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What changed in AXIS CAPITAL HOLDINGS LTD's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AXIS CAPITAL HOLDINGS LTD's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+643 added−668 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-27)

Top changes in AXIS CAPITAL HOLDINGS LTD's 2023 10-K

643 paragraphs added · 668 removed · 515 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

156 edited+26 added−41 removed173 unchanged
Biggest changeTo continue holding ourselves accountable, we have set goals to increase gender diversity within our organization. • Our Voice: AXIS continues to raise awareness and promote diversity, equity and inclusion issues, policies and initiatives to drive change across the insurance/reinsurance industry. ◦ In 2022, AXIS signed the CEO Action for Diversity & Inclusion pledge, reflecting our commitment to fostering a culture of inclusion. ◦ AXIS was proud to be a Gold sponsor of Bermuda Pride in an effort to promote inclusivity in Bermuda and at AXIS. ◦ AXIS continues to support Dive In, the insurance/reinsurance industry's festival for diversity, equity and inclusion.
Biggest changeTo continue holding ourselves accountable and in an effort to increase transparency, AXIS has published its Bloomberg Gender Equality data and response for the first time. • Our Voice: AXIS continues to raise awareness and promote DEI issues, policies and initiatives to drive change across the insurance industry. 2023 highlights are as follows: ◦ AXIS received the Armed Forces Covenant Employer Recognition Scheme Bronze Award. ◦ AXIS continued its partnership with the Center for Disability & Inclusion pledge, an organization focused on advancing inclusion in the workplace. ◦ AXIS continued to be a signatory of the CEO Action for Diversity & Inclusion pledge, reflecting our commitment to fostering a culture of inclusion. 18 ◦ AXIS sponsored the 2023 Bermuda Pride Walk that was organized by OUTBermuda, an organization that promotes and supports the well-being of the LGBTQ community in Bermuda. ◦ AXIS continued to support Dive In, the insurance industry's festival for DEI.
Bermuda Our Bermuda insurance operating subsidiary, AXIS Specialty Bermuda, is a Class 4 general business insurer subject to the Insurance Act 1978 of Bermuda and related regulations, as amended (the "Insurance Act").
Bermuda Our Bermuda insurance operating subsidiary, AXIS Specialty Bermuda, is a Class 4 general business insurer subject to the Insurance Act 1978 of Bermuda and related regulations, as amended ("Insurance Act").
The Insurance Act provides that no person may carry on any insurance or reinsurance business in or from within Bermuda unless registered as an insurer by the Bermuda Monetary Authority (the "BMA") under the Insurance Act.
The Insurance Act provides that no person may carry on any insurance or reinsurance business in or from within Bermuda unless registered as an insurer by the Bermuda Monetary Authority ("BMA") under the Insurance Act.
AXIS Capital, AXIS Specialty Bermuda, AXIS Specialty Holdings Bermuda Limited, AXIS Specialty Investments Limited, AXIS ILS Ltd., AXIS Specialty Investments II Limited and AXIS Reinsurance Managers must comply with provisions of the Bermuda Companies Act 1981 of Bermuda, as amended (the "Companies Act"), regulating the payment of dividends and distributions.
AXIS Capital, AXIS Specialty Bermuda, AXIS Specialty Holdings Bermuda Limited, AXIS Specialty Investments Limited, AXIS ILS Ltd., AXIS Specialty Investments II Limited and AXIS Reinsurance Managers must comply with provisions of the Bermuda Companies Act 1981 of Bermuda, as amended ("Companies Act"), regulating the payment of dividends and distributions.
The Singapore branch of AXIS Specialty Bermuda, AXIS Specialty Limited (Singapore Branch), established in 2008, is regulated by the Monetary Authority of Singapore (the "MAS") pursuant to The Insurance Act of Singapore, which imposes significant regulations relating to capital adequacy, risk management, governance, audit and actuarial requirements.
The Singapore branch of AXIS Specialty Bermuda, AXIS Specialty Limited (Singapore Branch), established in 2008, is regulated by the Monetary Authority of Singapore ("MAS") pursuant to The Insurance Act of Singapore, which imposes significant regulations relating to capital adequacy, risk management, governance, audit and actuarial requirements.
The regulatory framework varies from state to state, but generally relates to approval of policy forms and rates, the standards of solvency that must be met and maintained, including risk-based capital standards, material transactions between an insurer and its affiliates, the licensing of insurers, agents and brokers, restrictions on insurance policy terminations, the nature of and limitations on the amount of certain investments, limitations on the net amount of insurance of a single risk compared to the insurer’s surplus, deposits of securities for the benefit of policyholders, methods of accounting, periodic examinations of the financial condition and market conduct of insurance companies, the form and content of reports of financial condition required to be filed, reserves for unearned premiums, losses, expenses and other obligations.
The regulatory framework varies from state to state, but generally relates to approval of policy forms and rates, the standards of solvency that must be met and maintained, including risk-based capital standards, material transactions between an insurer and its affiliates, the licensing of insurers, agents and brokers, restrictions on insurance policy terminations, and limitations on the amount and nature of certain investments, limitations on the net amount of insurance of a single risk compared to the insurer’s surplus, deposits of securities for the benefit of policyholders, methods of accounting, periodic examinations of the financial condition and market conduct of insurance companies, the form and content of reports of financial condition required to be filed, and reserves for unearned premiums, losses, expenses and other obligations.
The great majority of states, however, permit a credit to statutory surplus resulting from reinsurance obtained from a non-licensed or non-accredited reinsurer to be recognized to the extent that the reinsurer provides a letter of credit, trust fund or other acceptable security arrangement.
The great majority of states, however, permit a credit to statutory surplus to be recognized resulting from reinsurance obtained from a non-licensed or non-accredited reinsurer to the extent that the reinsurer provides a letter of credit, trust fund or other acceptable security arrangement.
AXIS Specialty Europe is authorized and regulated by the CBI pursuant to the Insurance Acts 1909 to 2000, as amended, repealed or replaced, the Central Bank Acts 1942 – 2014, as amended, repealed or replaced, and E.U. regulation relating to general insurance and statutory instruments made thereunder.
AXIS Specialty Europe is authorized and regulated by the CBI pursuant to the Insurance Acts 1909 to 2000, as amended, repealed or replaced, the Central Bank Acts 1942 to 2014, as amended, repealed or replaced, and E.U. regulation relating to general insurance and statutory instruments made thereunder.
AXIS Re SE is authorized by the CBI as a composite reinsurer (non-life and life) in accordance with the Insurance Acts 1909 to 2000, as amended, repealed or replaced, the Central Bank Acts 1942 – 2014, as amended, repealed or replaced, and E.U. regulation applicable to reinsurance and statutory instruments made thereunder.
AXIS Re SE is authorized by the CBI as a composite reinsurer (non-life and life) in accordance with the Insurance Acts 1909 to 2000, as amended, repealed or replaced, the Central Bank Acts 1942 to 2014, as amended, repealed or replaced, and E.U. regulation applicable to reinsurance and statutory instruments made thereunder.
