE-approved.
GSE Eligible Mortgage Insurer Requirements. GSEs impose requirements on private mortgage insurers so that they may be eligible to insure loans sold to the GSEs, known as the Private Mortgage Insurer Eligibility Requirements (“PMIERs”). The PMIERs apply to our eligible mortgage insurers, but do not apply to AMG, which is not GSE-approved.
The IAF Act implements substantive changes to the fitness and probity regime maintained by the CBI in Ireland and imposes certain additional obligations and liability for senior executives in Irish regulated financial service entities, including (re)insurance companies. Arch has considered the impact of the IAF Act on its business and has catered for this accordingly.
The IAF Act implements substantive changes to the fitness and probity regime maintained by the CBI in Ireland and imposes certain additional obligations and liability for senior executives in Irish regulated financial service entities, including (re)insurance companies. Arch considered the impact of the IAF Act on its business and implemented the IAF Act requirements accordingly.
Arch Re Bermuda is also subject to an enhanced capital requirement (“ECR”) which is established by reference to either the Bermuda Solvency Capital Requirement model (“BSCR”) or an approved internal capital model.
Arch Re Bermuda and AGRL are also subject to an enhanced capital requirement (“ECR”) which is established by reference to either the Bermuda Solvency Capital Requirement model (“BSCR”) or an approved internal capital model.
(as applicable) and has extra-territorial effect where an entity established outside of the U.K. processes personal data in relation to the offering of goods or services to individuals in the EEA and/or the U.K. or the monitoring of their behavior. The U.K.
GDPR has direct effect where an entity is established in the U.K. (as applicable) and has extra-territorial effect where an entity established outside of the U.K. processes personal data in relation to the offering of goods or services to individuals in the U.K. or the monitoring of their behavior. The U.K.
Related Person Insurance Income Rules . In general, with respect to RPII (a limited category of insurance income, as defined below), the CFC rules are expanded in two ARCH CAPITAL 37 2023 FORM 10-K significant respects.
ARCH CAPITAL 40 2024 FORM 10-K Related Person Insurance Income Rules . In general, with respect to RPII (a limited category of insurance income, as defined below), the CFC rules are expanded in two significant respects.
Our mortgage group includes direct mortgage insurance in the U.S. primarily through Arch Mortgage Insurance Company, United Guaranty Residential Insurance Company, and Arch Mortgage Guaranty Company (together, “Arch MI U.S.”); mortgage reinsurance primarily through Arch Re Bermuda on both a proportional and non-proportional basis globally; mortgage insurance and reinsurance in the EEA and U.K. primarily through Arch Insurance (EU), and in Australia through Arch Indemnity; and participation in various GSE credit risk-sharing products primarily through Arch Re Bermuda.
Our mortgage group includes direct mortgage insurance in the U.S. primarily through Arch Mortgage Insurance Company (“AMIC”), United Guaranty Residential Insurance Company (“UGRIC”), and Arch Mortgage Guaranty Company (“AMG” and together with AMIC and UGRIC, “Arch MI U.S.”); mortgage reinsurance primarily through Arch Re Bermuda on both a proportional and non-proportional basis globally; mortgage insurance and reinsurance in the EEA and U.K. primarily through Arch Insurance (EU), and in Australia through Arch Indemnity; and participation in various GSE credit risk-sharing products primarily through Arch Re Bermuda.
Future changes to the FHA program, including any reduction to premiums charged, may impact the demand for private mortgage insurance. ARCH CAPITAL 14 2023 FORM 10-K In addition, Arch MI U.S. and other private mortgage insurers increasingly compete with multi-line reinsurers and capital markets alternatives to private mortgage insurance.
Future changes to the FHA program, including any reduction to premiums charged, may impact the demand for private mortgage insurance. In addition, Arch MI U.S. and other private mortgage insurers increasingly compete with multi-line reinsurers and capital markets alternatives to private mortgage insurance.
States may impose additional internal review and regulatory filing requirements on licensed insurers and their parent companies. All states have enacted the ORSA Model Act or substantially similar legislation. Cybersecurity and Privacy . In July 2023, the SEC adopted new cybersecurity disclosure rules (“SEC Cybersecurity Rules”) mandating cybersecurity incident and risk management disclosure for public companies such as Arch.
States may impose additional internal review and regulatory filing requirements on licensed insurers and their parent companies. All states have enacted the ORSA Model Act or substantially similar legislation. Cybersecurity and Privacy . The SEC maintains cybersecurity disclosure rules (“SEC Cybersecurity Rules”) mandating cybersecurity incident and risk management disclosure for public companies such as Arch.
Information Commissioner’s Office (“ICO”) has the power under the GDPR to (amongst other things) impose fines for serious breaches of up to the higher of 4% of the organization’s annual worldwide turnover or £17.5 million. Individuals also have a right to compensation, as a result of an organization’s breach of the U.K.
Information Commissioner’s Office (“ICO”) has the power under the GDPR to (amongst other things) impose fines for serious breaches of up to the higher of 4% of the organization’s annual worldwide turnover or £17.5 million. Individuals also have a right to compensation, as a result of ARCH CAPITAL 28 2024 FORM 10-K an organization’s breach of the U.K.
(the “Treaty”), Arch Capital's Bermuda insurance subsidiaries will be subject to U.S. income tax on any insurance premium income that is effectively connected with ARCH CAPITAL 33 2023 FORM 10-K a U.S. trade or business only if that trade or business is conducted through a permanent establishment in the U.S. No Treasury Regulations interpreting the Treaty have been issued.
(the “Treaty”), Arch Capital's Bermuda insurance subsidiaries will be subject to U.S. income tax on any insurance premium income that is effectively connected with a U.S. trade or business only if that trade or business is conducted through a permanent establishment in the U.S. No Treasury Regulations interpreting the Treaty have been issued.
Generally, mortgage insurance policies exclude direct physical losses resulting from physical damages, such as damaged caused by extreme weather events, though we do have some exposure to physical damage in certain GSE credit risk transfer (“CRT”) transactions.
Generally, mortgage insurance policies exclude direct physical losses resulting from physical damages, such as damage caused by extreme weather events, though we do have some exposure to physical damage in certain GSE credit risk transfer (“CRT”) and European structured financial transactions.
For information on our reserving process, see note 6, “Short Duration Contracts,” to our consolidated financial statements in Item 8. Unpaid and paid losses and loss adjustment expenses recoverable were approximately $7.1 billion at December 31, 2023.
For information on our reserving process, see note 6, “Short Duration Contracts,” to our consolidated financial statements in Item 8. Unpaid and paid losses and loss adjustment expenses recoverable were approximately $8.3 billion at December 31, 2024.
Certain of our European entities will fall within the scope of certain reporting obligations under the CSRD. An additional ESG framework, the EU Taxonomy, came into force in July 2020, with in-scope companies required to comply with certain reporting obligations from January 1, 2022.
Certain of our European entities and non-European entities will fall within the scope of certain reporting obligations under the CSRD. An additional environmental sustainability framework, the EU Taxonomy, came into force in July 2020, with in-scope companies required to comply with certain reporting obligations from January 1, 2022.
We refer you to Item 1A “Risk Factors” for a discussion of risk factors relating to our business. OUR COMPANY General Arch Capital is a publicly listed Bermuda exempted company with approximately $21.1 billion in capital at December 31, 2023 and is part of the S&P 500 index.
We refer you to Item 1A “Risk Factors” for a discussion of risk factors relating to our business. OUR COMPANY General Arch Capital is a publicly listed Bermuda exempted company with approximately $23.5 billion in capital at December 31, 2024 and is part of the S&P 500 index.
The majority of our European business is written through our Ireland-based carrier, Arch Insurance (EU) Designated Activity Company (“Arch Insurance (EU)”), which was authorized in 2011 to provide mortgage insurance products and services to the European and U.K. markets. In 2019, Arch LMI Pty Ltd.
The majority of our European business is written through our Ireland-based carrier, Arch Insurance (EU), which was authorized in 2011 to provide mortgage insurance products and services to the European and U.K. markets. In 2019, Arch LMI Pty Ltd.
Reinsurance Operations Our reinsurance operations are conducted on a worldwide basis through our reinsurance subsidiaries, Arch Re Bermuda, Arch Re U.S., Arch Syndicate 2012, Arch Syndicate 1955 and Arch Re Europe. Arch Re Bermuda is dual-licensed as a Class 4 general business insurer and Class C long-term insurer and is headquartered in Hamilton, Bermuda.
Reinsurance Operations Our reinsurance operations are conducted on a worldwide basis through our reinsurance subsidiaries, Arch Re Bermuda, Arch Re U.S., our Lloyd’s Syndicates, and Arch Re Europe. Arch Re Bermuda is dual-licensed as a Class 4 general business insurer and Class C long-term insurer and is headquartered in Hamilton, Bermuda.
The percentage of gross premiums written on our top 10 customers was 24.6% and 23.6% as of December 31, 2023 and 2022, respectively. In Europe, Bermuda and Australia, our products and services are distributed on a direct basis and through brokers.
The percentage of gross premiums written on our top 10 customers was 25.2% and 24.6% as of December 31, 2024 and 2023, respectively. In Europe, Bermuda and Australia, our products and services are distributed on a direct basis and through brokers.
Legislative, judicial or administrative changes or interpretations may be forthcoming that could be retroactive and could affect the tax consequences to us or to holders of our shares. Taxation of Arch Capital Bermuda .
Legislative, judicial or administrative changes or interpretations may be forthcoming that could be retroactive and could affect the tax consequences to us or to holders of our shares. Taxation of Arch Capital OECD’s Pillar II.
EIOPA has also indicated that, on a case by case basis, groups subject to this worldwide supervision may be exempted from any EEA sub-group ARCH CAPITAL 29 2023 FORM 10-K supervision, where this results in more efficient supervision of the group and does not impair EEA supervisors in respect of their individual responsibilities. The IDD was published in February 2016.
EIOPA has also indicated that, on a case by case basis, groups subject to this worldwide supervision may be exempted from any EEA sub-group supervision, where this results in more efficient supervision of the group and does not impair EEA supervisors in respect of their individual responsibilities. The IDD was published in February 2016.
Penalties may be imposed for a failure to disclose such information. U.S. holders are urged to consult their tax advisers regarding the effect, if any, of these additional reporting requirements on their ownership and disposition of our common shares or preferred shares. United States Taxation of Non-U.S. Shareholders Taxation of Dividends .
Penalties may be imposed for a failure to disclose such information. U.S. holders are urged to consult their tax advisers regarding the effect, if any, of these additional reporting requirements on their ownership and disposition of our common shares or preferred shares. ARCH CAPITAL 42 2024 FORM 10-K United States Taxation of Non-U.S. Shareholders Taxation of Dividends .
The DPF is the successor to the EU-U.S. Privacy Shield and allows companies that participate in the DPF to transfer personal data freely to the U.S. without the need for alternative data protection transfer mechanisms (such as SCCs or binding corporate rules).
The DPF is the successor to the EU-U.S. Privacy Shield and allows companies that are subject to the GDPR to transfer personal data to U.S. entities that participate in the DPF without the need for alternative data protection transfer mechanisms (such as SCCs or binding corporate rules).
In 2014, we entered the U.S. mortgage insurance marketplace, underwriting on the Arch Mortgage Insurance Company platform. Arch Mortgage Insurance Company is licensed and operates in all 50 states, the District of Columbia and Puerto Rico.
In 2014, we entered the U.S. mortgage insurance marketplace, underwriting on the AMIC platform. AMIC is licensed and operates in all 50 states, the District of Columbia, Puerto Rico and Guam.
See also “Ireland – Third Country Governance Arrangements.” ARCH CAPITAL 31 2023 FORM 10-K Switzerland In December 2008, Arch Re Europe opened Arch Re Europe Swiss Branch as a branch office.
See also “Ireland – Third Country Governance Arrangements.” ARCH CAPITAL 33 2024 FORM 10-K Switzerland In December 2008, Arch Re Europe opened Arch Re Europe Swiss Branch as a branch office.
ARCH CAPITAL 10 2023 FORM 10-K Sales and Distribution . In the U.S., we employ a sales force to directly sell mortgage insurance products and services to our customers, which include mortgage originators such as mortgage bankers, mortgage brokers, commercial banks, savings institutions, credit unions and community banks. Our largest single mortgage insurance customer in the U.S.
Sales and Distribution . In the U.S., we employ a sales force to directly sell mortgage insurance products and services to our customers, which include mortgage originators such as mortgage bankers, mortgage brokers, commercial banks, savings institutions, credit unions and community banks. Our largest single mortgage insurance customer in the U.S.
In May 2004, Arch Insurance (U.K.) was granted the relevant permissions for the classes of insurance business which it underwrites in the U.K. AMAL currently manages Arch Syndicate 2012 and Arch Syndicate 1955 pursuant to its authorizations by the U.K. regulators and Lloyd’s.
In May 2004, Arch Insurance (U.K.) was granted the relevant permissions for the classes of insurance business which it underwrites in the U.K. AMAL currently manages our Lloyd’s Syndicates pursuant to its authorizations by the U.K. regulators and Lloyd’s.
Our reinsurance group’s organizational structure and philosophy allows it to take advantage of increases or changes in demand or favorable pricing trends. Our reinsurance group believes that its existing platforms in Bermuda, the U.S., U.K., Europe and Canada, broad underwriting expertise and substantial capital facilitate adjustments to its mix of business geographically and by line and type of coverage.
Our reinsurance group’s organizational structure and philosophy allows it to take advantage of increases or changes in demand or favorable pricing trends. Our reinsurance group believes that its existing platforms, broad underwriting expertise and substantial capital facilitate adjustments to its mix of business geographically and by line and type of coverage.
In November 2022, HM Treasury set out the U.K. government’s final reform package on the Solvency II framework in the U.K., in response to an earlier consultation paper from April 2022. Significant changes to be introduced by these reforms included the reduction in risk margin by 30% for non-life insurers and the proposal to remove branch capital requirements.
In November 2022, HM Treasury set out the U.K. government’s final reform package on the Solvency II framework in the U.K. Significant changes to be introduced by these reforms included the reduction in risk margin by 30% for non-life insurers and the proposal to remove branch capital requirements.
In scope entities will be required to comply with the obligations set out under DORA from January 2025. In addition to the above, EIOPA continues to publish detailed guidelines, recommendations and expectations relating to cyber matters and how these should be managed and considered by the (re)insurance sector. Artificial Intelligence.
Certain of our in-scope Irish entities are required to comply with the obligations set out under DORA from January 17, 2025. In addition to the above, EIOPA continues to publish detailed guidelines, recommendations and expectations relating to cyber matters and how these should be managed and considered by the (re)insurance sector. Artificial Intelligence.
Under their monoline insurance licenses, each of Arch’s eligible mortgage insurers may only offer private mortgage insurance covering first lien, one-to-four family residential mortgages. Nearly all of our mortgage insurance written provides first loss protection on loans ARCH CAPITAL 9 2023 FORM 10-K originated by mortgage lenders and sold to the GSEs.