Effecting or intermediating contracts of insurance or reinsurance are regulated activities requiring authorization. Effecting contracts of insurance requires authorization by the PRA and is regulated by the FCA. Intermediating contracts of insurance requires authorization by the FCA.
Effecting or intermediating contracts of insurance or reinsurance are regulated activities requiring authorization. Effecting contracts of insurance requires authorization by the PRA and is regulated by the FCA.
The key objectives of our risk management framework are to: • Protect our capital base and earnings by monitoring our risks against our stated risk appetite and limits; • Promote a sound risk management culture through disciplined and informed risk taking; • Enhance value creation and contribute to an optimal risk-return profile by providing the basis for efficient capital deployment; • Support our group-wide decision-making process by providing reliable and timely risk information; and • Safeguard our reputation.
The key objectives of our ERM framework are to: • Protect our capital base and earnings by monitoring risks against our stated risk appetite and limits; • Promote a sound risk management culture through disciplined and informed risk taking; • Enhance value creation and contribute to an optimal risk-return profile by providing the basis for efficient capital deployment; • Support our group-wide decision-making process by providing reliable and timely risk information; and • Safeguard our reputation.
AXIS Managing Agency Ltd. is eligible to use Lloyd's licenses subject to the laws and regulations of each of the provinces and territories in which it is licensed and to write insurance in or from Canada, with the following exceptions: hail insurance in respect of crop in the province of Quebec; home warranty insurance in the province of British Columbia; life insurance; credit protection insurance; title insurance; surety; and mortgage default insurance.
AXIS Managing Agency Ltd. is eligible to use Lloyd's licenses to write insurance in and from Canada, subject to the laws and regulations of each of the provinces and territories in which it is licensed, with the following exceptions: hail insurance in respect of crop in the province of Quebec; home warranty insurance in the province of British Columbia; life insurance; credit protection insurance; title insurance; surety; and mortgage default insurance.
Environmental, Social and Governance (ESG) and sustainability have become major topics that encompass a wide range of issues, including climate change and other environmental risks. In line with our strategy, we have put in place a number of measures in order to identify, assess and manage potential exposure to climate risks, for example physical, transition and liability risks.
Environmental, Social and Governance (ESG) and sustainability have become major topics that encompass a wide range of issues, including climate change and other environmental risks. In line with our strategy, we have put in place a number of measures in order to identify, assess, manage, and monitor potential exposure to climate risks, for example physical, transition and liability risks.
In order to maintain business continuity, AXIS Specialty Europe submitted an application to the Prudential Regulatory Authority (the "PRA") in 2018 for authorization of a third-country 13 branch. This application was approved on October 28, 2022, and the UK Branch of AXIS Specialty Europe is now fully regulated by both the PRA and the Financial Conduct Authority ("FCA").
In order to maintain business continuity, AXIS Specialty Europe submitted an application to the Prudential Regulatory Authority ("PRA") in 2018 for authorization of a third-country branch. This application was approved on October 28, 2022, and the UK Branch of AXIS Specialty Europe is now fully regulated by both the PRA and the Financial Conduct Authority ("FCA").
For example, in certain circumstances, we use forward contracts to economically hedge portions of our un-matched foreign currency exposures. Liquidity Risk Liquidity risk is the risk that we may not have sufficient cash to meet our obligations when they are due or would have to incur excessive costs to do so.
For example, in certain circumstances, we use forward contracts to economically hedge portions of our un-matched foreign currency exposures. 28 Liquidity Risk Liquidity risk is the risk that we may not have sufficient cash to meet our obligations when they are due or would have to incur excessive costs to do so.
Across these risk categories, we identify and evaluate emerging threats and opportunities through a framework that includes the assessment of potential surprise factors that could affect exposures. Our risk landscape is reviewed on a regular basis to ensure that it remains up-to-date based on the evolving risk profile of the Company.
Across these risk categories, we identify and evaluate emerging threats and opportunities through a framework that includes the assessment of potential surprise factors that could affect exposures. Our risk landscape is reviewed and reported on a regular basis to ensure that it remains up-to-date based on the evolving risk profile of the Company.
AXIS Re SE has reinsurance permissions in Argentina, Bolivia, Brazil, China, Chile, Colombia, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, India, Mexico, Nicaragua, Panama, Paraguay, Peru and Venezuela. AXIS Specialty Holdings Ireland Limited AXIS Specialty Holdings Ireland Limited is the limited liability holding company for AXIS Specialty Europe, AXIS Re SE, and Contessa Limited.
AXIS Re SE has reinsurance permissions in Argentina, Bolivia, Brazil, China, Chile, Colombia, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, India, Mexico, Nicaragua, Panama, Paraguay, Peru and Venezuela. AXIS Specialty Holdings Ireland Limited AXIS Specialty Holdings Ireland Limited is incorporated in Ireland, and is the limited liability holding company for AXIS Specialty Europe, AXIS Re SE, and Contessa Limited.
We mitigate foreign currency risk by seeking to match our estimated insurance and reinsurance liabilities payable in foreign currencies with assets, including cash and investments that are denominated in the same currencies. Where necessary, we use 29 derivative financial instruments for economic hedging purposes.
We mitigate foreign currency risk by seeking to match our estimated insurance and reinsurance liabilities payable in foreign currencies with assets, including cash and investments that are denominated in the same currencies. Where necessary, we use derivative financial instruments for economic hedging purposes.
AXIS Specialty Europe has notified the CBI of its intention to provide insurance services on a Freedom of Services basis in all EEA countries. Solvency II also permits AXIS Specialty Europe to carry on insurance business in any EEA Member State under the principle of "Freedom of Establishment" subject to the prior approval of the CBI.
AXIS Specialty Europe has notified the CBI of its intention to provide insurance services on a Freedom of Services basis in all EEA countries. 13 Solvency II also permits AXIS Specialty Europe to carry on insurance business in any EEA Member State under the principle of "Freedom of Establishment" subject to the prior approval of the CBI.
The Risk Committee also assesses the independence and objectivity of our Group Risk function, approves its terms of reference, and reviews its ongoing activities. In addition, the Risk Committee conducts a review and provides a 23 recommendation to the Board of Directors regarding the appointment and/or removal of the Chief Risk Officer.
The Risk Committee also assesses the independence and objectivity of our Group Risk function, approves its terms of reference, and reviews its ongoing activities. In addition, the Risk Committee conducts a review and provides a recommendation to the Board of Directors regarding the appointment and/or removal of the Chief Risk Officer.
AXIS Underwriting Limited AXIS Underwriting Limited, formerly known as Novae Underwriting Limited, is authorized and regulated by the FCA as an insurance intermediary and underwrites insurance on behalf of AXIS Specialty Europe and at Lloyd's on behalf of Syndicate 1686. Contessa Limited Effective December 2019, Contessa Limited ceased writing insurance on behalf of AXIS Specialty Europe.
AXIS Underwriting Limited AXIS Underwriting Limited, formerly known as Novae Underwriting Limited, is authorized and regulated by the FCA as an insurance intermediary. AXIS Underwriting Limited underwrites insurance on behalf of AXIS Specialty Europe and at Lloyd's on behalf of Syndicate 1686. 15 Contessa Limited Effective December 2019, Contessa Limited ceased writing insurance on behalf of AXIS Specialty Europe.
Competitive Environment In our insurance segment, where competition is focused on price, service, availability of capacity, appetite and distribution, among other considerations, we compete globally and locally with North American and non-North American carriers.
Competitive Environment In our insurance segment, where competition is focused on price, service, availability of capacity, appetite and distribution, among other considerations, we compete globally and locally with North American and other carriers.
Estimated net losses from peak zone catastrophes may change from period to period as a result of several factors, which include but are not limited to, updates to vendor catastrophe models, changes to internal modeling, underwriting portfolios, reinsurance purchasing strategy and foreign exchange rates. 27 Man-Made Catastrophe Risk Consistent with our management of natural peril catastrophe exposures, we take a similarly focused and analytical approach to the management of man-made catastrophes.
Estimated net losses from peak zone catastrophes may change from period to period as a result of several factors, which include but are not limited to, updates to vendor catastrophe models, changes to internal modeling, underwriting portfolios, reinsurance purchasing strategy and foreign exchange rates. 26 Man-Made Catastrophe Risk Consistent with our management of natural peril catastrophe exposures, we take a similarly focused and analytical approach to the management of man-made catastrophes.
NRRA attempts to coordinate the payment of surplus lines taxes, simplify the granting of alien insurers to become surplus lines authorized and coordinates the credit for certain reinsurance. The Company continues to monitor the implementation of Dodd-Frank.
NRRA attempts to coordinate the payment of surplus lines taxes, simplify the granting of alien insurers to become surplus lines authorized and coordinate the credit for certain reinsurance. The Company continues to monitor the implementation of Dodd-Frank.
In addition, strategies employed throughout our business in support of the broader enterprise strategy are reviewed in the context of a broader governance structure by the Business Council and business leadership and are ultimately approved by the Board of Directors.
In addition, strategies employed throughout our business in support of the broader enterprise strategy are reviewed in the context of a broader governance structure by business leadership and are ultimately approved by the Board of Directors.
A few states do not allow credit for reinsurance ceded to non-licensed reinsurers except in certain limited circumstances, and others impose additional requirements that make it difficult to become accredited. In connection with the establishment of a Multi-Beneficiary Reinsurance Trust, AXIS Specialty Bermuda obtained accredited or trusteed reinsurer status in all U.S. jurisdictions except for New York.
A few states do not allow credit for reinsurance ceded to non-licensed reinsurers except in certain limited circumstances, and others impose additional requirements that make it difficult to become accredited. In connection with the establishment of a Multi-Beneficiary Reinsurance Trust, AXIS Specialty Bermuda obtained accredited or trusted reinsurer status in all U.S. jurisdictions except for New York.
In 2022, our key financial metrics for performance measurement of the Company included operating return on average common equity ("operating ROACE"), which is reconciled to the most comparable GAAP financial measure, return on average common equity ("ROACE"), in Item 7 ' Management's Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation ', on an annual basis and relative total shareholder return ("TSR") over the long-term.
In 2023, our key financial metrics for performance measurement of the Company included operating return on average common equity ("operating ROACE"), which is reconciled to the most comparable GAAP financial measure, return on average common equity ("ROACE"), in Item 7 ' Management's Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measures Reconciliation ', on an annual basis and relative total shareholder return ("TSR") over the long-term.
This business is written on a proportional and non-proportional basis. The Company exited Aviation business effective January 1, 2023. Run-off lines • Catastrophe: provides protection for most catastrophic losses that are covered in the underlying insurance policies written by our cedants. The underlying policies principally cover property-related exposures but other exposures including workers compensation and personal accident are also covered.
This business is written on a proportional and non-proportional basis. The Company exited Aviation business effective January 1, 2023. Run-off lines • Catastrophe: provides protection for most catastrophic losses that are covered in the underlying insurance policies written by our cedants. The underlying policies principally cover property-related exposures but other exposures including personal accident are also covered.
As indicated in the table above, our modeled single occurrence 1-in-100-year return period PML for a Southeast U.S. hurricane, net of reinsurance, is approximately $96 million. According to our modeling, there is a one percent chance that on an annual basis losses incurred from a Southeast U.S. hurricane event could be in excess of $96 million.
As indicated in the table above, our modeled single occurrence 1-in-100-year return period PML for a Southeast U.S. hurricane, net of reinsurance, is approximately $131 million. According to our modeling, there is a one percent chance that on an annual basis losses incurred from a Southeast U.S. hurricane event could be in excess of $131 million.
We manage material third-party vendor risk, by, among other things, performing a thorough risk assessment on potential large vendors, reviewing a vendor’s financial stability, ability to provide ongoing service and business resilience planning. 31 Capital Management Our capital management strategy is to maximize long-term shareholder value by, among other things, optimizing capital allocation and minimizing our cost of capital.
We manage material third-party vendor risk, by, among other things, performing a thorough risk assessment on potential large vendors, reviewing a vendor’s financial stability, ability to provide ongoing service and business resilience planning. 30 Capital Management Our capital management strategy is to maximize long-term shareholder value by, among other things, optimizing capital allocation and minimizing our cost of capital.
At an annual aggregated level, we also monitor and manage the potential financial loss from the accumulation of risk exposure in any one year. Specific risk limits are defined and translated into a consistent framework across our identified risk categories and across our operating entities and are intended to limit the impact of individual risk types or accumulations of risk.
At an annual aggregated level, we also monitor and manage the potential financial loss from the accumulation of risk exposure in any one year. Specific risk limits are defined and translated into a consistent framework across our identified risk categories and across our legal entities and are intended to limit the impact of individual risk types or accumulations of risk.
We have specific processes and systems in place to focus on high priority operational matters, such as managing business resilience, information security, and third-party vendor risk, which are described below: • Major failures and disasters that could cause a severe disruption to working environments, facilities, and personnel, represent a significant operational risk to us.
We have specific processes and systems in place to focus on high priority operational matters, such as managing business resilience, information security, and third-party vendor risk, which are described below: • Major failures and disasters that could cause a severe disruption to working environments, facilities, and personnel, represent a significant operational risk to our business.
No cedant accounted for more than 10% of the gross premiums written in the reinsurance segment. 8 Competitive Environment In our reinsurance segment, competition tends to be focused on availability, service, financial strength and price. We compete with major North American and non-North American reinsurers and reinsurance departments of numerous multi-line insurance organizations.
No cedant accounted for more than 10% of the gross premiums written in the reinsurance segment. 8 Competitive Environment In our reinsurance segment, competition tends to be focused on availability, service, financial strength and price. We compete with major North American and other reinsurers and reinsurance departments of numerous multi-line insurance organizations.