Under their monoline insurance licenses, each of Arch’s eligible mortgage insurers may only offer private mortgage insurance covering first lien, one-to-four family residential mortgages. Nearly all of our mortgage insurance written provides first loss protection on loans originated by mortgage lenders and sold to the GSEs.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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For our U.S. mortgage insurance business, in addition to utilizing reinsurance, we have developed a proprietary risk model that simulates the maximum probable loss resulting from a severe economic event impacting the housing market. We also seek to limit our loss exposure by geographic diversification, including by pricing adjustments in our U.S. mortgage insurance business.
For our U.S. insurance business, in addition to utilizing reinsurance, we have developed a proprietary risk model that simulates the maximum probable loss resulting from a severe economic event impacting the housing market. We also seek to limit our loss exposure by geographic diversification, including by pricing adjustments in our U.S. mortgage insurance business.
Like all companies, our information technology systems and the systems of third parties we do business with are vulnerable to data breaches, interruptions or failures due to events that may be beyond our control, including, but not limited to, natural disasters, power outages, theft, terrorist attacks, computer viruses, hackers, employee or vendor error or misconduct, malicious actors, errors in usage or deepfake or social engineering or schemes, phishing attacks, other external hazards and general technology failures.
Like all companies, our information technology systems and the systems of third-parties that we do business with are vulnerable to data breaches, interruptions or failures due to events that may be beyond our control, including, but not limited to, natural disasters, power outages, theft, terrorist attacks, computer viruses, hackers, employee or vendor error or misconduct, malicious actors, errors in usage or deepfake or social engineering or schemes, phishing attacks, other external hazards and general technology failures.
Changes in in the criteria used by rating agencies may impact our capital position, our capital requirements and the treatment of certain items on our balance sheet.
Changes in the criteria used by rating agencies may impact our capital position, our capital requirements and the treatment of certain items on our balance sheet.
Factors affecting the volume of low down payment mortgage originations include, among others: restrictions on mortgage credit due to stringent underwriting standards and liquidity issues affecting lenders; changes in mortgage interest rates and home prices, and other economic conditions in the U.S. and regional economies; population trends, including the rate of household formation; and U.S. government housing policy.
Factors affecting the volume of low down payment mortgage originations include, among others: restrictions on mortgage credit due to stringent underwriting standards and liquidity issues affecting lenders; changes in mortgage interest rates and home prices, and other economic conditions in the U.S., Australian and regional economies; population trends, including the rate of household formation; and U.S. government housing policy, and Australian government housing policy.
It is impossible to predict whether Russia will expand hostilities to other countries in Europe or elsewhere. A further prolonged war may also create uncertainty in the global economy in the form of oil shortages, inflationary pressures, loss of confidence and general increase in risks worldwide.
It is impossible to predict whether Russia will expand hostilities to other countries in Europe or elsewhere. A further prolonged war may also create continued uncertainty in the global economy in the form of oil shortages, inflationary pressures, loss of confidence and general increase in risks worldwide.
New sanctions regimes may be initiated, or existing sanctions expanded, at any time, which can immediately impact our business activities. Since the Russian invasion of Ukraine in February 2022, there have been several sanctions packages imposed by the U.S., U.K. and EU which impact our business.
New sanctions regimes may be initiated, or existing sanctions expanded or lifted, at any time, which can immediately impact our business activities. Since the Russian invasion of Ukraine in February 2022, there have been several sanctions packages imposed by the U.S., U.K. and EU which impact our business.
We have substantial exposure to unexpected, large losses resulting from future man-made catastrophic events, such as acts of war, regional hostilities, acts of terrorism, political instability, social unrest and pandemics similar to the COVID-19 pandemic. These risks are inherently unpredictable.
We have substantial exposure to unexpected, large losses resulting from man-made catastrophic events, such as acts of war, regional hostilities, acts of terrorism, political instability, social unrest and pandemics similar to the COVID-19 pandemic. These risks are inherently unpredictable.
Our ability to execute our business strategy successfully, continue to grow and innovate and offer our employees a dynamic and supportive workplace depends on the recruitment, retention and promotion of talented, agile, diverse and resilient employees at all levels of our organization. The success of our business depends on attracting and retaining a capable and talented workforce.
Our ability to execute our business strategy successfully, continue to grow and innovate and offer our employees a dynamic and supportive workplace depends on the recruitment, retention and promotion of talented, agile, and resilient employees at all levels of our organization. The success of our business depends on attracting and retaining a capable and talented workforce.
Our success will depend on our ability to maintain and enhance effective operating procedures and internal controls and our ERM program. We operate within an ERM framework designed to identify, assess and monitor our risks. We consider underwriting, reserving, investment, credit and operational risk in our ERM framework.
Our success will depend on our ability to maintain and enhance effective operating procedures and internal controls and our ERM program. We operate within an ERM framework designed to identify, assess and monitor our risks. We consider underwriting, reserving, investment, credit, group and operational risk in our ERM framework.
In addition, our policyholders, reinsurers and retrocessionaires may be affected by developments in the financial markets, which could adversely affect their ability to meet their obligations to us. Volatility in the financial markets could continue to significantly affect our investment returns, reported results and shareholders’ equity.
In addition, our policyholders, reinsurers and retrocessionaires may be affected by developments in the financial markets, which could adversely affect their ability to meet their obligations to us. Volatility in the financial markets could significantly affect our investment returns, reported results and shareholders’ equity.
If the volume of low down payment mortgage originations declines, or if other government housing policies, practices or regulations change, the amount of mortgage insurance we write in the U.S. could decline, which would reduce our mortgage insurance revenues.
If the volume of low down payment mortgage originations declines, or if other government housing policies, practices or regulations change, the amount of mortgage insurance we write in the U.S. or Australia could decline, which would reduce our mortgage insurance revenues.
See note 3, “Significant Accounting Policy.” Our business is subject to applicable laws and regulations relating to economic trade sanctions and foreign bribery laws, the violation of which could adversely affect our operations. We must comply with all applicable economic sanctions and anti-bribery laws and regulations of the U.S. and other foreign jurisdictions where we operate.
See note 3, “Significant Accounting Policies.” Our business is subject to laws and regulations relating to economic trade sanctions and foreign bribery laws, the violation of which could adversely affect our operations. We must comply with all applicable economic sanctions and anti-bribery laws and regulations of the U.S. and other foreign jurisdictions where we operate.
The program trigger for calendar year 2023 and any program year thereafter through 2027 is $200 million. If an act (or acts) of terrorism result in covered losses exceeding the $100 billion annual limit, insurers with losses exceeding their deductibles will not be responsible for additional losses.
The program trigger for calendar year 2024 and any program year thereafter through 2027 is $200 million. If an act (or acts) of terrorism result in covered losses exceeding the $100 billion annual limit, insurers with losses exceeding their deductibles will not be responsible for additional losses.
State credit for reinsurance rules also generally provide that certified reinsurers such as Arch Re Bermuda must provide 100% collateral in the event their certified status is “terminated” or upon the entry of an order of rehabilitation, liquidation or conservation against a ceding insurer.
State credit for reinsurance rules also generally provide that reinsurers such as Arch Re Bermuda must provide statutory collateral in the event their certified or reciprocal status is “terminated” or 100% collateral upon the entry of an order of rehabilitation, liquidation or conservation against a ceding insurer.
A Second Public Consultation was published on October 5, 2023 confirming, inter alia, a statutory corporate tax rate of 15% and a Third Public Consultation was published on November 15, 2023. The Bermuda CIT Act was enacted on December 27, 2023 and is to be effective for tax years beginning on or after January 1, 2025.
A Second Public Consultation was published on October 5, 2023 confirming, inter alia, a statutory corporate tax rate of 15% and a Third Public Consultation was published on November 15, 2023. The Bermuda CIT Act was enacted on December 27, 2023 and is effective for tax years beginning on or after January 1, 2025.
Any estimates and assumptions made as part of the reserving process could prove to be inaccurate due to several factors, including the fact that for certain lines of business relatively limited historical information has been reported to us through December 31, 2023.
Any estimates and assumptions made as part of the reserving process could prove to be inaccurate due to several factors, including the fact that for certain lines of business relatively limited historical information has been reported to us through December 31, 2024.
While our efforts to attract, develop and retain talented employees continues to be a top priority, we may not be able to complete successfully for talented executives and employees, which may adversely impact our ability to fully realize our business strategy.
While our efforts to attract, develop and retain talented employees continues to be a top priority, we may not be able to compete successfully for talented executives and employees, which may adversely impact our ability to fully realize our business strategy.
Risks Relating to Our Mortgage Operations • The ultimate performance of our mortgage insurance portfolios remains uncertain. • If the volume of low down payment mortgage originations declines, or if other government housing policies, practices or regulations change, the amount of mortgage insurance we write in the U.S. could decline, which would reduce our mortgage insurance revenues. • Changes to the role of the GSEs in the U.S. housing market or to GSE eligibility requirements for mortgage insurers or to the GSEs’ use of CRT could negatively impact our results of operations and financial condition or reduce our operating flexibility. • The implementation of the Basel III Capital Accord and FHFA’s Enterprise Regulator Capital Framework may adversely affect the use of mortgage insurance and CRT opportunities.
Risks Relating to Our Mortgage Operations • The ultimate performance of our mortgage insurance portfolios remains uncertain. • If the volume of low down payment mortgage originations declines, or if other government housing policies, practices or regulations change, the amount of mortgage insurance we write in the U.S. or Australia could decline, which would reduce our mortgage insurance revenues. • Changes to the role of the GSEs in the U.S. housing market or to GSE eligibility requirements for mortgage insurers or to the GSEs’ use of CRT could negatively impact our results of operations and financial condition or reduce our operating flexibility. • The implementation of the Basel III Capital Accord and Federal Housing Finance Agency (“FHFA”)’s Enterprise Regulator Capital Framework may adversely affect the use of mortgage insurance and CRT opportunities.
The impact of any such changes is unknown, but such changes could have an adverse effect on our effective tax rate and aggregate tax liability and could increase the complexity and costs associated with our tax compliance worldwide. ARCH CAPITAL 59 2023 FORM 10-K ITEM 1B. UNRESOLVED STAFF COMMENTS None.
The impact of any such changes is unknown, but such changes could have an adverse effect on our effective tax rate and aggregate tax liability and could increase the complexity and costs associated with our tax compliance worldwide. ARCH CAPITAL 62 2024 FORM 10-K ITEM 1B. UNRESOLVED STAFF COMMENTS None.
The size of the U.S. mortgage insurance market depends in large part upon the volume of low down payment home mortgage originations.
The size of the U.S. and Australian mortgage insurance market depends in large part upon the volume of low down payment home mortgage originations.
The effects of inflation and global recessionary conditions impact the insurance and reinsurance industry in ways which may negatively impact our business, financial condition and results of operations. While general economic inflation has eased in recent quarters, higher inflationary conditions may continue to remain in place.
The effects of inflation, trade and tariff disputes and global recessionary and other economic conditions impact the insurance and reinsurance industry in ways which may negatively impact our business, financial condition and results of operations. While general economic inflation has eased in recent quarters, higher inflationary conditions may continue to remain in place.
Disruption in the financial markets and the downturn in global economic activity resulting from geopolitical conflict, elevated financing rates, housing market declines or other macro-and micro-economic conditions could adversely affect the valuation of securities in our investment portfolio. Credit deterioration spread widening and/or equity market volatility could result in temporary or permanent impairment.
Disruption in the financial markets and the downturn in global economic activity resulting from geopolitical conflict or economic decisions/trade wars, elevated financing rates, property market declines or other macro-and micro-economic conditions could adversely affect the valuation of securities in our investment portfolio. Credit deterioration spread widening and/or equity market volatility could result in temporary or permanent impairment.
Governments, regulators, legislators and influential non-governmental organizations continue to focus on enacting laws, regulations and other requirements relating to climate change. We are subject to some of these changing laws, regulations and public policy debates, which are difficult to predict and quantify and may have an adverse impact on our business.
Governments, regulators, legislators and influential non-governmental organizations continue to focus on enacting laws, regulations and other requirements relating to climate change. Regulator and shareholder focus on “greenwashing” also continues. We are subject to some of these changing laws, regulations and public policy debates, which are difficult to predict and quantify and may have an adverse impact on our business.
To the extent that an act of terrorism is certified by the Secretary of the Treasury and aggregate industry insured losses resulting from the act of terrorism exceeds the prescribed program trigger, our U.S. insurance operations may be covered under TRIP for up to 80% subject to (i) a mandatory deductible of 20% of our prior year’s direct earned premium for covered property and liability coverages, and (ii) an industry aggregate retention of $37.5 billion.
To the extent that an act of terrorism is certified by the Secretary of the Treasury and aggregate industry insured losses resulting from the act of terrorism exceeds the prescribed program trigger, our U.S. insurance operations may be covered under TRIP for up to ARCH CAPITAL 49 2024 FORM 10-K 80% subject to (i) a mandatory deductible of 20% of our prior year’s direct earned premium for covered property and liability coverages, and (ii) an industry aggregate retention of $37.5 billion.
Risks Relating to Financial Markets and Investment s • Adverse developments in the financial markets could have a material adverse effect on our results of operations, financial position and our businesses, and may also limit our access to capital; our policyholders, reinsurers and retrocessionaires may also be affected by such developments, which could adversely affect their ability to meet their obligations to us. • Disruption to the financial markets and weak economic conditions resulting from situations such as post pandemic imbalances, inflation and geopolitical conflict may ARCH CAPITAL 41 2023 FORM 10-K adversely and materially impact our investments, financial condition and results of operation. • Foreign currency exchange rate fluctuation may adversely affect our financial results. • The determination of the amount of current expected credit losses (“CECL”) allowances taken on our investments is highly subjective and could materially impact our results of operations or financial position. • Our reinsurance subsidiaries may be required to provide collateral to ceding companies, by applicable regulators, their contracts or other commercial considerations.
ARCH CAPITAL 44 2024 FORM 10-K Risks Relating to Financial Markets and Investment s • Adverse developments in the financial markets could have a material adverse effect on our results of operations, financial position and our businesses, and may also limit our access to capital; our policyholders, reinsurers and retrocessionaires may also be affected by such developments, which could adversely affect their ability to meet their obligations to us. • Disruption to the financial markets and weak economic conditions resulting from situations such as supply/demand imbalances, inflation and political unrest may adversely and materially impact our investments, financial condition and results of operation. • Foreign currency exchange rate fluctuation may adversely affect our financial results. • The determination of the amount of current expected credit losses (“CECL”) allowances taken on our investments is highly subjective and could materially impact our results of operations or financial position. • Our reinsurance subsidiaries may be required to provide collateral to ceding companies, by applicable regulators, their contracts or other commercial considerations.
As industry practices and legal, social and other environmental conditions change, unexpected and unintended issues related to claims and coverage may emerge, including new or expanded theories of liability.
As industry practices and legal, social and new coverage issues change, unexpected and unintended issues related to claims and coverage may emerge, including new or expanded theories of liability.
The issuance of securities ranking equally with or senior to our preferred shares may reduce the amount available for dividends and the amount recoverable by holders of such series in the event of a liquidation, dissolution or winding-up of Arch Capital. ARCH CAPITAL 57 2023 FORM 10-K The voting rights of holders of our preferred shares are limited.
The issuance of securities ranking equally with or senior to our preferred shares may reduce the amount available for dividends and the amount recoverable by holders of such series in the event of a liquidation, dissolution or winding-up of Arch Capital. The voting rights of holders of our preferred shares are limited.
Legislatures in multiple countries outside of the European Union have also drafted and/or enacted legislation to implement the OECD’s minimum tax proposal.
Legislatures in multiple countries outside of the EU have also drafted and/or enacted legislation to implement the OECD’s minimum tax proposal.
As such, these preferred shares will rank junior to all of our indebtedness and other non-equity claims with respect to assets available to satisfy our claims, including in our liquidation. Our existing and future indebtedness may restrict payments of dividends on our preferred shares.
Our preferred shares are equity interests and do not constitute indebtedness. As such, these preferred shares will rank junior to all of our indebtedness and other non-equity claims with respect to assets available to satisfy our claims, including in our liquidation. Our existing and future indebtedness may restrict payments of dividends on our preferred shares.
Changes in criteria used by rating agencies which may result in a downgrade in our ratings, our inability to obtain a rating or a change in capital application or requirements for our operating insurance and reinsurance subsidiaries may adversely affect our relationships with clients and brokers and negatively impact sales of our products.
ARCH CAPITAL 53 2024 FORM 10-K Changes in criteria used by rating agencies which may result in a downgrade in our ratings, our inability to obtain a rating or a change in capital application or requirements for our operating insurance and reinsurance subsidiaries may adversely affect our relationships with clients and brokers and negatively impact sales of our products.
Arch Re Bermuda is a registered Bermuda insurance company and is not licensed or admitted as an insurer in any jurisdiction in the U.S., although Arch Re Bermuda has been approved as a “certified reinsurer” in certain U.S. states that allow reduced collateral for reinsurance ceded to such reinsurers.
Arch Re Bermuda is a registered Bermuda insurance company and is not licensed or admitted as an insurer in any jurisdiction in the U.S., although Arch Re Bermuda has been approved as a “certified reinsurer” and a “reciprocal reinsurer” in certain U.S. states that allow for the reduction or elimination of statutory collateral for reinsurance ceded to such reinsurers.
ARCH CAPITAL 58 2023 FORM 10-K On August 8, 2023, the Bermuda Ministry of Finance published its first Public Consultation announcing the proposed implementation of a new corporate income tax regime applicable to Bermuda businesses that are part of Multinational Enterprise Groups with annual revenue of €750 million or more.
On August 8, 2023, the Bermuda Ministry of Finance published its first Public Consultation announcing the proposed implementation of a new corporate income tax regime applicable to Bermuda businesses that are part of Multinational Enterprise Groups with annual revenue of €750 million or more.
The potential also exists, after a catastrophe loss or pandemic events like COVID-19, or geopolitical tensions and hostilities for the development of inflationary pressures in a local or regional economy. This may have a material effect on the adequacy of our reserves for losses and loss adjustment expenses, especially in longer-tailed lines of business.
The potential also exists, after a catastrophe loss or geopolitical hostilities for the development of inflationary pressures in a local or regional economy. This may have a material effect on the adequacy of our reserves for losses and loss adjustment expenses, especially in longer-tailed lines of business.
The higher risk-capital charges for residential mortgages could be incorporated into the PMIERs standards, thereby requiring mortgage insurers to hold higher capital levels in order to be recognized as approved counterparties for the GSEs. This could have a negative impact on our return on equity. In addition, higher capital standards could impact the guarantee fees charged to acquire loans.
The higher risk-capital charges for residential mortgages could be incorporated into the PMIERs standards, thereby requiring mortgage insurers to hold higher capital levels in order to be recognized as approved counterparties for the GSEs. This could have a negative impact on our return on equity.
While we conduct underwriting, financial, claims and information technology due diligence reviews and apply rigorous standards in the selection of these counterparties, there is no assurance they have provided us accurate or complete information to assess their risk or that they can manage effectively their own risks.
ARCH CAPITAL 51 2024 FORM 10-K While we conduct underwriting, financial, claims and information technology due diligence reviews and apply rigorous standards in the selection of these counterparties, there is no assurance they have provided us accurate or complete information to assess their risk or that they can manage effectively their own risks.
These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake or circumvention of controls. There can be no assurance that our control system will succeed in achieving its stated goals under all potential future conditions.
These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake or ARCH CAPITAL 54 2024 FORM 10-K circumvention of controls. There can be no assurance that our control system will succeed in achieving its stated goals under all potential future conditions.
In addition, these provisions could also result in the entrenchment of incumbent management. There are regulatory limitations on the ownership and transfer of our common shares. The jurisdictions where we operate have laws and regulations that require regulatory approval of a change in control of an insurer or an insurer's holding company.
In addition, these provisions could also result in the entrenchment of incumbent management. ARCH CAPITAL 59 2024 FORM 10-K There are regulatory limitations on the ownership and transfer of our common shares. The jurisdictions where we operate have laws and regulations that require regulatory approval of a change in control of an insurer or an insurer's holding company.
Arch Re Bermuda's contracts generally require it to post a letter of credit or provide other security, even in U.S. states where it has been approved for reduced collateral.
Arch Re Bermuda's contracts generally require it to post a letter of credit or provide other security, even in U.S. states where it has been approved for reduced collateral, upon the happening of certain events.
Disputes relating to coverage and choice of legal forum may also arise. Underwriting is inherently a matter of judgment, involving important assumptions about matters that are inherently unpredictable and beyond our control, and for which historical experience and probability analysis may not provide sufficient guidance.
Disputes relating to coverage and choice of legal forum may also arise. Underwriting is inherently a matter of ARCH CAPITAL 50 2024 FORM 10-K judgment, involving important assumptions about matters that are inherently unpredictable and beyond our control, and for which historical experience and probability analysis may not provide sufficient guidance.
All of the catastrophe modeling tools that we use or rely on to evaluate our catastrophe exposures are therefore based on significant assumptions and judgments and are subject to ARCH CAPITAL 43 2023 FORM 10-K error and misestimation. As a result, our estimated exposures could be materially different than our actual results.
All of the catastrophe modeling tools that we use or rely on to evaluate our catastrophe exposures are therefore based on significant assumptions and judgments and are subject to error and misestimation. As a result, our estimated exposures could be materially different than our actual results.
A significant portion of cash and invested assets held by Arch consists of fixed maturities ( 70.1% as of December 31, 2023). Although our current investment guidelines and approach emphasize preservation of capital, market liquidity and diversification of risk, our investments are subject to market-wide risks and fluctuations.
A significant portion of cash and invested assets held by Arch consists of fixed maturities ( 67.4% as of December 31, 2024). Although our current investment guidelines and approach emphasize preservation of capital, market liquidity and diversification of risk, our investments are subject to market-wide risks and valuation fluctuations.
ARCH CAPITAL 56 2023 FORM 10-K Arch Capital is a holding company and is dependent on dividends and other distributions from its operating subsidiaries. Arch Capital is a holding company whose assets primarily consist of the shares in our subsidiaries.
Arch Capital is a holding company and is dependent on dividends and other distributions from its operating subsidiaries. Arch Capital is a holding company whose assets primarily consist of the shares in our subsidiaries.
We cannot cancel mortgage insurance coverage or adjust renewal premiums during the life of the policy. Thus, higher than anticipated claims generally cannot be offset by premium increases on policies in force or mitigated by our non-renewal or cancellation of insurance coverage.
We cannot cancel mortgage insurance coverage or adjust renewal premiums during the life of the policy. Thus, ARCH CAPITAL 56 2024 FORM 10-K higher than anticipated claims generally cannot be offset by premium increases on policies in force or mitigated by our non-renewal or cancellation of insurance coverage.
While we believe that the systems are adequate to service our insurance portfolios, there can be no assurance that they will operate in all manners in which we intend or possess all of the functionality required by customers currently or in the future.
While we believe that the systems are adequate to service our business, there can be no assurance that they will operate in all manners in which we intend, possess all of the functionality required by customers currently or in the future or continuously operate without significant disruption.
If the charters of the GSEs were amended to change or eliminate the acceptability of private mortgage insurance, our mortgage insurance business could decline significantly. In January 2021, the U.S.
If the charters of the GSEs were amended to change or eliminate the acceptability of private mortgage insurance, our mortgage insurance business could decline significantly. On January 2, 2025, the U.S.
While we believe we have effective technical and organizational measures in place to prevent, detect, manage and mitigate the impact of data breaches caused by malicious actors, systemic failures or human error, we cannot offer complete assurances that significant data breaches will not occur.
While we believe we have effective technical and organizational measures in place to prevent, detect, manage and mitigate the impact of data breaches and cybersecurity incidents caused by malicious actors, systemic failures or human error, we cannot offer complete assurances that significant data breaches on our systems and those of third parties we use will not occur.
The ERCF includes higher risk-capital charges for residential mortgages and continues to take into account the benefits of mortgage insurance, provided the mortgage insurer is compliant with the PMIERs.
ARCH CAPITAL 58 2024 FORM 10-K The ERCF includes higher risk-capital charges for residential mortgages and continues to take into account the benefits of mortgage insurance, provided the mortgage insurer is compliant with the PMIERs.
Given the OECD's continued release of guidance regarding Pillar II, that only certain jurisdictions have currently enacted laws to give effect to Pillar II, and that jurisdictions may interpret such laws in different manners, the overall implementation of Pillar II remains uncertain and subject to change, possibly on a retroactive basis.
Given the OECD’s continued release of guidance regarding Pillar II, that only certain jurisdictions have currently enacted laws to give effect to Pillar II, that some jurisdictions have just recently enacted such laws, that jurisdictions may interpret such laws in different manners, and that certain elements of such laws are currently subject to challenge pursuant to legal proceedings, the overall implementation of Pillar II remains uncertain and subject to change, possibly on a retroactive basis.
If either or both of the GSEs were to cease to consider Arch Mortgage Insurance Company or United Guaranty Residential Insurance Company as eligible mortgage insurers and, therefore, cease accepting our mortgage insurance products, our results of operations and financial condition would be adversely affected.
If either or both of the GSEs were to cease to consider AMIC or UGRIC as eligible mortgage insurers and, therefore, cease accepting our mortgage insurance products, our results of operations and financial condition would be adversely affected.
The PMIERs impose limitations on the type of risk insured, the forms and insurance policies issued, standards for the geographic and customer diversification of risk, acceptable underwriting practices, quality assurance, loss mitigation, claims handling, standards for certain reinsurance cessions and financial requirements, among other things.
The PMIERs apply to AMIC and UGRIC, which are eligible mortgage insurers. The PMIERs impose limitations on the type of risk insured, the forms and insurance policies issued, standards for the geographic and customer diversification of risk, acceptable underwriting practices, quality assurance, loss mitigation, claims handling, standards for certain reinsurance cessions and financial requirements, among other things.
Deteriorating economic conditions, potentially due to prolonged recessionary conditions increasing levels of unemployment and inflation, could adversely affect the performance of our mortgage insurance portfolio and could ARCH CAPITAL 53 2023 FORM 10-K adversely affect our results of operations and financial condition.
Deteriorating economic conditions, potentially due to prolonged recessionary conditions increasing levels of unemployment and inflation, could adversely affect the performance of our mortgage insurance portfolio and could adversely affect our results of operations and financial condition.
Pillar II addresses the remaining BEPS risk of profit shifting to certain in-scope entities in low tax jurisdictions by introducing a global minimum tax (15%), which would operate through a denial of a deduction or imposition of source-based taxation (including withholding tax) on certain payments.
Pillar II addresses the remaining BEPS risk of profit shifting to certain in-scope entities in low tax jurisdictions by introducing a global minimum tax (15%), which would operate through the imposition of residence-based and source-based taxation (including potentially through the denial of certain deductions).
Certain lines of business we write have been impacted by the sanctions, such as the marine and energy lines of business, although the extent of the impact will depend on the outcome of the war in Ukraine and the nature of future sanctions packages.
Certain lines of business we write have been impacted by the sanctions, such as the marine and energy lines of business, although the extent of the impact will depend on the outcome of the war in Ukraine and the nature of future sanctions packages or potential rescindment of some or all of the Russia sanctions currently in place.
Risks Relating to Our Industry, Business and Operations We operate in a highly competitive environment, and we may not be able to compete successfully in our industry. The insurance and reinsurance industry is highly competitive.
ARCH CAPITAL 45 2024 FORM 10-K Risks Relating to Our Industry, Business and Operations We operate in a highly competitive environment, and we may not be able to compete successfully in our industry. The insurance and reinsurance industry is highly competitive.
We offer flexible work arrangements, when possible, for our employees globally, as well as competitive compensation packages which include participation in our Employee Stock Purchase Plan and the possibility of equity awards at certain job levels.
We provide a work environment and culture which reflects our goal to “Enable Possibility”. We offer flexible and hybrid work arrangements, when possible, for our employees globally, as well as competitive compensation packages which include participation in our Employee Stock Purchase Plan and the possibility of equity awards at certain job levels.
Our eligible mortgage insurers each satisfied the PMIERs’ financial requirements as of December 31, 2023. While we intend to continue to comply with these requirements, there can be no assurance that the GSEs will not change the PMIERs or that Arch Mortgage Insurance Company or United Guaranty Residential Insurance Company will continue as eligible mortgage insurers.
Our eligible mortgage insurers each satisfied the PMIERs’ financial requirements as of December 31, 2024. While we intend to continue to comply with these requirements, there can be no assurance that the GSEs will not change the PMIERs or that AMIC or UGRIC will continue as eligible mortgage insurers.