The detailed and analytical reserving approach that follows is designed to absorb and understand the latest information on reported and unreported claims, to recognize the resultant exposure as quickly as possible, and to record appropriate loss reserves in our consolidated financial statements. Reserving for long-tail lines of business represents a significant component of reserving risk.
The detailed and analytical reserving approach that follows is designed to absorb and understand the latest information on reported and unreported claims, to recognize the resultant exposure as quickly as possible, and to record appropriate loss reserves in our consolidated financial statements. Reserving for longer tail lines of business represents a significant component of reserving risk.
The process is designed to ensure consistency between the claims teams and to develop group-wide best practices. When we receive notice of a claim, regardless of size, it is recorded in our claims and underwriting systems. In addition, we produce alerts regarding significant events and potential losses, regardless of whether we have exposure.
The process is designed to ensure consistency between the claims teams and to develop group-wide best practices. When we receive notice of a claim, regardless of size, it is recorded in our claims and financial systems. In addition, we produce alerts regarding significant events and potential losses, regardless of whether we have exposure.
The Investment & Finance Committee also prepares the Group’s strategic asset allocation and presents it to the Finance Committee of the Board of Directors for approval. • The Capital Management Committee oversees the integrity and effectiveness of the Company’s capital management policy, including the capital management policies of the Company’s legal entities and branches, and oversees the availability of capital within the Group. • The Group Reserving Committee ensures appropriate oversight and validation of the Group loss reserves.
The Investment & Finance Committee also prepares the Group’s strategic asset allocation and presents it to the Finance Committee of the Board of Directors for approval. • The Capital Management Committee oversees the integrity and effectiveness our capital management policy, including the capital management policies of our legal entities and branches, and oversees the availability of capital within the Group. • The Group Reserving Committee ensures appropriate oversight and validation of the Group loss reserves.
Conversely, there is a 99% chance that on an annual basis the loss from a Southeast U.S. hurricane will fall below $96 million. PMLs are based on results of stochastic models that consider a wide range of possible events, their losses and probabilities.
Conversely, there is a 99% chance that on an annual basis the loss from a Southeast U.S. hurricane will fall below $131 million. PMLs are based on results of stochastic models that consider a wide range of possible events, their losses and probabilities.
Solvency II covers three main areas: (i) the valuation of assets and liabilities and related solvency capital requirements; (ii) governance requirements including key functions of compliance, internal audit, actuarial and risk management; and (iii) legal entity and European Union ("E.U.") group reporting and disclosure requirements including public disclosures.
Solvency II covers three main areas: (i) the valuation of assets and liabilities and related solvency capital requirements; (ii) governance requirements including key functions of compliance, internal audit, actuarial and risk management; and (iii) legal entity and E.U. group reporting and disclosure requirements including public disclosures.
Credit Risk Aggregation Refer to Item 8, Note 8 to the Consolidated Financial Statements 'Commitment and Contingencies' – Concentration of Credit Risk – Credit Risk Aggregation Credit Risk Relating to Cash and Investments Refer to Item 8, Note 8 to the Consolidated Financial Statements 'Commitment and Contingencies' – Concentration of Credit Risk – Cash and Investments Credit Risk Relating to Reinsurance Recoverable Assets Refer to Item 8, Note 8 to the Consolidated Financial Statements 'Commitment and Contingencies' – Concentration of Credit Risk – Reinsurance Recoverable on Unpaid and Paid Losses and Loss Expenses Credit Risk Relating to Premium Receivables Refer to Item 8, Note 8 to the Consolidated Financial Statements 'Commitment and Contingencies' – Concentration of Credit Risk – Insurance and Reinsurance Premium Balances Receivable Credit Risk Relating to our Underwriting Portfolio In the insurance segment, we provide credit insurance primarily for lenders (financial institutions) and commodity traders seeking to mitigate the risk of non-payment from their borrowers and trading counterparties.
Credit Risk Aggregation Refer to Item 8, Note 12 to the Consolidated Financial Statements 'Commitment and Contingencies' – Concentration of Credit Risk – Credit Risk Aggregation Credit Risk Relating to Cash and Investments Refer to Item 8, Note 12 to the Consolidated Financial Statements 'Commitment and Contingencies' – Concentration of Credit Risk – Cash and Investments Credit Risk Relating to Reinsurance Recoverable Assets Refer to Item 8, Note 12 to the Consolidated Financial Statements 'Commitment and Contingencies' – Concentration of Credit Risk – Reinsurance Recoverable on Unpaid and Paid Losses and Loss Expenses Credit Risk Relating to Premium Receivables Refer to Item 8, Note 12 to the Consolidated Financial Statements 'Commitment and Contingencies' – Concentration of Credit Risk – Insurance and Reinsurance Premium Balances Receivable Credit Risk Relating to our Underwriting Portfolio We provide credit insurance primarily for lenders (financial institutions) and commodity traders seeking to mitigate the risk of non-payment from their borrowers and trading counterparties.
Our internal capital model is an integral part of the business planning process which provides an assessment as to whether our prospective business and investment strategies are in line with our defined risk appetite and objectives at the Group and operating entity level.
Our internal capital model is an integral part of the business planning process which provides an assessment as to whether our prospective business and investment strategies are in line with our defined risk appetite and objectives at the Group and legal entity level.
Refer to Item 8, Note 21 to the Consolidated Financial Statements 'Statutory Financial Information' for further details. • Rating agency capital requirements - Rating agencies apply their own models to evaluate the relationship between the required risk capital of a company and its available capital resources.
Refer to Item 8, Note 22 to the Consolidated Financial Statements 'Statutory Financial Information' for further details. • Rating agency capital requirements - Rating agencies apply their own models to evaluate the relationship between the required risk capital of a company and its available capital resources.
External Perspectives Various external stakeholders, among them regulators, rating agencies, investors and accounting bodies, place emphasis on the importance of sound risk management in the insurance/reinsurance industry. We monitor developments in the external environment and evolve our risk management practices accordingly.
External Perspectives Various external stakeholders, among them regulators, rating agencies, investors and accounting bodies, place emphasis on the importance of sound risk management in the insurance and reinsurance industry. We monitor developments in the external environment and evolve our ERM framework and risk management practices accordingly.
The principal perils covered by policies in this portfolio include physical loss, damage and/or liability arising from natural perils of the seas or land, man-made events including fire and explosion, stranding/sinking/salvage, pollution, shipowners and maritime employers liability. This business is written on a non-proportional and proportional basis. Aviation provides cover for airline, aerospace and general aviation exposures.
The principal perils covered by policies in this portfolio include physical loss, damage and/or liability arising from natural perils of the seas or land, man-made events including fire and explosion, stranding/sinking/salvage, pollution, shipowners and maritime employers liability. This business is written on a non-proportional and proportional basis. Aviation provides cover for air line, aerospace and general aviation exposures.
The Insurance Code, as amended, came into force on September 1, 2022. Bermuda insurers and insurance groups are required to be compliant with sections 1 through 7 of the Insurance Code by September 1, 2023 and applicable parts of section 8 of the Insurance Code by March 1, 2023.