Changes to existing regulation and supervisory standards, or failure to comply with applicable requirements, could adversely affect our business and results of operations. • We are subject to ongoing legal and policy actions around climate change which may result in additional requirements that could prompt us to shift our risk selection and business strategy in ways which may adversely impact our results of operations. • The Russian invasion of Ukraine and the resulting imposition of sanctions by the U.S., U.K. and EU on Russia and Russia-related businesses created global instability. • Our customers and policyholders may also be impacted by regulatory, technological, market or other risks relating to climate change in ways which we cannot predict with certainty and adversely impact our results of operations. • As we continue to incorporate climate change and other ESG factors in our business strategy, we cannot be certain that shareholders, investors and other influential environmental and social-focused groups will agree with our approach, which may adversely impact our ability to raise funds in the capital markets, our share price and our results of operations. • We could face unanticipated losses from increased geopolitical tensions, hostilities, war, terrorism, cyber attacks and general political instability, and these or other unanticipated losses could have a material adverse effect on our financial condition and results of operations. • Underwriting risks and reserving for losses are based on probabilities and related modeling, which are subject to inherent uncertainties. • The failure of any of the loss limitation methods we employ could have a material adverse effect on our financial condition or results of operations. • The availability of reinsurance, retrocessional coverage and capital market transactions to limit our exposure to risks may be limited, and counterparty credit and other risks associated with our reinsurance arrangements may result in losses which could adversely affect our financial condition and results of operations. • We could be materially adversely affected to the extent that important third parties with whom we do business do not adequately or appropriately manage their risks, commit fraud or otherwise breach obligations owed to us. • Emerging claim and coverage issues may adversely affect our business. • Acquisitions, the addition of new lines of insurance or reinsurance business, expansion into new geographic regions and/or entering into joint ventures or partnerships expose us to risks. • Our information technology systems may be unable to meet the demands of customers and our workforce. • Technology failures and cyber attacks, including, but not limited to, ransomware, exploitation in software or code with malicious intent, state-sponsored cyber attacks, as well as vulnerabilities relating to new technologies, such as generative AI, may impact us or our business partners and service providers, causing a disruption in service and operations which could materially and negatively impact our business and/or expose us to litigation. • Cyber incidents or data breaches caused by bad actors or unintentional human error impacting data, including personal data, we maintain or use during our business operations may result in regulatory fines or action, reputation damage and a disruption in our business operations. • Changes in criteria used by rating agencies which may result in a downgrade in our ratings, our inability to obtain a rating or a change in capital allocation or requirements for our operating insurance and reinsurance subsidiaries may adversely affect our relationships with clients and brokers and negatively impact sales of our products. • Our ability to execute our business strategy successfully, continue to grow and innovate and offer our employees a dynamic and supportive workplace depends on the recruitment, retention and promotion of talented, agile, diverse and resilient employees at all levels of our organization. • Our success will depend on our ability to maintain and enhance effective operating procedures and internal controls and our ERM program. • We are exposed to credit risk in certain of our business operations. • Our business is subject to applicable laws and regulations relating to economic trade sanctions and foreign bribery laws, the violation of which could adversely affect our operations. • New legislation or regulations relating to the U.K.’s withdrawal from the EU could adversely affect us.
Changes to existing regulation and supervisory standards, or failure to comply with applicable requirements, could adversely affect our business and results of operations. • We are subject to ongoing legal and policy actions around climate change which may result in additional requirements that could prompt us to shift our risk selection and business strategy in ways which may adversely impact our results of operations. • The imposition of sanctions by the U.S., U.K. and EU on Russia and Russia-related businesses has impacted certain sectors in which we write business. • Our customers and policyholders may also be impacted by regulatory, technological, market or other risks relating to climate change in ways which we cannot predict with certainty and adversely impact our results of operations. • We are subject to changes in governmental, investor and societal responses to climate change and sustainability-related issues, which may result in scrutiny of our business, litigation or adverse impacts to our share price and our results of operations. • We could face unanticipated losses from increased geopolitical tensions, hostilities, war, terrorism, cyber attacks and general political instability, and these or other unanticipated losses could have a material adverse effect on our financial condition and results of operations. • Underwriting risks and reserving for losses are based on probabilities and related modeling, which are subject to inherent uncertainties. • The failure of any of the loss limitation methods we employ could have a material adverse effect on our financial condition or results of operations. • The availability of reinsurance, retrocessional coverage and capital market transactions to limit our exposure to risks may be limited, and counterparty credit and other risks associated with our reinsurance arrangements may result in losses which could adversely affect our financial condition and results of operations. • We could be materially adversely affected to the extent that important third parties with whom we do business do not adequately or appropriately manage their risks, commit fraud or otherwise breach obligations owed to us. • Emerging claim and coverage issues may adversely affect our business. • Acquisitions, the addition of new lines of insurance or reinsurance business, expansion into new geographic regions and/or entering into joint ventures or partnerships expose us to risks. • Our information technology systems and our pace of adoption of new technologies, such as generative AI, may not be adequate to meet the demands of our customers or impact negatively our ability to compete with our peers. • Technology failures caused by intentional and unintentional human and non-human actions may cause material disruption in the availability of the information technology systems we use in our business. • We could be materially impacted by a cyber attack, data breach, ransomware, phishing, social engineering or other cybersecurity incident resulting in loss of business data, personal data and other confidential or secret information, a disruption in our business operations, regulatory or other legal action, and fines. • Changes in criteria used by rating agencies which may result in a downgrade in our ratings, our inability to obtain a rating or a change in capital allocation or requirements for our operating insurance and reinsurance subsidiaries may adversely affect our relationships with clients and brokers and negatively impact sales of our products. • Our ability to execute our business strategy successfully, continue to grow and innovate and offer our employees a dynamic and supportive workplace depends on the recruitment, retention and promotion of talented, agile, and resilient employees at all levels of our organization. • Our success will depend on our ability to maintain and enhance effective operating procedures and internal controls and our ERM program. • We are exposed to credit risk in certain of our business operations. • Our business is subject to laws and regulations relating to economic trade sanctions and foreign bribery laws, the violation of which could adversely affect our operations.
Disruption to the financial markets and weak economic conditions resulting from situations such as post pandemic imbalances, inflation and geopolitical conflict may adversely and materially impact our investments, financial condition and results of operation.
Disruption to the financial markets and weak economic conditions resulting from situations such as supply/demand imbalances, inflation and political unrest may adversely and materially impact our investments, financial condition and results of operation.
Our failure to establish adequate reinsurance or retrocessional arrangements or the failure of our existing reinsurance or retrocessional arrangements to protect us from overly concentrated risk exposure could adversely affect our financial condition and results of operations.
We are at risk that losses could exceed the collateral we have obtained. Our failure to establish adequate reinsurance or retrocessional arrangements or the failure of our existing reinsurance or retrocessional arrangements to protect us from overly concentrated risk exposure could adversely affect our financial condition and results of operations.
We rely on certain third party technology service providers and other service providers, notably major cloud providers, Software-as-a-Service (or SaaS) solutions, and on-premise software, including proprietary and open source solutions. ARCH CAPITAL 49 2023 FORM 10-K We also outsource certain business process functions to third parties and may continue do so in the future.
We rely on certain third-party technology service providers and other service providers, notably major cloud providers, Software-as-a-Service (or “SaaS”) solutions, and on-premise software, including proprietary and open source solutions. We also outsource certain business processes to third parties and may continue do so in the future.
In addition, governmental actions in response to inflationary pressures, such as increasing interest rates, may have a material impact on the market value of our investment portfolio.
In addition, governmental actions in response to inflationary pressures, such as increasing interest rates, may have a material impact, such as on the market value of our investment portfolio, or on the size of the mortgage origination market available to be insured by our mortgage business.
ARCH CAPITAL 46 2023 FORM 10-K As of December 31, 2023, our consolidated reserves for unpaid losses and loss adjustment expenses, net of unpaid losses and loss adjustment expenses recoverable, were approximately $16.1 billion. Such reserves were established in accordance with applicable insurance laws and GAAP. Loss reserves are inherently subject to uncertainty.
As of December 31, 2024, our consolidated reserves for unpaid losses and loss adjustment expenses, net of unpaid losses and loss adjustment expenses recoverable, were approximately $21.5 billion. Such reserves were established in accordance with applicable insurance laws and GAAP. Loss reserves are inherently subject to uncertainty.
In addition, we may replicate investment positions in foreign currencies using derivative financial instruments. Changes in the value of available-for-sale investments due to foreign currency rate movements are reflected as a direct increase or decrease to shareholders' equity and are not included in the statement of income.
Changes in the value of available-for-sale investments due to foreign currency rate movements are reflected as a direct increase or decrease to shareholders' equity and are not included in the statement of income.
A cybersecurity incident could also result in a violation of applicable privacy, data protection or other laws, damage our reputation, cause a loss of customers, adversely affect our stock price, cause us to incur remediation costs, increased insurance premiums, and/or give rise to monetary fines, penalties, or litigation any of which could adversely affect our business.
A cybersecurity incident could result in a violation of these and other applicable laws, resulting in damage to our reputation, loss of customers, decline in our stock price, litigation, remediation costs, increased insurance premiums, employee dissatisfaction and/or monetary fines, penalties or litigation, any of which could adversely affect our business.
Over the past few years, we have also implemented and expanded our learning programs, career leveling and employee networks, all of which we believe will help us retain talent. In 2023, we launched our talent acquisitions shared services team for our North American entities.
Over the past few years, we have also implemented and expanded our learning programs, career leveling and employee networks, all of which we believe will help us retain talent.
These provisions may also prevent our shareholders from receiving premium prices for their shares in an unsolicited takeover. Some provisions of our bye-laws could have the effect of discouraging unsolicited takeover bids from third parties or changes in management initiated by shareholders.
Risk Relating to Our Company and Our Shares Some of the provisions of our bye-laws and our shareholders agreement may have the effect of hindering, delaying or preventing third party takeovers or changes in management initiated by shareholders. These provisions may also prevent our shareholders from receiving premium prices for their shares in an unsolicited takeover.
ARCH CAPITAL 44 2023 FORM 10-K We are subject to ongoing legal and policy actions around climate change which may result in additional requirements which could prompt us to shift our risk selection and business strategy in ways which may adversely impact our results of operations.
As a result, such actions could have a material effect on our results of operations and financial condition. We are subject to ongoing legal and policy actions around climate change which may result in additional requirements which could prompt us to shift our risk selection and business strategy in ways which may adversely impact our results of operations.
ARCH CAPITAL 52 2023 FORM 10-K Foreign currency exchange rate fluctuation may adversely affect our financial results. We write business on a worldwide basis, and our results of operations may be affected by fluctuations in the value of currencies other than the U.S. Dollar.
Foreign currency exchange rate fluctuation may adversely affect our financial results. We write business on a worldwide basis, and our results of operations may be affected by fluctuations in the value of currencies other than the U.S. Dollar. The primary foreign currencies in which we operate are the Euro, the British Pound Sterling, the Australian Dollar and the Canadian Dollar.
In addition, we cannot predict how legal challenges to diversity and inclusion recruitment programs may impact our efforts in this area. We could face unanticipated losses from increased geopolitical tensions, hostilities,war, terrorism, cyber attacks, and general political instability, and these or other unanticipated losses could have a material adverse effect on our financial condition and results of operations.
We could face unanticipated losses from increased geopolitical tensions, hostilities, war, terrorism, cyber attacks, and general political instability, and these or other unanticipated losses could have a material adverse effect on our financial condition and results of operations.
The Russian invasion of Ukraine and the resulting imposition of sanctions by the U.S., U.K. and EU on Russia and Russia-related businesses created global instability. The Russian invasion of Ukraine and ongoing hostilities have created a high level of uncertainty as well as disruption in certain sectors of the global economy.
ARCH CAPITAL 48 2024 FORM 10-K The imposition of sanctions by the U.S., U.K. and EU on Russia and Russia-related businesses has impacted certain sectors in which we write business. The ongoing Russia-Ukraine hostilities have created a high level of uncertainty as well as disruption in certain sectors of the global economy.
Global recessionary conditions, including inflation, the slow recovery of certain sectors from the pandemic, predicted slow growth rates across key markets and other factors, will impact the insurance and reinsurance industry. There is great uncertainty around how severe and how long a recession will last on a global and local basis.
Global recessionary conditions, including inflation, the slow recovery of certain sectors from the pandemic, predicted slow growth rates across key markets and other factors, will impact the insurance and reinsurance industry.
Our losses for a given event or occurrence may increase if our reinsurers or retrocessionaires dispute or fail ARCH CAPITAL 47 2023 FORM 10-K to meet their obligations to us or the reinsurance or retrocessional protections purchased by us are exhausted or are otherwise unavailable for any reason.
Our losses for a given event or occurrence may increase if our reinsurers or retrocessionaires dispute or fail to meet their obligations to us or the reinsurance or retrocessional protections purchased by us are exhausted or are otherwise unavailable for any reason. In certain instances, we also require collateral to mitigate our credit risk to our reinsurers or retrocessionaires.
With new technologies, such as AI, emerging at a rapid pace, there is no assurance that we will be able to evaluate and integrate new technologies or update our existing systems.
With new technologies emerging at a rapid pace, there is no assurance that we will be able to evaluate and integrate new ARCH CAPITAL 52 2024 FORM 10-K technologies or update our existing systems to keep pace with our competitors and customer needs.
The primary foreign currencies in which we operate are the Euro, the British Pound Sterling, the Australian Dollar and the Canadian Dollar. In order to minimize the possibility of losses we may suffer as a result of our exposure to foreign currency fluctuations in our net insurance liabilities, we invest in securities denominated in currencies other than the U.S. Dollar.
In order to minimize the possibility of losses we may suffer as a result of our exposure to foreign currency fluctuations in our net insurance liabilities, we invest in securities denominated in currencies other than the U.S. Dollar. In addition, we may replicate investment positions in foreign currencies using derivative financial instruments.
Risks Relating to Our Industry, Business and Operations • We operate in a highly competitive environment. • The insurance and reinsurance industry is highly cyclical, and we may at times experience periods characterized by excess underwriting capacity and unfavorable premium rates. • The effects of inflation and global recessionary conditions impact the insurance and reinsurance industry in ways which may negatively impact our business, financial condition and results of operations. • Claims for natural and man-made catastrophic events could cause large losses and substantial volatility in our results of operations and could have a material adverse effect on our financial position and results of operations. • The impact of climate change will affect our loss limitation methods, such as the purchase of third party reinsurance and catastrophe risk modeling and risk selection in ways which may adversely impact our business, financial condition and results of operations.
ARCH CAPITAL 43 2024 FORM 10-K • The effects of inflation, trade and tariff disputes and global recessionary and other economic conditions impact the insurance and reinsurance industry in ways which may negatively impact our business, financial condition and results of operations. • Claims for natural and man-made catastrophic events could cause large losses and substantial volatility in our results of operations and could have a material adverse effect on our financial position and results of operations. • The impact of climate change will affect our loss limitation methods, such as the purchase of third party reinsurance and catastrophe risk modeling and risk selection in ways which may adversely impact our business, financial condition and results of operations. • Our insurance and reinsurance subsidiaries are subject to supervision and regulation.
We are subject to many laws and regulations relating to the adequacy of cybersecurity programs and business resiliency, including industry specific requirements under federal and state law, the new SEC Cybersecurity Rules, and comprehensive privacy or security laws in the EU, U.K. and some U.S. states like New York and California.
We are subject to many laws and regulations relating to the adequacy of cybersecurity programs and business resiliency, including the SEC Cybersecurity Rules, and comprehensive privacy, security and business resiliency laws in the EU such as GDPR and DORA. Some U.S. industry regulators like the NYDFS in New York also impose comprehensive cybersecurity requirements on our U.S. operations.
We may also be subject to financial exposures in the event that the sellers of the entities or business we acquire are unable or unwilling to meet their indemnification, reinsurance and other contractual ARCH CAPITAL 48 2023 FORM 10-K obligations to us.
We may also be subject to financial exposures in the event that the sellers of the entities or business we acquire are unable or unwilling to meet their indemnification, reinsurance and other contractual obligations to us. Our failure to manage successfully any of the foregoing challenges and risks may adversely impact our results of operations.
Pillar I addresses the broader challenge of a digitalized economy and focuses on the allocation of group profits among taxing jurisdictions based on a market-based concept rather than historical “permanent establishment” concepts. In January 2020, the OECD released a statement excluding most financial services activities, including insurance activities, from the scope of the profit reallocation mechanism in Pillar I.
Pillar I addresses the broader challenge of a digitalized economy and focuses on the allocation of group profits among taxing jurisdictions based on a market-based concept rather than historical “permanent establishment” concepts.
Changes to existing regulation and supervisory standards, or failure to comply with applicable requirements, could adversely affect our business and results of operation. Our insurance and reinsurance subsidiaries conduct business globally and are subject to varying degrees of regulation in the various jurisdictions in which they conduct business, including by state, federal and national insurance regulators.
Our insurance and reinsurance subsidiaries are subject to supervision and regulation. Changes to existing regulation and supervisory standards, or failure to comply with applicable requirements, could adversely affect our business and results of operation.
Until recently, the supply of insurance and reinsurance had increased over the past several years, and may again in the future, either as a result of capital provided by new entrants or by the commitment of additional capital by existing insurers or reinsurers.
The supply of insurance and reinsurance is increasing, either as a result of capital provided by new entrants or by the commitment of additional capital by existing insurers or reinsurers.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Our Audit Committee, comprised of independent directors from our Board, oversees the Board’s responsibilities relating to the operational (including information technology (“IT”) risks, business continuity and data security) risk affairs of the Company.
Our Audit Committee, comprised of independent directors from our Board, oversees the Board’s responsibilities relating to the operational (including IT risks, business continuity and data security) risk affairs of the Company.
See Item 1A, “ Risk Factors — Risk Relating to Our Indus try , Business & Op erations —Technology failures and cyber attacks, including, but not limited to, ransomware, exploitation in software or code with malicious intent, state-sponsored cyber attacks, as well as vulnerabilities relating to new technologies, such as generative AI, may impact us or our business partners and service providers, causing a disruption in service and operations which could materially and negatively impact our business and/or expose us to litigation.” Governance As part of our overall risk management approach, we recognize the importance of identifying and managing cybersecurity risk at several levels, including Board oversight, executive commitment and employee training.
See Item 1A, “ Risk Factors—Risk Relating to Our Industry, Business & Operations —Technology failures and cyber attacks, including, but not limited to, ransomware, exploitation in software or code with malicious intent, state-sponsored cyber attacks, as well as vulnerabilities relating to new technologies, such as generative AI, may impact us or our business partners and service providers, causing a disruption in service and operations which could materially and negatively impact our business and/or expose us to litigation.” ARCH CAPITAL 63 2024 FORM 10-K Governance As part of our overall risk management approach, we recognize the importance of identifying and managing cybersecurity risk at several levels, including Board oversight, executive commitment and employee training.
Our vendor management group performs information security risk assessments on our third party service providers with respect to their ability to protect data from unauthorized access, and on a risk weighted basis, we perform re-assessments routinely.
We use many third parties for IT functions and our vendor management group performs information security risk assessments on our third-party service providers with respect to their ability to protect data from unauthorized access, and on a risk weighted basis, we perform re-assessments routinely.
The CISO holds certifications from leading security associations. The CISO, reporting to the CIO, oversees the implementation and compliance of our information security standards and mitigation of related risks.
The CISO, reporting to the CIO, oversees the implementation and compliance of our information security standards and mitigation of related risks.
Computer viruses, hackers, employee or vendor error or misconduct, and other external hazards could expose our information systems and those of our vendors to security breaches, cybersecurity incidents or other disruptions, any of which could materially and adversely affect our ability to conduct our business.
Computer viruses, hackers, employee or vendor error or misconduct, and other external hazards could expose our information systems and those of our vendors to security breaches, cybersecurity incidents or other disruptions, any of which could materially and adversely affect our ability to conduct our business. We annually undergo an external penetration testing by a third-party cybersecurity firm.
While we and third parties with which we do business have experienced cybersecurity incidents, to date, the Company does not believe that any previous cybersecurity incidents have materially affected the Company.
These tests and our tabletop exercises enable us to incorporate recommendations and learnings in our program. While we and third parties with which we do business have experienced cybersecurity incidents, to date, the Company does not believe that any previous cybersecurity incidents have materially affected the Company.
The Company also requires these vendors to adhere to privacy and cybersecurity measures and has a third party service provider monitoring program in place that reviews changes to the security posture of certain higher risk third party service providers. In addition, the Company negotiates appropriately protective terms in its legal agreements with these providers.
The Company also requires these vendors to adhere to privacy and cybersecurity measures and has a third-party service provider monitoring program in place that reviews changes to the security posture of certain higher risk third-party service providers. Our operations rely on the secure processing, storage and transmission of confidential and other information in our computer systems and networks.
Our Audit Committee is informed of such risks through quarterly reports from our Chief Information Officer (“CIO”) and Chief Operations Officer (“COO”), with input from our Chief Information Security Officer (“CISO”).
Our Audit Committee is informed of such risks through quarterly reports from our Chief Information Officer (“CIO”) and Chief Operations Officer (“COO”), with input from our Chief Information Security Officer (“CISO”). Our cybersecurity and IT executives include our CIO, who has 34 years of experience in Information Technology, including 21 years in the financial services space.
As a foundation of our approach to cybersecurity risk, we have implemented processes at several levels across our enterprise to help assess, identify and manage cybersecurity risks. Our privacy and information security policies and standards govern our business lines and subsidiaries and encompass incident response, access control, and vendor management, among others.
As a foundation of our approach to cybersecurity risk, we have implemented processes at several levels across our enterprise to help assess, identify and manage cybersecurity risks and incidents.
The P&S Committee, ORC, CIMT and IT Committee are comprised of executives with reporting lines to the CIO and/or the COO.
The P&S Committee, ORC, CIMT and IT Committee are comprised of executives with reporting lines to the CIO and/or the COO. We also have an enterprise Artificial Intelligence Governance and Oversight Committee focusing on the use and management of AI in our operations.
In order to develop these policies and procedures, we monitor the privacy and cybersecurity laws, regulations and guidance applicable to us in the regions where we do business. See Item 1, “ Business—Regulation—Cybersecurity and Privacy ” for additional details. We annually undergo an external evaluation by a third party cybersecurity firm with a specialty in penetration testing.
These policies and standards are regularly reviewed and updated at least annually based on the risk and regulatory environment in which we operate. We monitor closely privacy and cybersecurity, AI and operational resilience laws, regulations and guidance applicable to us. See Item 1, “ Business—Regulation—Cybersecurity and Privacy ” for additional details.
Our cybersecurity and IT executives include our CIO, who has 33 years of experience in Information Technology, ARCH CAPITAL 60 2023 FORM 10-K including 20 years in the financial services space. His responsibilities as the CIO include information security oversight, and board reporting. Our CISO, has 18 years of experience in Information Security.
His responsibilities as the CIO include all areas of Information Technology and information security oversight. Our CISO, has 19 years of experience in information security. The CISO holds certifications from leading security associations. The information security personnel reporting to the CISO hold various leading security certifications.
Removed
Our operations rely on the secure processing, storage and transmission of confidential and other information in our computer systems and networks.
Added
Our privacy and information security policies and standards cover topics such as information sharing, privacy, data handling and data management as well as more detailed information technology (“IT”) processes encompassing incident response, access control, disaster recovery and testing, among other areas.

Item 2. Properties

Properties — owned and leased real estate

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Our mortgage group leases space for offices in the U.S., Hong Kong and Australia. We believe that the above described office space is adequate for our needs. However, as we continue to develop our business, we may open additional office locations in 2024 .
Our mortgage group leases space for offices in the U.S., Bermuda, Hong Kong and Australia. We believe that the above described office space is adequate for our needs. However, as we continue to develop our business, we may open additional office locations in 2025 . ARCH CAPITAL 64 2024 FORM 10-K

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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As of December 31, 2023, we were not a party to any litigation or arbitration which is expected by management to have a material adverse effect on our results of operations and financial condition and liquidity. ARCH CAPITAL 61 2023 FORM 10-K ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II
As of December 31, 2024, we were not a party to any litigation or arbitration which is expected by management to have a material adverse effect on our results of operations and financial condition and liquidity. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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ITEM 4. MINE SAFETY DISCLOSURES 61 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 62 ITEM 6. [ RESERVED ] 63 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 64 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 95 ITEM 8.
ITEM 4. MINE SAFETY DISCLOSURES 65 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 65 ITEM 6. [ RESERVED ] 66 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 67 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 98 ITEM 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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ARCH CAPITAL 62 2023 FORM 10-K PERFORMANCE GRAPH The following graph compares the cumulative total shareholder return on our common shares for each of the last five years through December 31, 2023 to the cumulative total return, assuming reinvestment of dividends, of (1) S&P 500 Composite Stock Index (“S&P 500 Index”) and (2) the S&P 500 Property & Casualty Insurance Index.
ARCH CAPITAL 65 2024 FORM 10-K PERFORMANCE GRAPH The following graph compares the cumulative total shareholder return on our common shares for each of the last five years through December 31, 2024 to the cumulative total return, assuming reinvestment of dividends, of (1) S&P 500 Composite Stock Index (“S&P 500 Index”) and (2) the S&P 500 Property & Casualty Insurance Index.
(2) The above graph assumes that the value of the investment was $100 on December 31, 2018.
(2) The above graph assumes that the value of the investment was $100 on December 31, 2019.
(2) This column represents the remaining approximate dollar amount available at the end of each applicable period under Arch Capital’s $1.0 billion share repurchase authorization, authorized by the Board of Directors of ACGL on December 19, 2022. Repurchases may be effected from time to time in open market or privately negotiated transactions through December 31, 2024.
(2) This column represents the remaining approximate dollar amount available at the end of each applicable period under Arch Capital’s $1.0 billion share repurchase authorization, authorized by the Board of Directors of ACGL on December 20, 2024, and having no expiration date. Repurchases may be effected from time to time in open market or privately negotiated transactions.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES HOLDERS As of February 16, 2024, and based on information provided to us by our transfer agent and proxy solicitor, there were 1,200 holders of record of our common shares (Nasdaq: ACGL) and approximately 360,100 beneficial holders of our common shares.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES HOLDERS As of February 21, 2025, and based on information provided to us by our transfer agent and proxy solicitor, there were 1,210 holders of record of our common shares (Nasdaq: ACGL) and approximately 485,646 beneficial holders of our common shares.
ISSUER PURCHASES OF EQUITY SECURITIES The following table summarizes our purchases of common shares for the 2023 fourth quarter: Issuer Purchases of Common Shares Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Plan or Programs ($000’s) (2) 10/1/2023-10/31/2023 56,056 $ 82.70 — $ 1,000,000 11/1/2023-11/30/2023 134,250 $ 85.28 — $ 1,000,000 12/1/2023-12/31/2023 11,201 $ 74.71 — $ 1,000,000 Total 201,507 $ 83.97 — $ 1,000,000 (1) This column represents (in whole shares) open market share repurchases, including an aggregate of 56,056, 134,250 and 11,201 shares repurchased by Arch Capital during October, November and December, respectively, other than through publicly announced plans or programs.
ISSUER PURCHASES OF EQUITY SECURITIES The following table summarizes our purchases of common shares for the 2024 fourth quarter: Issuer Purchases of Common Shares Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Plan or Programs ($000’s) (2) 10/1/2024-10/31/2024 517 $ 113.51 — $ 1,000,000 11/1/2024-11/30/2024 80 $ 101.85 — $ 1,000,000 12/1/2024-12/31/2024 262,857 $ 89.66 261,981 $ 996,796 Total 263,454 $ 89.71 261,981 $ 996,796 (1) This column represents (in whole shares) open market share repurchases, including an aggregate of 517 shares, 80 shares and 876 shares repurchased by Arch Capital during October, November and December, respectively, other than through publicly announced plans or programs.
CUMULATIVE TOTAL SHAREHOLDER RETURN (1)(2)(3) Base Period Company Name/Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 l Arch Capital Group Ltd. $100.00 $160.52 $134.99 $166.35 $234.96 $277.96 n S&P 500 Index $100.00 $131.49 $155.68 $200.37 $164.08 $207.21 p S&P 500 Property & Casualty Insurance Index $100.00 $125.87 $134.63 $160.58 $190.89 $211.53 (1) Stock price appreciation plus dividends.
CUMULATIVE TOTAL SHAREHOLDER RETURN (1)(2)(3) Base Period Company Name/Index 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24 l Arch Capital Group Ltd. $100.00 $84.10 $103.64 $146.37 $173.16 $226.44 n S&P 500 Index $100.00 $118.40 $152.39 $124.79 $157.59 $197.02 p S&P 500 Property & Casualty Insurance Index $100.00 $106.96 $127.58 $151.65 $168.05 $227.67 (1) Stock price appreciation plus dividends.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Corporate Segment The corporate segment results include net investment income, net realized gains or losses, equity in net income or loss of investments accounted for using the equity method, other income (loss), corporate expenses, transaction costs and other, amortization of intangible assets, interest expense, net foreign exchange gains or losses, income taxes items (which for 2023 reflects the establishment of a net deferred income tax asset related to the enactment of Bermuda’s new corporate income tax), income from operating affiliates and items related to our non-cumulative preferred shares.
Corporate The corporate results include net investment income, net realized gains or losses, equity in net income or loss of investments accounted for using the equity method, other income (loss), corporate expenses, transaction costs and other, amortization of intangible assets, interest expense, net foreign exchange gains or losses, income taxes items (which for 2023 reflects the establishment of a net deferred income tax asset related to the enactment of Bermuda’s new corporate income tax), income from operating affiliates and items related to our non-cumulative preferred shares.
See note 9, “Investment Information—Net Realized Gains (Losses),” and note 9, “Investment Information—Allowance for Credit Losses,” to our consolidated financial statements for additional information. Equity in Net Income (Loss) of Investments Accounted for Using the Equity Method.
See note 9, “Investment Information—Net Realized Gains (Losses),” and note 9, “Investment Information—Allowance for Expected Credit Losses,” to our consolidated financial statements for additional information. Equity in Net Income (Loss) of Investments Accounted for Using the Equity Method.
We utilize various derivative instruments such as futures contracts to enhance investment performance, replicate investment positions or manage market exposures and duration risk that would be allowed under our investment guidelines if implemented in other ways. See note 11, “Derivative Instruments,” to our consolidated financial statements in Item 8 for additional disclosures concerning derivatives.
We utilize various derivative instruments such as futures contracts to enhance investment performance, replicate investment positions or manage market exposures and fixed income duration risk that would be allowed under our investment guidelines if implemented in other ways. See note 11, “Derivative Instruments,” to our consolidated financial statements in Item 8 for additional disclosures concerning derivatives.
In addition, the potential variability shown in the tables above are reasonably likely scenarios of changes in our key assumptions at December 31, 2023 and are not meant to be a “best case” or “worst case” series of outcomes and therefore, it is possible that future variations may be more or less than the amounts set forth above.
In addition, the potential variability shown in the tables above are reasonably likely scenarios of changes in our key assumptions at December 31, 2024 and are not meant to be a “best case” or “worst case” series of outcomes and therefore, it is possible that future variations may be more or less than the amounts set forth above.
Comparisons between 2022 and 2021 have been omitted from this Form 10-K, but may be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K year ended December 31, 2022 filed with the SEC.
Comparisons between 2023 and 2022 have been omitted from this Form 10-K, but may be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K year ended December 31, 2023 filed with the SEC.