The Insurance Code, as amended, came into force on September 1, 2022. Bermuda insurers and insurance groups were required to be compliant with sections 1 through 7 of the Insurance Code by September 1, 2023 and applicable parts of section 8 of the Insurance Code by March 1, 2023.
Employees (1) African American / Black 16% Asian 11% Hispanic / Latinx 5% White 59% Multiracial, Native American and Pacific Islander 2% No Response / Not Disclosed 7% Total employees 100% (1) This information is presented for U.S. employees only. We continue to gather global demographic information in compliance with laws and regulations to demonstrate our racial and ethnic diversity.
Employees (1) African American / Black 16% Asian 11% Hispanic / Latinx 5% White 61% Multiracial, Native American and Pacific Islander 2% No Response / Not Disclosed 5% Total employees 100% (1) This information is presented for U.S. employees only. We continue to gather global demographic information in compliance with laws and regulations to demonstrate our racial and ethnic diversity.
Cover is provided for a range of risks including data recovery and bricking, cyber-crime, liability and regulatory actions, business interruption, extortion, reputational harm, Payment Card Industry Data Security Standard and media liability. • Marine and Aviation : Marine provides cover for traditional marine classes, including offshore energy, renewable offshore energy, cargo, liability including kidnap and ransom, fine art, specie, and hull war.
Cover is provided for a range of risks including data recovery and bricking, cyber-crime, liability and regulatory actions, business interruption, extortion, reputational harm, Payment Card Industry Data Security Standard and media liability. • Marine and Aviation : Marine provides cover for a range of exposures including offshore energy, renewable offshore energy, cargo, liability including kidnap and ransom, fine art, specie, and hull war.
Our qualitative and quantitative risk reporting framework provides transparency and early warning indicators to senior management with regard to our overall risk profile, adherence to risk appetite and limits and management actions at the Group and operating entity level.
Our qualitative and quantitative risk reporting framework provides transparency and early warning indicators to senior management with regard to our overall risk profile, adherence to risk appetite and limits and management actions at the Group and legal entity level.
For example, at the 1-in-250-year return period, we are not willing to expose more than 10% of common equity to a single event within a single zone. 26 The table below shows our net PML to a single natural peril catastrophe event within certain defined single zones which correspond to peak industry catastrophe exposures at January 1, 2023 and 2022: Estimated Net Exposures (millions of U.S. dollars) January 1, 2023 January 1, 2022 Territory Peril 50 Year Return Period 100 Year Return Period 250 Year Return Period 50 Year Return Period 100 Year Return Period 250 Year Return Period Single zone, single event Southeast U.S.
For example, at the 1-in-250-year return period, we are not willing to expose more than 10% of common equity to a single event within a single zone. 25 The table below shows our net PML to a single natural peril catastrophe event within certain defined single zones which correspond to peak industry catastrophe exposures at January 1, 2024 and 2023: Estimated Net Exposures (millions of U.S. dollars) January 1, 2024 January 1, 2023 Territory Peril 50 Year Return Period 100 Year Return Period 250 Year Return Period 50 Year Return Period 100 Year Return Period 250 Year Return Period Single zone, single event Southeast U.S.
We maintain excellent financial strength, characterized by financial discipline and transparency: Our total capital of $6.0 billion at December 31, 2022, as well as our high-quality and liquid investment portfolio and our operating subsidiary ratings of "A+" ("Strong") by Standard & Poor's and "A" ("Excellent") by the A.M. Best Company, Inc. ("A.M. Best") are key indicators of our financial strength.
We maintain excellent financial strength, characterized by financial discipline and transparency: Our total capital of $6.6 billion at December 31, 2023, as well as our high-quality and liquid investment portfolio and our operating subsidiary ratings of "A+" ("Strong") by Standard & Poor's and "A" ("Excellent") by the A.M. Best Company, Inc. ("A.M. Best") are key indicators of our financial strength.
This business is written on a proportional and aggregate stop loss reinsurance basis. • Marine and Aviation: Marine includes specialty marine classes such as cargo, hull, pleasure craft, marine liability, inland marine and offshore energy.
This business is written on a proportional and aggregate stop loss reinsurance basis. • Marine and Aviation: Marine includes specialty marine exposures such as cargo, hull, pleasure craft, marine liability, inland marine and offshore energy.
Our Chief Risk Officer regularly reports risk matters to the Chief Financial Officer, Executive Committee, RMC, and the Risk Committee. Internal Audit, an independent, objective function, reports to the Audit Committee of the Board of Directors on the effectiveness of our risk management framework.
Our Chief Risk Officer regularly reports risk matters to the Chief Financial Officer, Executive Committee, RMC, and the Risk Committee. Internal Audit, an independent, objective function, reports to the Audit Committee of the Board of Directors on the effectiveness of our ERM framework.
In certain circumstances, we use facultative reinsurance to complement treaty reinsurance by covering additional risks above and beyond what is already covered by treaties. Facultative reinsurance is monitored by the risk funding team.
In certain circumstances, we use facultative reinsurance to complement treaty reinsurance by covering additional risks over and above what is already covered by treaties. Facultative reinsurance is monitored by the risk funding team.
We target to hold, in addition to the minimum capital required to comply with the solvency requirements, an adequate buffer to ensure that each of our operating entities meets its local capital requirements.
We target to hold, in addition to the minimum capital required to comply with the solvency requirements, an adequate buffer to ensure that each of our regulated entities meets its local capital requirements.
As part of our strategic asset allocation process, different asset strategies are simulated and stressed in order to evaluate the ‘optimal’ portfolio, given return objectives and risk constraints. Our investments team manages asset classes to control aggregation of risk and provide a consistent approach to constructing portfolios and the selection process of external asset managers.
As part of our strategic asset allocation process, different strategic asset classes are simulated and stressed to evaluate the ‘optimal’ portfolio, given return objectives and risk constraints. Our investments team manages asset classes to control aggregation of risk and provide a consistent approach to constructing portfolios and the selection process of external asset managers.
We have been successful in extending our product lines, finding new distribution channels and entering new geographies. When we do not find sufficiently attractive uses for our capital, we may return excess capital to our shareholders through share repurchases and dividends.
We have been successful in adding new underwriting teams, extending our product lines, finding new distribution channels and entering new geographies. When we do not find sufficiently attractive uses for our capital, we may return excess capital to our shareholders through share repurchases and dividends.
Market Risk Market risk is the risk that our financial instruments may be negatively impacted by movements in financial market prices or rates, such as interest rates, credit spreads, equity securities' prices and foreign currency exchange rates. Fluctuations in market prices or rates primarily affect our investment portfolio.
Market Risk Market risk is the risk that our financial instruments, which include derivatives, may be negatively impacted by movements in financial market prices or rates, such as interest rates, credit spreads, equity securities' prices and foreign currency exchange rates. Fluctuations in market prices or rates primarily affect our investment portfolio.
Various governance and control bodies coordinate to help ensure that objectives are being achieved, risks are identified, and appropriately managed, and internal controls are in place and operating effectively. Internal Capital Model An important aspect of our risk management framework is our internal capital model.
Various governance and control bodies coordinate to help ensure that objectives are being achieved, risks are identified, and appropriately managed, and internal controls are in place and operating effectively. Internal Capital Model An important aspect of our ERM framework is our internal capital model.
The most significant perils covered by policies in this portfolio include windstorm, tornado and earthquake, but other perils such as freezes, riots, floods, industrial explosions, fires, hail and a number of other loss events are also included. This business is written on a proportional and excess of loss basis.
The most significant perils covered by policies in this portfolio include windstorm, tornado and earthquake, but other perils such as freezes, riots, flood, industrial explosions, fire, hail and a number of other loss events are also included. This business is written on a proportional and excess of loss basis.
Following the closure of our Florida office in 2021, AXIS Specialty Underwriters' coverholder agreement with Syndicate 1686 was terminated, effective December 31, 2021. All regulatory licenses in Florida for AXIS Specialty Underwriters, Inc. were terminated in 2022, however, the entity remained registered in Delaware and was renamed AXIS ILS, Inc.
AXIS Specialty Underwriters, Inc. was a Florida licensed reinsurance intermediary. Following the closure of our Florida office in 2021, AXIS Specialty Underwriters' coverholder agreement with Syndicate 1686 was terminated, effective December 31, 2021. All regulatory licenses in Florida for AXIS Specialty Underwriters, Inc. were terminated in 2022, however, the entity remained registered in Delaware and was renamed AXIS ILS, Inc.
Refer to Item 7 'Management’s Discussion and Analysis of Financial Condition and Results of Operations' for additional information relating to our reportable segments and Item 8, Note 3 to the Consolidated Financial Statements ' Segment Information ' for additional information relating to our reportable segments and a description of the geographic distribution of gross premiums written based on the location of our subsidiaries.
Refer to Item 7 'Management’s Discussion and Analysis of Financial Condition and Results of Operations' for further details on our reportable segments and Item 8, Note 3 to the Consolidated Financial Statements ' Segment Information ' for further details on our reportable segments and a description of the geographic distribution of gross premiums written based on the location of our subsidiaries.
During 2022, AXIS Specialty Bermuda obtained reciprocal jurisdiction reinsurer status with Missouri as its lead state. Reinsurers licensed in reciprocal jurisdictions (which include European Union member states, Bermuda, Japan and Switzerland) are not required to post reinsurance collateral if approved as reciprocal jurisdiction reinsurers.
During 2022, AXIS Specialty Bermuda obtained reciprocal jurisdiction reinsurer status with Missouri as its lead state. Reinsurers licensed in reciprocal jurisdictions (which include E.U. member states, Bermuda, Japan and Switzerland) are not required to post reinsurance collateral if approved as reciprocal jurisdiction reinsurers.
AXIS Group Benefits LLC, a leading provider of voluntary, limited benefit, affordable health plans and other employee benefits coverage for hourly and part-time workers and their families, is an authorized insurance producer in all 50 American states except Hawaii.
AXIS Group Benefits LLC, a leading provider of voluntary, limited benefit, affordable health plans and other employee benefits coverage for hourly and part-time workers and their families, is an authorized insurance producer in all U.S. states except Hawaii.
We have claims teams embedded in our main lines of business. Our claim teams include a diverse group of experienced professionals, including claims adjusters and attorneys. We also use approved external service providers, such as independent adjusters and appraisers, surveyors, accountants, investigators, and specialist attorneys, as appropriate.
We have claims teams dedicated to our main lines of business. Our claim teams include a diverse group of experienced professionals, including claims adjusters and attorneys. We also use approved external service providers, such as independent adjusters and appraisers, surveyors, accountants, investigators, and specialist attorneys, as appropriate.
To maintain communication between underwriting and claims teams, claims personnel regularly report at underwriting meetings and frequently attend client meetings. We foster a strong culture of review among our claims teams. This includes MIAs, whereby senior claims handlers audit a sample of claim files.
To maintain communication between underwriting and claims teams, claims personnel regularly report at underwriting meetings and frequently attend client meetings. 27 We foster a strong culture of review among our claims teams. This includes MIAs whereby senior claims handlers and/or external audit resources audit a sample of claim files.
Refer to ' Risk and Capital Management' for additional information regarding the management of investment risk. 9 REGULATION General Our insurance and reinsurance entities are regulated in most countries, although the degree and type of regulation varies significantly from one jurisdiction to another. We may become subject to regulation in new jurisdictions or to additional regulations in existing jurisdictions .
Refer to ' Risk and Capital Management' for further details on management of investment risk. 9 REGULATION General Our insurance and reinsurance entities are regulated in most countries, although the degree and type of regulation varies significantly from one jurisdiction to another. We may become subject to regulation in new jurisdictions or to additional regulations in existing jurisdictions .
Group Risk is responsible for developing methods and processes for identifying, assessing, managing, monitoring, and reporting risk. This forms the basis for informing the Risk Committee and RMC of the Group’s risk profile. Group Risk develops our risk management framework and oversees the adherence to this framework at the Group and operating entity level.
Group Risk is responsible for developing methods and processes for identifying, assessing, managing, monitoring, and reporting risk. This forms the basis for informing the Risk Committee and RMC of the Group’s risk profile. Group Risk develops our ERM framework and oversees the adherence to this framework at the Group and legal entity level.
This business is predominantly written on a claims-made basis. • Property : provides physical loss or damage, business interruption and machinery breakdown cover for virtually all types of property, including commercial buildings, residential premises, construction projects, and onshore renewable energy installations, and physical damage and business interruption following an act of terrorism.
This business is predominantly written on a claims-made basis. • Property : provides physical loss or damage, business interruption and machinery breakdown cover for virtually all types of property, including commercial buildings, residential premises, construction projec ts, property in transit, onshore renewable energy installations, and physical damage and business interruption following an act of terrorism.
The RPG, which includes, among others, our Chief Executive Officer, Chief Financial Officer, Chief Risk Officer, Chief Underwriting Officer and representatives from the business leadership team, approves each treaty placement and aims to ensure that appropriate diversification exists within our RSC approved counterparty panels. Facultative reinsurance is case by case risk transfer.
The RPG, which includes, among others, our Chief Executive Officer, Chief Financial Officer, Chief Risk Officer, Chief Underwriting Officer and representatives from the business leadership team, approves each treaty placement and aims to ensure that appropriate diversification exists within our RSC approved counterparty panels. Facultative reinsurance provides risk transfer on a case by case basis.
AXIS Specialty Global Holdings Limited AXIS Specialty Global Holdings Limited is the limited liability holding company for AXIS Capital's U.S. Insurance subsidiaries. Other AXIS Entities AXIS Specialty Bermuda may write reinsurance under Solvency II equivalence granted to Bermuda by the E.U.