The scenarios shown in the tables summarize the effect of (i) changes to the expected loss ratio selections used at December 31, 2023, which represent loss ratio point increases or decreases to the expected loss ratios used, and (ii) changes to the loss development patterns used in our reserving process at December 31, 2023, which represent claims reporting that is either slower or faster than the reporting patterns used.
The scenarios shown in the tables summarize the effect of (i) changes to the expected loss ratio selections used at December 31, 2024, which represent loss ratio point increases or decreases to the expected loss ratios used, and (ii) changes to the loss development patterns used in our reserving process at December 31, 2024, which represent claims reporting that is either slower or faster than the reporting patterns used.
We believe that the illustrated sensitivities are indicative of the potential variability inherent in the estimation process of those parameters. The results show the impact of varying each key actuarial assumption using the chosen sensitivity on our IBNR reserves, on a net basis and across all accident years.
We believe that the illustrated sensitivities are indicative of the potential variability inherent in the estimation process of those parameters. The results show the impact of varying each key actuarial assumption using the chosen sensitivity on our Loss Reserves, on a net basis and across all accident years.
The models, assumptions and estimates we use to evaluate the need for a PDR may prove to be inaccurate, especially during an extended economic downturn or a period of extreme market volatility and uncertainty. No premium deficiency charges were recorded by us during 2023 or 2022.
The models, assumptions and estimates we use to evaluate the need for a PDR may prove to be inaccurate, especially during an extended economic downturn or a period of extreme market volatility and uncertainty. No premium deficiency charges were recorded by us during 2024 or 2023.
In accordance with the SEC’s Financial Reporting Release No. 48, we performed a sensitivity analysis to determine the effects that market risk exposures could have on the future earnings, fair values or cash flows of our financial instruments as of December 31, 2023.
In accordance with the SEC’s Financial Reporting Release No. 48, we performed a sensitivity analysis to determine the effects that market risk exposures could have on the future earnings, fair values or cash flows of our financial instruments as of December 31, 2024.
Potential Variability in Loss Reserves The following tables summarize the effect of reasonably likely scenarios on the key actuarial assumptions used to estimate our Loss Reserves, net of unpaid losses and loss adjustment expenses recoverable, at December 31, 2023 by underwriting segment and reserving lines.
Potential Variability in Loss Reserves The following tables summarize the effect of reasonably likely scenarios on the key actuarial assumptions used to estimate our Loss Reserves, net of unpaid losses and loss adjustment expenses recoverable, at December 31, 2024 by underwriting segment and reserving lines.
For additional information on our preferred shares, see note 21, “Shareholders’ Equity,” to our consolidated financial statements in Item 8. The following tables present condensed financial information for Arch Capital (parent guarantor) and Arch-U.S. (subsidiary issuer): December 31, 2023 December 31, 2022 Arch Capital Arch-U.S. Arch Capital Arch-U.S.
For additional information on our preferred shares, see note 21, “Shareholders’ Equity,” to our consolidated financial statements in Item 8. The following tables present condensed financial information for Arch Capital (parent guarantor) and Arch-U.S. (subsidiary issuer): December 31, 2024 December 31, 2023 Arch Capital Arch-U.S. Arch Capital Arch-U.S.
The sensitivity analysis performed as of December 31, 2023 presents hypothetical losses in cash flows, earnings and fair values of market sensitive instruments which were held by us on December 31, 2023 and are sensitive to changes in interest rates and equity security prices.
The sensitivity analysis performed as of December 31, 2024 presents hypothetical losses in cash flows, earnings and fair values of market sensitive instruments which were held by us on December 31, 2024 and are sensitive to changes in interest rates and equity security prices.
See note 10, “Fair Value,” to our consolidated financial statements in Item 8 for a summary of our financial assets and liabilities measured at fair value at December 31, 2023 and 2022 segregated by level in the fair value hierarchy.
See note 10, “Fair Value,” to our consolidated financial statements in Item 8 for a summary of our financial assets and liabilities measured at fair value at December 31, 2024 and 2023 segregated by level in the fair value hierarchy.
For our mortgage segment, we considered the sensitivity of loss reserve estimates at December 31, 2023 by assessing the potential changes resulting from a parallel shift in severity and default to claim rate.
For our mortgage segment, we considered the sensitivity of loss reserve estimates at December 31, 2024 by assessing the potential changes resulting from a parallel shift in severity and default to claim rate.
If we are not able to obtain adequate capital, our business, results of operations and financial condition could be adversely affected, which could include, among other things, the following possible outcomes: (1) potential downgrades in the financial strength ratings assigned by ratings agencies to our operating subsidiaries, which could place those operating subsidiaries at a competitive disadvantage compared to higher-rated competitors; (2) reductions in the amount of business that our operating subsidiaries are able to write in order to meet capital adequacy-based tests enforced by statutory agencies; and (3) any resultant ratings downgrades could, among other things, affect our ability to write business and increase the cost of bank credit and letters of credit.
ARCH CAPITAL 93 2024 FORM 10-K If we are not able to obtain adequate capital, our business, results of operations and financial condition could be adversely affected, which could include, among other things, the following possible outcomes: (1) potential downgrades in the financial strength ratings assigned by ratings agencies to our operating subsidiaries, which could place those operating subsidiaries at a competitive disadvantage compared to higher-rated competitors; (2) reductions in the amount of business that our operating subsidiaries are able to write in order to meet capital adequacy-based tests enforced by statutory agencies; and (3) any resultant ratings downgrades could, among other things, affect our ability to write business and increase the cost of bank credit and letters of credit.
Amounts in both periods primarily reflect changes in the cash surrender value of our investment in corporate-owned life insurance. Corporate Expenses. Corporate expenses were $96 million for 2023, compared to $95 million for 2022. Such amounts primarily represent certain holding company costs necessary to support our worldwide operations and costs associated with operating as a publicly traded company.
Amounts in both periods primarily reflect changes in the cash surrender value of our investment in corporate-owned life insurance. Corporate Expenses. Corporate expenses were $119 million for 2024, compared to $96 million for 2023. Such amounts primarily represent certain holding company costs necessary to support our worldwide operations and costs associated with operating as a publicly traded company.
The insurance in force and risk in force for our U.S. primary mortgage insurance business by policy year were as follows at December 31, 2023: IIF RIF Delinquency Amount % Amount % Rate (1) Policy year: 2013 and prior $ 10,859 3.7 $ 2,738 3.6 6.55 % 2014 2,442 0.8 649 0.9 2.89 % 2015 4,691 1.6 1,244 1.6 1.98 % 2016 7,525 2.6 2,025 2.7 2.50 % 2017 7,600 2.6 2,023 2.7 3.13 % 2018 8,512 2.9 2,207 2.9 4.04 % 2019 15,767 5.4 4,074 5.4 2.40 % 2020 51,349 17.7 13,357 17.7 1.17 % 2021 76,667 26.4 19,812 26.2 1.12 % 2022 63,899 22.0 16,755 22.2 0.89 % 2023 41,453 14.3 10,643 14.1 0.26 % Total $ 290,764 100.0 $ 75,527 100.0 1.74 % (1) Represents the ending percentage of loans in default.
The insurance in force and risk in force for our U.S. primary mortgage insurance business by policy year were as follows at December 31, 2023: IIF RIF Delinquency Amount % Amount % Rate (1) Policy year: 2014 and prior $ 13,301 4.6 $ 3,387 4.5 6.01 % 2015 4,691 1.6 1,244 1.6 1.98 % 2016 7,525 2.6 2,025 2.7 2.50 % 2017 7,600 2.6 2,023 2.7 3.13 % 2018 8,512 2.9 2,207 2.9 4.04 % 2019 15,767 5.4 4,074 5.4 2.40 % 2020 51,349 17.7 13,357 17.7 1.17 % 2021 76,667 26.4 19,812 26.2 1.12 % 2022 63,899 22.0 16,755 22.2 0.89 % 2023 41,453 14.3 10,643 14.1 0.26 % Total $ 290,764 100.0 $ 75,527 100.0 1.74 % (1) Represents the ending percentage of loans in default.
Mortgage Backed Securities Index 1.50 ICE BofA 1-5 Year Canada Government Index 2.70 ICE BofA 15+ Year Canada Government Index 0.30 ICE BofA 1-5 Year Japan Government Index 0.25 Total 100.00 % COMMENT ON NON-GAAP FINANCIAL MEASURES Throughout this filing, we present our operations in the way we believe will be the most meaningful and useful to investors, analysts, rating agencies and others who use our financial information in evaluating the performance of our company.
Mortgage Backed Securities Index 1.50 ICE BofA 1-5 Year Japan Government Index 0.25 Total 100.00 % COMMENT ON NON-GAAP FINANCIAL MEASURES Throughout this filing, we present our operations in the way we believe will be the most meaningful and useful to investors, analysts, rating agencies and others who use our financial information in evaluating the performance of our company.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion and analysis of the financial condition and results of operations for the year ended December 31, 2023 and 2022.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion and analysis of the financial condition and results of operations for the year ended December 31, 2024 and 2023.
Any estimates and ARCH CAPITAL 77 2023 FORM 10-K assumptions made as part of the reserving process could prove to be inaccurate due to several factors, including the fact that for certain lines of business relatively limited historical information has been reported to us through December 31, 2023.
Any estimates and ARCH CAPITAL 80 2024 FORM 10-K assumptions made as part of the reserving process could prove to be inaccurate due to several factors, including the fact that for certain lines of business relatively limited historical information has been reported to us through December 31, 2024.
Estimating reinsurance recoverables can be more subjective than estimating the underlying reserves for losses and loss adjustment expenses as discussed above in “—Loss Reserves.” In particular, reinsurance recoverables may be affected by deemed inuring reinsurance, industry losses ARCH CAPITAL 79 2023 FORM 10-K reported by various statistical reporting services, and other factors.
Estimating reinsurance recoverables can be more subjective than estimating the underlying reserves for losses and loss adjustment expenses as discussed above in “—Loss Reserves.” In particular, reinsurance recoverables may be ARCH CAPITAL 82 2024 FORM 10-K affected by deemed inuring reinsurance, industry losses reported by various statistical reporting services, and other factors.
For multi-year reinsurance treaties which are payable in annual installments, generally, ARCH CAPITAL 80 2023 FORM 10-K only the initial annual installment is included as premiums written at policy inception due to the ability of the reinsured to commute or cancel coverage during the term of the policy.
For multi-year reinsurance treaties which are payable in annual installments, generally, ARCH CAPITAL 83 2024 FORM 10-K only the initial annual installment is included as premiums written at policy inception due to the ability of the reinsured to commute or cancel coverage during the term of the policy.
At December 31, 2023 and 2022, the fair value of our investments in equity securities and certain investments accounted for using the equity method with underlying equity strategies totaled $1.0 billion and $0.8 billion, respectively. These investments are exposed to price risk, which is the potential loss arising from decreases in fair value.
At December 31, 2024 and 2023, the fair value of our investments in equity securities and certain investments accounted for using the equity method with underlying equity strategies totaled $1.5 billion and $1.0 billion, respectively. These investments are exposed to price risk, which is the potential loss arising from decreases in fair value.
If we require significant amounts of cash on short notice in excess of anticipated cash requirements, then we may have difficulty selling these investments in a timely manner or may be forced to sell or terminate them at unfavorable values. Our unfunded investment commitments totaled approximately $3.6 billion at December 31, 2023 and are callable by our investment managers.
If we require significant amounts of cash on short notice in excess of anticipated cash requirements, then we may have difficulty selling these investments in a timely manner or may be forced to sell or terminate them at unfavorable values. Our unfunded investment commitments totaled approximately $4.4 billion at December 31, 2024 and are callable by our investment managers.
We recorded net realized losses of $165 million for 2023, compared to net realized losses of $663 million for 2022. Currently, our portfolio is actively managed to maximize total return within certain guidelines. The effect of financial market movements on the investment portfolio will directly impact net realized gains or losses as the portfolio is rebalanced.
We recorded net realized gains of $197 million for 2024, compared to net realized losses of $165 million for 2023. Currently, our portfolio is actively managed to maximize total return within certain guidelines. The effect of financial market movements on the investment portfolio will directly impact net realized gains or losses as the portfolio is rebalanced.
During 2023 and 2022, we made interest payments of $127 million and $128 million, respectively, related to our senior notes and other financing arrangements. See note 19, “Debt and Financing Arrangements,” to our consolidated financial statements in Item 8 for additional disclosures concerning our senior notes and revolving credit agreement borrowings.
During 2024 and 2023, we made interest payments of $127 million and $127 million, respectively, primarily related to our senior notes and other financing arrangements. See note 19, “Debt and Financing Arrangements,” to our consolidated financial statements in Item 8 for additional disclosures concerning our senior notes and revolving credit agreement borrowings.
As of December 31, 2023, our portfolio’s 95th percentile VaR was estimated to be 7.8%, compared to an estimated 8.8% at December 31, 2022. In periods where the volatility of the risk factors mapped to our portfolio’s exposures is higher due to market conditions, the resulting VaR is higher than in other periods. Equity Securities.
As of December 31, 2024, our portfolio’s 95th percentile VaR was estimated to be 5.6%, compared to an estimated 7.8% at December 31, 2023. In periods where the volatility of the risk factors mapped to our portfolio’s exposures is higher due to market conditions, the resulting VaR is higher than in other periods. Equity Securities.
Although the estimated duration and average credit quality of this index will move as the duration and rating of its constituent securities change, generally we do not adjust the composition of the benchmark return index except to incorporate changes to the mix of liability currencies and durations noted above.
Although the estimated fixed income duration and average credit quality of this index will move as the duration and rating of its constituent securities change, generally we do not adjust the composition of the benchmark return index during the year except to incorporate changes to the mix of liability currencies and durations noted above.
If single premium policies related to insured loans are canceled for any reason and the policy is a non-refundable product, the remaining unearned ARCH CAPITAL 81 2023 FORM 10-K premium related to each canceled policy is recognized as earned premium upon notification of the cancellation.
If single premium policies related to insured loans are canceled for any reason and the policy is a non-refundable product, the remaining unearned ARCH CAPITAL 84 2024 FORM 10-K premium related to each canceled policy is recognized as earned premium upon notification of the cancellation.
Share Repurchase Program Our Board has authorized the investment in Arch Capital’s common shares through a share repurchase program. Since the inception of the share repurchase program through December 31, 2023, Arch Capital has repurchased approximately 433.6 million common shares for an aggregate purchase price of $5.9 billion.
Share Repurchase Program Our Board has authorized the investment in Arch Capital’s common shares through a share repurchase program. Since the inception of the share repurchase program through December 31, 2024, Arch Capital has repurchased approximately 433.8 million common shares for an aggregate purchase price of $5.9 billion.
Dollar against foreign currencies: Shareholders’ equity $ (110) $ (97) Book value per share $ (0.30) $ (0.26) Pre-tax impact of a hypothetical 10% decline of the U.S. Dollar against foreign currencies: Shareholders’ equity $ 110 $ 97 Book value per share $ 0.30 $ 0.26 (1) Represents capital contributions held in the foreign currencies of our operating units.
Dollar against foreign currencies: Shareholders’ equity $ (76) $ (110) Book value per share $ (0.20) $ (0.30) Pre-tax impact of a hypothetical 10% decline of the U.S. Dollar against foreign currencies: Shareholders’ equity $ 76 $ 110 Book value per share $ 0.20 $ 0.30 (1) Represents capital contributions held in the foreign currencies of our operating units.
Total return is calculated on a pre-tax basis and before investment expenses, excludes amounts reflected in the ‘other’ segment, and reflects the effect of financial market conditions along with foreign currency fluctuations. In addition, total return incorporates the timing of investment returns during the periods. There is no directly comparable GAAP financial measure for total return.
Total return is calculated on a pre-tax basis and before investment expenses, and reflects the effect of financial market conditions along with foreign currency fluctuations. In addition, total return incorporates the timing of investment returns during the periods. There is no directly comparable GAAP financial measure for total return.
If the underlying exposure of each investment-related derivative held at December 31, 2023 depreciated by 100 basis points, it would have resulted in a reduction in net income of approximately $42 million, and a decrease in book value per share of $0.11, compared to $66 million and $0.18, respectively, on investment-related derivatives held at December 31, 2022.
If the underlying exposure of each investment-related derivative held at December 31, 2024 depreciated by 100 basis points, it would have resulted in a reduction in net income of approximately $50 million, and a decrease in book value per share of $0.13, compared to $42 million and $0.11, respectively, on investment-related derivatives held at December 31, 2023.
If the underlying exposure of each investment-related derivative held at December 31, 2023 appreciated by 100 basis points, it would have resulted in an increase in net income of approximately $42 million, and an increase in book value per share of $0.11, compared to $66 million and $0.18, respectively, on investment-related derivatives held at December 31, 2022.
If the underlying exposure of each investment-related derivative held at December 31, 2024 appreciated by 100 basis points, it would have resulted in an increase in net income of approximately $50 million, and an increase in book value per share of $0.13, compared to $42 million and $0.11, respectively, on investment-related derivatives held at December 31, 2023.
Management uses ARCH CAPITAL 68 2023 FORM 10-K total return on investments as a key measure of the return generated to Arch common shareholders on the capital held in the business, and compares the return generated by our investment portfolio against benchmark returns which we measured our portfolio against during the periods.
Management uses total return on investments as a key measure of the return generated to Arch common shareholders on the capital held in the business, and compares the return generated by our investment portfolio against benchmark returns which we measured our portfolio against during the periods.
Best group rating of “A” (Excellent) has been applied to all Lloyd’s syndicates. (4) Over 95% of such amount is collateralized through reinsurance trusts, funds withheld arrangements, letters of credit or other. See note 8, “Reinsurance,” to our consolidated financial statements in Item 8 for further details.
Best group rating of “A+” (Superior) has been applied to all Lloyd’s syndicates. (4) Over 96% of such amount is collateralized through reinsurance trusts, funds withheld arrangements, letters of credit or other. See note 8, “Reinsurance,” to our consolidated financial statements in Item 8 for further details.
See note 9, “Investment Information—Equity in Net Income (Loss) of Investments Accounted For Using the Equity Method,” to our consolidated financial statements in Item 8 for additional information. Other Income or Losses Other income for the 2023 period was $27 million, compared to a loss of $27 million for the 2022 period.
See note 9, “Investment Information—Equity in Net Income (Loss) of Investments Accounted For Using the Equity Method,” to our consolidated financial statements in Item 8 for additional information. Other Income or Losses Other income for 2024 was $42 million, compared to $27 million for 2023.
On a consolidated basis, ceded premiums written represented 26.8% of gross premiums written for 2023, compared to 27.7% for 2022. We monitor the financial condition of our reinsurers and attempt to place coverages only with substantial, financially sound carriers.
On a consolidated basis, ceded premiums written represented 26.9% of gross premiums written for 2024, compared to 26.8% for 2023. We monitor the financial condition of our reinsurers and attempt to place coverages only with substantial, financially sound carriers.
The table below shows the components of the mortgage segment’s loss ratio: Year Ended December 31, 2023 2022 Current year 20.8 % 19.8 % Prior period reserve development (29.7) % (47.8) % Loss ratio (8.9) % (28.0) % Unlike property and casualty business for which we estimate ultimate losses on premiums earned, losses on U.S. primary mortgage insurance business are only recorded at the time a borrower is delinquent on their mortgage, in accordance with primary mortgage insurance industry practice.
The table below shows the components of the mortgage segment’s loss ratio: Year Ended December 31, 2024 2023 Current year 18.6 % 20.8 % Prior period reserve development (23.0) % (29.7) % Loss ratio (4.4) % (8.9) % Unlike property and casualty business for which we estimate ultimate losses on premiums earned, losses on U.S. primary mortgage insurance business are only recorded at the time a borrower is delinquent on their mortgage, in accordance with primary mortgage insurance industry practice.
Other operating expenses include those operating expenses that are incremental and/or directly attributable to our individual underwriting operations. Underwriting income or loss does not incorporate items included in our corporate segment.
Other operating expenses include those operating expenses that are incremental and/or directly attributable to our individual underwriting operations. Underwriting income or loss does not incorporate certain income and expense items which are included in corporate.
For example, assuming all other factors remain constant, for every one percentage point change in primary claim severity (which we estimate to be approximately 29% of the unpaid principal balance at December 31, 2023), we estimated that our loss reserves would change by approximately $17 million at December 31, 2023.
For example, assuming all other factors remain constant, for every one percentage point change in primary claim severity (which we estimate to be approximately 30% of the unpaid principal balance at December 31, 2024), we estimated that our loss reserves would change by approximately $15 million at December 31, 2024.
These are special purpose variable interest entities that are not consolidated in our financial results because we do not have the unilateral power to direct those activities that are significant to its economic performance. See note 12, “Variable Interest Entity and Noncontrolling Interests,” to our consolidated financial statements in Item 8 for additional information.
These are special purpose variable interest entities that are not consolidated in our financial results because we do not have the unilateral power to direct those activities that are significant to its economic performance. See note 12, “Variable Interest Entities” to our consolidated financial statements in Item 8 for additional information.
As of January 1, 2024, our modeled peak zone earthquake exposure (San Francisco area earthquake) represented approximately 54% of our peak zone catastrophe exposure, and our modeled peak zone international exposure (German windstorm) was substantially less than both our peak zone windstorm and earthquake exposures.
As of January 1, 2025, our modeled peak zone earthquake exposure (San Francisco area earthquake) represented approximately 57% of our peak zone catastrophe exposure, and our modeled peak zone international exposure (German windstorm) was substantially less than both our peak zone windstorm and earthquake exposures.
The reinsurance segment’s net favorable development was $152 million, or 2.6 points, for 2023, compared to $190 million, or 4.8 points, for 2022, See note 5, “Reserve for Losses and Loss Adjustment Expenses,” to our consolidated financial statements in Item 8 for information about the reinsurance segment’s prior year reserve development. ARCH CAPITAL 71 2023 FORM 10-K Underwriting Expenses .
The reinsurance segment’s net favorable development was $188 million, or 2.6 points, for 2024, compared to $152 million, or 2.6 points, for 2023, See note 5, “Reserve for Losses and Loss Adjustment Expenses,” to our consolidated financial statements in Item 8 for information about the reinsurance segment’s prior year reserve development. ARCH CAPITAL 74 2024 FORM 10-K Underwriting Expenses .
The Credit Facility, as amended, consists of a $425 million secured facility for letters of credit (the “Secured Facility”) and a $500 million unsecured facility for revolving loans and letters of credit (the “Unsecured Facility”).
The Group Credit Facility consists of a $425 million secured facility for letters of credit (the “Secured Facility”) and a $500 million unsecured facility for revolving loans and letters of credit (the “Unsecured Facility”).
For further discussion on investment activity, please refer to “—Financial Condition, Liquidity and Capital Resources—Financial Condition—Investable Assets.” ARCH CAPITAL 94 2023 FORM 10-K Foreign Currency Exchange Risk Foreign currency rate risk is the potential change in value, income and cash flow arising from adverse changes in foreign currency exchange rates.
For further discussion on investment activity, please refer to “—Financial Condition, Liquidity and Capital Resources—Financial Condition—Investable Assets.” Foreign Currency Exchange Risk Foreign currency rate risk is the potential change in value, income and cash flow arising from adverse changes in foreign currency exchange rates.
See note 19, “Debt and Financing Arrangements,” to our consolidated financial statements in Item 8 for additional disclosures concerning our senior notes and revolving credit agreement borrowings. ARCH CAPITAL 90 2023 FORM 10-K RATINGS Our ability to underwrite business is affected by the quality of our claims paying ability and financial strength ratings as evaluated by independent agencies.
See note 19, “Debt and Financing Arrangements,” to our consolidated financial statements in Item 8 for additional disclosures concerning our senior notes and revolving credit agreement borrowings. RATINGS Our ability to underwrite business is affected by the quality of our claims paying ability and financial strength ratings as evaluated by independent agencies.
Based on in-force exposure estimated as of January 1, 2024, our modeled RDS loss was 7.0% of tangible shareholders’ equity available to Arch. Net probable maximum loss estimates are net of expected reinsurance recoveries, before income tax and before excess reinsurance reinstatement premiums. RDS loss estimates are net of expected reinsurance recoveries and before income tax.
Based on in-force exposure estimated as of January 1, 2025, our modeled RDS loss was 4.8% of tangible shareholders’ equity available to Arch. Net probable maximum loss estimates are net of expected reinsurance recoveries, before income tax and before excess reinsurance reinstatement premiums. RDS loss estimates are net of expected reinsurance recoveries and before income tax.
At December 31, 2023, the notional value of all derivative instruments (excluding foreign currency forward contracts which are included in the foreign currency exchange risk analysis below) was $4.2 billion, compared to $6.6 billion at December 31, 2022.
At December 31, 2024, the notional value of all derivative instruments (excluding foreign currency forward contracts which are included in the foreign currency exchange risk analysis below) was $5.0 billion, compared to $4.2 billion at December 31, 2023.
In addition to establishing loss reserves for delinquent loans, under GAAP, we are required to establish a premium deficiency reserve for our mortgage insurance products if the amount of expected future losses and maintenance costs exceeds expected future premiums, existing reserves and the anticipated investment income for ARCH CAPITAL 72 2023 FORM 10-K such product.
In addition to establishing loss reserves for delinquent loans, under GAAP, we are required to establish a premium deficiency reserve for our mortgage insurance products if the amount of expected future losses and maintenance costs exceeds expected future premiums, existing reserves and the anticipated investment income for such product.
The significant assumptions utilized in the DCF models included the future revenue and profits expected to be generated by the identifiable intangible assets and the discount rates. See note 15, “Income Taxes” to our consolidated financial statements in Item 8 for disclosures concerning our Company’s deferred income tax asset.
The significant assumptions ARCH CAPITAL 85 2024 FORM 10-K utilized in the DCF models included the future revenue and profits expected to be generated by the identifiable intangible assets and the discount rates. See note 15, “Income Taxes” to our consolidated financial statements in Item 8 for disclosures concerning our Company’s deferred income tax asset.
An immediate hypothetical 10% increase in the value of each position would increase the fair value of such investments by approximately $101 million and $79 million at December 31, 2023 and 2022, respectively, and would have increased book value per share by approximately $0.27 and $0.21, respectively. Investment-Related Derivatives.
An immediate hypothetical 10% increase in the value of each position would increase the fair value of such investments by approximately $149 million and $101 million at December 31, 2024 and 2023, respectively, and would have increased book value per share by approximately $0.40 and $0.27, respectively. Investment-Related Derivatives.
The Credit Facility contains certain restrictive covenants customary for facilities of this type, including restrictions on indebtedness, consolidated tangible net worth, minimum shareholders’ equity levels and minimum financial strength ratings. Arch Capital and its subsidiaries which are party to the agreement were in compliance with all covenants contained therein at December 31, 2023.
The Group Credit Facility contains certain restrictive and maintenance covenants customary for facilities of this type, including restrictions on indebtedness, minimum consolidated tangible net worth, maximum leverage levels and minimum financial strength ratings. Arch Capital and its subsidiaries which are party to the agreement were in compliance with all covenants contained therein at December 31, 2024.
The mortgage segment’s net favorable development was $344 million, or 29.7 points, for 2023, compared to $554 million, or 47.8 points, for 2022. See note 5, “Reserve for Losses and Loss Adjustment Expenses,” to our consolidated financial statements in Item 8 for information about the mortgage segment’s prior year reserve development. Underwriting Expenses .
The mortgage segment’s net favorable development was $282 million, or 23.0 points, for 2024, compared to $344 million, or 29.7 points, for 2023. See note 5, “Reserve for Losses and Loss Adjustment Expenses,” to our consolidated financial statements in Item 8 for information about the mortgage segment’s prior year reserve development. Underwriting Expenses .
Best based on its opinion of the insurer’s financial strength as of such date. An explanation of the ratings listed in the table follows: the rating of “A+” is designated “Superior”; and the “A” and “A-” ratings are designated “Excellent.” (2) See note 12, “Variable Interest Entity and Noncontrolling Interests” and note 16, “Transactions with Related Parties.” (3) The A.M.
Best based on its opinion of the insurer’s financial strength as of such date. An explanation of the ratings listed in the table follows: the rating of “A++” and “A+” are designated “Superior”; and the “A” and “A-” ratings are designated “Excellent.” (2) See note 16, “Transactions with Related Parties.” (3) The A.M.
Our models employ both proprietary and vendor-based systems and include cross-line correlations for property, marine, offshore energy, aviation, workers compensation and personal accident. We seek to limit the probable maximum pre-tax loss to a specific level for severe catastrophic events.
ARCH CAPITAL 94 2024 FORM 10-K Our models employ both proprietary and vendor-based systems and include cross-line correlations for property, marine, offshore energy, aviation, workers compensation and personal accident. We seek to limit the probable maximum pre-tax loss to a specific level for severe catastrophic events.
This risk management discussion and the estimated amounts generated from the following sensitivity analysis represent forward-looking statements of market risk assuming certain adverse market conditions occur. Actual results in the future may differ materially from these projected results due to actual developments in the global financial markets.
This risk management ARCH CAPITAL 95 2024 FORM 10-K discussion and the estimated amounts generated from the following sensitivity analysis represent forward-looking statements of market risk assuming certain adverse market conditions occur. Actual results in the future may differ materially from these projected results due to actual developments in the global financial markets.
The following table summarizes the effect that an immediate, parallel shift in the interest rate yield curve would have had on our investment portfolio at December 31, 2023 and 2022: (U.S. dollars in billions) Interest Rate Shift in Basis Points -100 -50 - +50 +100 Dec. 31, 2023 Total fair value $ 33.6 $ 33.1 $ 32.7 $ 32.2 $ 31.7 Change from base 3.0 % 1.5 % (1.4) % (2.8) % Change in unrealized value $ 0.98 $ 0.49 $ (0.46) $ (0.91) Dec. 31, 2022 Total fair value $ 27.2 $ 26.8 $ 26.4 $ 26.0 $ 25.7 Change from base 2.9 % 1.4 % (1.4) % (2.7) % Change in unrealized value $ 0.77 $ 0.37 $ (0.37) $ (0.71) In addition, we consider the effect of credit spread movements on the market value of our Fixed Income Securities and the corresponding change in unrealized value.