AXIS Specialty Global Holdings Limited AXIS Specialty Global Holdings Limited is incorporated in Ireland, and is the limited liability holding company for AXIS Capital's U.S. Insurance subsidiaries. Other AXIS Entities AXIS Specialty Bermuda may write reinsurance under Solvency II equivalence granted to Bermuda by the E.U.
AXIS Managing Agency Ltd. is eligible to write insurance (except permanent health) and reinsurance business in Ireland through Lloyd's Europe (see 'Regulatory Impact Due to Brexit' below). U.K. and Lloyd's of London In the U.K., under the Financial Services and Markets Act 2000 ("FSMA"), no person may carry on a regulated activity unless authorized or exempt.
AXIS Managing Agency Ltd. is eligible to write insurance (except permanent health) and reinsurance business in Ireland through Lloyd's Europe. U.K. and Lloyd's of London In the U.K., under the Financial Services and Markets Act 2000 ("FSMA"), no person may carry on a regulated activity unless authorized or exempt.
The PRA and the FCA require regular and ad hoc reporting and monitor compliance with their respective rule books through a variety of means including the collection of data, industry reviews and site visits.
The PRA and the FCA require regular and ad hoc reporting and monitor compliance with their respective rule books through a variety of means including the collection of data, industry reviews and site visits. AXIS Managing Agency Ltd.
The risk management framework applies to all lines of business and corporate functions across our Company. Risk Governance At the heart of our risk management framework is a governance process with responsibilities for identifying, assessing, managing, monitoring, and reporting risks.
The ERM framework applies to all lines of business and corporate functions. Risk Governance At the heart of our ERM framework is a governance process with responsibilities for identifying, assessing, managing, monitoring, and reporting risks.
RMC Sub-Committees • The Natural Catastrophe Committee oversees the Group's natural catastrophe risk management framework, including the validation of modeling and accumulation practices. • The Non-Natural Catastrophe Committee oversees the Group's non-natural catastrophe risk management framework, including the validation of modeling and accumulation practices. • The Reinsurance Security Committee ("RSC") sets out the financial security requirements of our reinsurance counterparties and approves counterparties, as needed. • The Internal Model Committee oversees the Group's internal model framework, including the key model assumptions, methodology and validation framework. • The Operational Risk Committee oversees the Group's operational risk framework for identifying, assessing, managing, monitoring, and reporting of operational risk and facilitates the embedding of effective operational risk management practices throughout the Group. • The Emerging Risks Working Group oversees the processes for identifying, assessing, managing, monitoring, and reporting current and potential emerging risks. 24 • The Climate Change Working Group focuses specifically on climate-related risks and oversees the implementation of our climate risk management framework.
RMC Sub-Committees • The Exposure Management Committee oversees the Group's exposure management framework for catastrophe and non-catastrophe lines, including the validation of modeling, threats framework, accumulation practices and monitoring of management appetites. • The Reinsurance Security Committee ("RSC") sets out the financial security requirements of our reinsurance counterparties and approves counterparties, as needed. • The Internal Model Committee oversees the Group's internal model framework, including the key model assumptions, methodology and validation framework. • The Operational Risk Committee oversees the Group's operational risk framework for identifying, assessing, managing, monitoring, and reporting of operational risk and facilitates the embedding of effective operational risk management practices throughout the Group. • The Emerging Risks Working Group oversees the processes for identifying, assessing, managing, monitoring, and reporting current and potential emerging risks. • The Climate Change Working Group focuses specifically on climate-related risks and opportunities and oversees climate risk initiatives.
Lloyd’s is a society of corporate and individual members that underwrite insurance and reinsurance as members of syndicates. A syndicate is made up of one or more members that form a group to accept insurance and reinsurance risks. Each syndicate is managed by a managing agent.
Lloyd’s is a society of corporate and individual members that underwrite insurance and reinsurance as members of syndicates. A syndicate is made up of one or more members that form a group to accept insurance and reinsurance risks. Each syndicate is managed by a managing agent that writes insurance business on behalf of the members of the syndicate.
AXIS Corporate Capital UK II Limited (formerly Novae Corporate Underwriting Limited) AXIS Corporate Capital UK II Limited is a corporate member of Syndicate 1686, providing 30% capital support.
AXIS Corporate Capital UK Limited AXIS Corporate Capital UK Limited is a corporate member of Syndicate 1686, providing 70% capital support. AXIS Corporate Capital UK II Limited AXIS Corporate Capital UK II Limited, formerly known as Novae Corporate Underwriting Limited, is a corporate member of Syndicate 1686, providing 30% capital support.
Our employee engagement initiatives include: • AXIS Applause (our global recognition program to recognize the contributions of other AXIS members and drive strong employee performance); • Community building events for AXIS employees and their families; and • Employee-led charitable giving program which helps our employees give back to their communities.
Our employee engagement initiatives include: • AXIS Applause is our global recognition program we use to recognize the contributions of AXIS colleagues and drive strong employee performance; • Community building events for AXIS employees and their families; and • Employee-led charitable giving program which helps our employees give back to their communities.
This includes assurance that key business risks have been adequately identified and managed appropriately and that our system of internal control is operating effectively. Internal Audit also provides independent assurance around the validation of our internal capital model and coordinates risk-based audits, compliance reviews and other specific initiatives to evaluate and address risk within targeted areas of our business.
This includes assurance that key business risks have been adequately identified and managed appropriately and that our system of internal control is operating effectively. Internal Audit also coordinates risk-based audits, compliance reviews and other specific initiatives to evaluate and address risk within targeted areas of our business.
Each year, we conduct an enterprise-wide engagement survey to better understand and improve the employee experience and identify opportunities to strengthen our culture. Managers and teams reflect on the survey results and develop enterprise-wide and local action plans to address areas identified for growth. In 2022, on average 80% of employees participated in our biannual employee surveys.
Each year, we conduct two enterprise-wide engagement surveys to better understand and improve the employee experience and identify opportunities to strengthen our culture. Managers and teams reflect on the survey results and develop enterprise-wide and local action plans to address areas identified for improvement. In 2023, on average 86% of employees participated in our biannual employee surveys.
Under the Financial Services Act 2012, the FCA is a conduct regulator for all U.K. firms carrying on regulated activity in the U.K. while the PRA is the prudential regulator of U.K. banks, building societies, credit unions, insurers and major investment firms.
Intermediating contracts of insurance requires authorization by the FCA. 14 Under the Financial Services Act 2012, the FCA is a conduct regulator for all U.K. firms carrying on regulated activity in the U.K. while the PRA is the prudential regulator for U.K. banks, building societies, credit unions, insurers and major investment firms.
Syndicate 1686, through Lloyd's, is authorized to write reinsurance in or from Canada subject to certain restrictions relating to life reinsurance. Belgium AXIS Specialty Europe conducts insurance from its Belgium branch, AXIS Specialty Europe SE (Belgium Branch), which is subject to CBI prudential supervision and limited regulation by the NBB.