The following table summarizes the effect that an immediate, parallel shift in the interest rate yield curve would have had on our investment portfolio at December 31, 2024 and 2023: (U.S. dollars in billions) Interest Rate Shift in Basis Points -100 -50 - +50 +100 Dec. 31, 2024 Total fair value $ 40.0 $ 39.5 $ 38.9 $ 38.4 $ 37.9 Change from base 2.8 % 1.4 % (1.4) % (2.7) % Change in unrealized value $ 1.09 $ 0.54 $ (0.54) $ (1.05) Dec. 31, 2023 Total fair value $ 33.6 $ 33.1 $ 32.7 $ 32.2 $ 31.7 Change from base 3.0 % 1.5 % (1.4) % (2.8) % Change in unrealized value $ 0.98 $ 0.49 $ (0.46) $ (0.91) In addition, we consider the effect of credit spread movements on the market value of our Fixed Income Securities and the corresponding change in unrealized value.
The following table provides a summary of our net foreign currency exchange exposures, as well as foreign currency derivatives in place to manage these exposures: (U.S. dollars in millions, except per share data) December 31, 2023 December 31, 2022 Net assets (liabilities), denominated in foreign currencies, excluding shareholders’ equity and derivatives $ (300) $ (396) Shareholders’ equity denominated in foreign currencies (1) 1,158 1,056 Net foreign currency forward contracts outstanding (2) 246 312 Net exposures denominated in foreign currencies $ 1,104 $ 972 Pre-tax impact of a hypothetical 10% appreciation of the U.S.
The following table provides a summary of our net foreign currency exchange exposures, as well as foreign currency derivatives in place to manage these exposures: (U.S. dollars in millions, except per share data) December 31, 2024 December 31, 2023 Net assets (liabilities), denominated in foreign currencies, excluding shareholders’ equity and derivatives $ (815) $ (300) Shareholders’ equity denominated in foreign currencies (1) 1,120 1,158 Net foreign currency forward contracts outstanding (2) 453 246 Net exposures denominated in foreign currencies $ 758 $ 1,104 Pre-tax impact of a hypothetical 10% appreciation of the U.S.
Our segment information includes the presentation of consolidated underwriting income or loss and a subtotal of underwriting income or loss before the contribution from the ‘other’ segment. Such measures represent the pre-tax profitability of our underwriting operations and include net premiums earned plus other underwriting income, less losses and loss adjustment expenses, acquisition expenses and other operating expenses.
Our segment information includes the presentation of consolidated underwriting income or loss. Such measures represent the pre-tax profitability of our underwriting operations and include net premiums earned plus other underwriting income, less losses and loss adjustment expenses, acquisition expenses and other operating expenses.
ARCH CAPITAL 88 2023 FORM 10-K GUARANTOR INFORMATION The below table provides a description of our senior notes payable at December 31, 2023: Interest Principal Carrying Issuer/Due (Fixed) Amount Amount Arch Capital: May 1, 2034 7.350 % $ 300 $ 298 June 30, 2050 3.635 % 1,000 989 Arch-U.S.: Nov. 1, 2043 (1) 5.144 % 500 495 Arch Finance: Dec. 15, 2026 (1) 4.011 % 500 498 Dec. 15, 2046 (1) 5.031 % 450 446 Total $ 2,750 $ 2,726 ( 1) Fully and unconditionally guaranteed by Arch Capital.
GUARANTOR INFORMATION The below table provides a description of our senior notes payable at December 31, 2024: Interest Principal Carrying Issuer/Due (Fixed) Amount Amount Arch Capital: May 1, 2034 7.350 % $ 300 $ 298 June 30, 2050 3.635 % 1,000 989 Arch-U.S.: Nov. 1, 2043 (1) 5.144 % 500 496 Arch Finance: Dec. 15, 2026 (1) 4.011 % 500 499 Dec. 15, 2046 (1) 5.031 % 450 446 Total $ 2,750 $ 2,728 ( 1) Fully and unconditionally guaranteed by Arch Capital.
Based on in-force exposure estimated as of January 1, 2024, our modeled peak zone catastrophe exposure is a windstorm affecting the Florida Tri-County, with a net probable maximum pre-tax loss of $1.6 billion, followed by windstorms affecting the Northeast U.S., and the Gulf of Mexico with net probable maximum pre-tax losses of $1.4 billion and $1.3 billion, respectively.
Based on in-force exposure estimated as of January 1, 2025, our modeled peak zone catastrophe exposure is a windstorm affecting the Florida Tri-County, with a net probable maximum pre-tax loss of $1.8 billion, followed by windstorms affecting the Northeast U.S., and the Gulf of Mexico with net probable maximum pre-tax losses of $1.7 billion and $1.5 billion, respectively.
(“Arch Capital” and, together with its subsidiaries, “we” or “us”) is a publicly listed Bermuda exempted company with approximately $21.1 billion in capital at December 31, 2023 and is part of the S&P 500 index.
(“Arch Capital” and, together with its subsidiaries, “we” or “us”) is a publicly listed Bermuda exempted company with approximately $23.5 billion in capital at December 31, 2024 and is part of the S&P 500 index.
Transaction costs and other include advisory, financing, legal, severance, incentive compensation and other transaction costs related to acquisitions. We believe that transaction costs and other, due to their non-recurring nature, are not indicative of the performance of, or trends in, our business performance.
Transaction costs and other include integration, advisory, financing, legal, severance, incentive compensation and all other transaction costs directly related to acquisitions. We believe that transaction costs and other, due to their nonrecurring nature, are not indicative of the performance of, or trends in, our business performance.
Total return on investments includes investment income, equity in net income or loss of investments accounted for using the equity method, net realized gains or losses (excluding changes in the allowance for credit losses on non-investment related financial assets) and the change in unrealized gains or losses generated by Arch’s investment portfolio.
ARCH CAPITAL 71 2024 FORM 10-K Total return on investments includes investment income, equity in net income or loss of investments accounted for using the equity method, net realized gains or losses (excluding changes in the allowance for credit losses on non-investment related financial assets) and the change in unrealized gains or losses generated by Arch’s investment portfolio.
ARCH CAPITAL 92 2023 FORM 10-K MARKET SENSITIVE INSTRUMENTS AND RISK MANAGEMENT Our investment results are subject to a variety of risks, including risks related to changes in the business, financial condition or results of operations of the entities in which we invest, as well as changes in general economic conditions and overall market conditions.
MARKET SENSITIVE INSTRUMENTS AND RISK MANAGEMENT Our investment results are subject to a variety of risks, including risks related to changes in the business, financial condition or results of operations of the entities in which we invest, as well as changes in general economic conditions and overall market conditions.
We believe that net realized gains or losses, equity in net income or loss of investments accounted for using the equity method, net foreign exchange gains or losses and transaction costs and other in any particular period are not indicative of the performance of, or trends in, our business.
ARCH CAPITAL 70 2024 FORM 10-K We believe that net realized gains or losses, equity in net income or loss of investments accounted for using the equity method, net foreign exchange gains or losses and transaction costs and other in any particular period are not indicative of the performance of, or trends in, our business.
There can ARCH CAPITAL 91 2023 FORM 10-K be no assurance that various provisions of our policies, such as limitations or exclusions from coverage or choice of forum, will be enforceable in the manner we intend. Disputes relating to coverage and choice of legal forum may also arise.
There can be no assurance that various provisions of our policies, such as limitations or exclusions from coverage or choice of forum, will be enforceable in the manner we intend. Disputes relating to coverage and choice of legal forum may also arise.
ARCH CAPITAL 74 2023 FORM 10-K SUMMARY OF CRITICAL ACCOUNTING ESTIMATES The preparation of consolidated financial statements in accordance with GAAP requires us to make many estimates and judgments that affect the reported amounts of assets, liabilities (including reserves), revenues and expenses, and related disclosures of contingent liabilities.
SUMMARY OF CRITICAL ACCOUNTING ESTIMATES The preparation of consolidated financial statements in accordance with GAAP requires us to make many estimates and judgments that affect the reported amounts of assets, liabilities (including reserves), revenues and expenses, and related disclosures of contingent liabilities.
Our senior notes were issued by Arch Capital, Arch Capital Group (U.S.) Inc. (“Arch-U.S.”) and Arch Capital Finance LLC (“Arch Finance”). Arch-U.S. is a wholly-owned subsidiary of Arch Capital and Arch Finance is a wholly-owned finance subsidiary of Arch-U.S.
Our senior notes were issued by Arch Capital, Arch Capital Group (U.S.) Inc. (“Arch-U.S.”) and Arch Capital Finance ARCH CAPITAL 91 2024 FORM 10-K LLC (“Arch Finance”). Arch-U.S. is a wholly-owned subsidiary of Arch Capital and Arch Finance is a wholly-owned finance subsidiary of Arch-U.S.
Management uses Operating ROAE as a key measure of the return generated to Arch common shareholders. See “Comment on Non-GAAP Financial Measures.” Our annualized net income return on average common equity was 29.7% for 2023, compared to 11.6% for 2022.
Management uses Operating ROAE as a key measure of the return generated to Arch common shareholders. See “Comment on Non-GAAP Financial Measures.” Our annualized net income return on average common equity was 22.8% for 2024, compared to 29.7% for 2023. Our Operating ROAE was 18.9% for 2024, compared to 21.6% for 2023.
The table below shows the components of the insurance segment’s loss ratio: Year Ended December 31, 2023 2022 Current year 58.1 % 61.6 % Prior period reserve development (0.8) % (0.6) % Loss ratio 57.3 % 61.0 % Current Year Loss Ratio . The insurance segment’s current year loss ratio was 3.5 points lower in 2023 than in 2022.
The table below shows the components of the insurance segment’s loss ratio: Year Ended December 31, 2024 2023 Current year 61.9 % 58.1 % Prior period reserve development (0.5) % (0.8) % Loss ratio 61.4 % 57.3 % Current Year Loss Ratio . The insurance segment’s current year loss ratio was 3.8 points higher in 2024 than in 2023.
ARCH CAPITAL 67 2023 FORM 10-K In the 2023 fourth quarter, the Company established a net deferred income tax asset, resulting in a benefit of $1.18 billion, consistent with the transition provisions specified in the Bermuda CIT Act.
In the 2023 fourth quarter, the Company established a net deferred income tax asset, resulting in a benefit of $1.18 billion, consistent with the transition provisions specified in the Bermuda CIT Act.
See note 15, “Income Taxes,” to our consolidated financial statements in Item 8 for a reconciliation of the difference between the provision for income taxes and the expected tax provision at the weighted average statutory tax rate for 2023 and 2022. Income (Loss) from Operating Affiliates.
See note 15, “Income Taxes,” to our consolidated financial statements in Item 8 for a reconciliation of the difference ARCH CAPITAL 77 2024 FORM 10-K between the provision for income taxes and the expected tax provision at the weighted average statutory tax rate for 2024 and 2023. Income (Loss) from Operating Affiliates.
For every one percentage point change in our primary net default to claim rate (which we estimate to be approximately 27% at December 31, 2023), we estimated a $18 million change in our loss reserves at December 31, 2023.
For every one percentage point change in our primary net default to claim rate (which we estimate to be approximately 22% at December 31, 2024), we estimated a $20 million change in our loss reserves at December 31, 2024.
For informational purposes, based on the total simulation results, a change in our Loss Reserves to the amount indicated at the 90th percentile would result in a decrease in income before income taxes of approximately $2.8 billion, or $7.27 per diluted share, while a change in our Loss Reserves to the amount indicated at the 10th percentile would result in an increase in income before income taxes of approximately $2.6 billion, or $6.95 per diluted share.
For informational purposes, based on the total simulation results, a change in our Loss Reserves to the amount indicated at the 90th percentile would result in a decrease in income before income taxes of approximately $3.7 billion, or $9.71 per diluted share, while a change in our Loss Reserves to the amount indicated at the 10th percentile would result in an increase in income before income taxes of approximately $3.4 billion, or $8.99 per diluted share.
This presentation includes the use of after-tax operating income available to Arch common shareholders, which is defined as net income available to Arch common shareholders, excluding net realized gains or losses (which includes changes in the allowance for credit losses on financial assets and net impairment losses recognized in earnings), equity in net income or loss of investments accounted for using the equity method, net foreign exchange gains or losses, transaction costs and other, net of income taxes (which for the 2023 fourth quarter includes a one-time deferred income tax benefit related to the enactment of Bermuda’s new corporate income tax), and the use of annualized operating return on average common equity.
This presentation includes the use of after-tax operating income available to Arch common shareholders, which is defined as net income available to Arch common shareholders, excluding net realized gains or losses (which includes realized and unrealized changes in the fair value of equity securities and assets accounted for using the fair value option, realized and unrealized gains or losses on derivative instruments, changes in the allowance for credit losses on financial assets and gains or losses realized from the acquisition or disposition of subsidiaries), equity in net income or loss of investments accounted for using the equity method, net foreign exchange gains or losses, transaction costs and other, net of income taxes (which for the 2023 fourth quarter includes a one-time deferred income tax benefit related to the enactment of Bermuda’s new corporate income tax), and the use of annualized operating return on average common equity.
Total return is calculated on a pre-tax basis before investment expenses, excluding amounts reflected in the ‘other’ segment, and reflects the effect of financial market conditions along with foreign currency fluctuations.
Total return is calculated on a pre-tax basis before investment expenses and reflects the effect of financial market conditions along with foreign currency fluctuations.
Total Return on Investments Total return on investments includes investment income, equity in net income or loss of investments accounted for using the equity method, net realized gains or losses and the change in unrealized gains or losses generated by Arch’s investment portfolio.
ARCH CAPITAL 69 2024 FORM 10-K Total Return on Investments Total return on investments includes investment income, equity in net income or loss of investments accounted for using the equity method, net realized gains or losses and the change in unrealized gains or losses generated by Arch’s investment portfolio.
In 2023, Arch Capital received dividends of $164 million from Arch Reinsurance Ltd. (“Arch Re Bermuda”), our Bermuda-based reinsurer and insurer. Arch Re Bermuda can pay approximately $4.8 billion to Arch Capital in 2024 without providing an affidavit to the Bermuda Monetary Authority (“BMA”).
In 2024, Arch Capital received dividends of $2.5 billion from Arch Reinsurance Ltd. (“Arch Re Bermuda”), our Bermuda-based reinsurer and insurer. Arch Re Bermuda can pay approximately $5.5 billion to Arch Capital in 2025 without providing an affidavit to the Bermuda Monetary Authority (“BMA”).

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Reference is made to the information appearing above under the subheading “Market Sensitive Instruments and Risk Management” under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” which information is hereby incorporated by reference. ARCH CAPITAL 95 2023 FORM 10-K
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Reference is made to the information appearing above under the subheading “Market Sensitive Instruments and Risk Management” under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” which information is hereby incorporated by reference. ARCH CAPITAL 98 2024 FORM 10-K

Other ACGL 10-K year-over-year comparisons