AXIS Managing Agency Ltd., through Lloyd's, is authorized to write reinsurance in and from Canada subject to certain restrictions relating to life reinsurance. 16 Belgium AXIS Specialty Europe conducts insurance from its Belgium branch, AXIS Specialty Europe SE (Belgium Branch), which is subject to CBI prudential supervision and limited regulation by the NBB.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOn December 20, 2021, the OECD released proposed model legislation for Pillar Two which was approved by 135 countries. The Pillar Two legislation would impose a minimum tax rate of 15% on each jurisdiction that has an effective tax rate less than the minimum. The model rules now need to be implemented through domestic legislation.
Biggest changeThe application of the multilateral convention on Pillar One is therefore not expected to have a material impact on our effective tax rate, however these rules remain subject to ongoing negotiation and implementation. Pillar Two On December 20, 2021, the OECD released proposed model legislation for Pillar Two which was approved by 135 countries (the "Model Rules").
ITEM 1A. RISK FACTORS Insurance Risk Insurance risk is the inherent uncertainty as to the occurrence, amount and timing of insurance and reinsurance liabilities transferred to us through the underwriting process. The insurance/reinsurance business is historically cyclical, and we expect to experience periods with excess underwriting capacity and unfavorable premium rates.
ITEM 1A. RISK FACTORS Insurance Risk Insurance risk is the inherent uncertainty as to the occurrence, amount and timing of insurance and reinsurance liabilities transferred to us through the underwriting process. The insurance and reinsurance business is historically cyclical, and we expect to experience periods with excess underwriting capacity and unfavorable premium rates.
There can be no assurance that the integration of acquired businesses or new personnel will be successful, that we will realize anticipated synergies, cost savings and operational efficiencies, or that the business acquired will prove to be profitable or sustainable.
There can be no assurance that the integration of acquired businesses or new personnel will be successful, or that we will realize anticipated synergies, cost savings and operational efficiencies, or that the business acquired will prove to be profitable or sustainable.
If we successfully purchase reinsurance, we may be unable to collect amounts due to us. A reinsurer’s insolvency, or inability or refusal to make payments under the terms of its reinsurance agreement with us, could have a material adverse effect on our business because we remain liable to the insured.
If we successfully purchase reinsurance, we may be unable to collect amounts due to us. A reinsurer’s insolvency, inability or refusal to make payments under the terms of its reinsurance agreement with us, could have a material adverse effect on our business because we remain liable to the insured.
Anti-takeover provisions in our bye-laws could impede an attempt to replace our directors or to effect a change in control, which could diminish the value of our common shares. Our bye-laws contain provisions that may make it more difficult for shareholders to replace directors and could delay or prevent a change of control that a shareholder might consider favorable.
Anti-takeover provisions in our bye-laws could impede an attempt to replace our directors or to effect a change in control, which could diminish the value of our common shares. Our bye-laws contain provisions that may make it more difficult for shareholders to replace our directors and could delay or prevent a change of control that a shareholder might consider favorable.
Our bye-laws also provide that if our Board of Directors determines that share ownership by a person may result in non-de minimis adverse tax, legal or regulatory consequences to us, any of our subsidiaries or any of our shareholders, then we have the option, but not the obligation, to require that shareholder to sell to us or to third parties to whom we assign the repurchase right for fair value the minimum number of common shares held by such person that is necessary to eliminate the non-de minimis adverse tax, legal or regulatory consequences.
Our bye-laws also provide that if our Board of Directors determines that share ownership by a person may result in non-de minimis adverse tax, legal or regulatory consequences to us, any of our subsidiaries or any of our shareholders, then we have the option, but not the obligation, to require such person to sell to us or to third parties to whom we assign the repurchase right for fair value the minimum number of common shares held by such person that is necessary to eliminate the non-de minimis adverse tax, legal or regulatory consequences.
There can be no assurance that we will be successful in identifying, hiring or retaining successors on terms acceptable to us. With few exceptions, generally only Bermudians, spouses of Bermudians or Permanent Resident Certificate holders (collectively, "Residents") may engage in any gainful occupation in Bermuda without an appropriate governmental work permit.
There can be no assurance that we will be successful in identifying, hiring or retaining successors on terms acceptable to us. 39 With few exceptions, generally only Bermudians, spouses of Bermudians or Permanent Resident Certificate holders (collectively, "Residents") may engage in any gainful occupation in Bermuda without an appropriate governmental work permit.
Consequently, we assume a degree of credit risk associated with brokers with whom we transact business. These risks are heightened during periods characterized by financial market instability and/or an economic downturn or recession. 43 Certain of our policyholders and intermediaries may not pay premiums owed to us due to insolvency or other reasons.
Consequently, we assume a degree of credit risk associated with brokers with whom we transact business. These risks are heightened during periods characterized by financial market instability and/or an economic downturn or recession. Certain of our policyholders and intermediaries may not pay premiums owed to us due to insolvency or other reasons.
If, based upon these models or other factors, we misprice our products or underestimate the frequency and/or severity of loss events, our results of operations, financial condition or liquidity may be adversely affected. In addition, PMLs are based on results of stochastic 36 models that consider a wide range of possible events, their losses and probabilities.
If, based upon these models or other factors, we misprice our products or underestimate the frequency and/or severity of loss events, our results of operations, financial condition or liquidity may be adversely affected. In addition, PMLs are based on results of stochastic models that consider a wide range of possible events, their losses and probabilities.
If a shareholder fails to respond to our request for information or submits incomplete or inaccurate information in response to a request by us, we may, in our sole discretion, eliminate the shareholder’s voting rights. There are provisions in our bye-laws that may restrict the ability to transfer common shares and which may require shareholders to sell their common shares.
If a shareholder fails to respond to our request for information or submits incomplete or inaccurate information in response to a request by us, we may, in our sole discretion, eliminate the shareholder’s voting rights. 47 There are provisions in our bye-laws that may restrict the ability to transfer common shares and which may require shareholders to sell their common shares.
There are many factors that would cause loss reserves to increase or decrease, which include, but are not limited to changes in claim severity, changes in the expected level 35 of reported claims, judicial action changing the scope and/or liability of coverage, changes in the legislative, regulatory, social and economic environment and unexpected changes in loss inflation.
There are many factors that would cause loss reserves to increase or decrease, which include, but are not limited to, changes in claim severity, changes in the expected level of reported claims, judicial action changing the scope and/or liability of coverage, changes in the legislative, regulatory, social and economic environment and unexpected changes in loss inflation.
Conversely, in certain jurisdictions, when the insured or ceding insurer pays premiums for these policies to brokers for payment over to us, these premiums might be considered to have been paid to us and the insured or ceding insurer will no longer be liable to us for those amounts, whether or not we have actually received the premiums from the broker.
Conversely, in certain jurisdictions, when the insured or ceding insurer pays premiums for these policies to brokers for payment to us, these premiums might be considered to have been paid to us and the insured or ceding insurer will no longer be liable to us for those amounts, whether or not we have actually received the premiums from the broker.
As a result, the full extent of liability under an insurance or reinsurance contract may not be known for many years after the contract is issued and a loss occurs. If actual claims exceed loss reserves, our financial results could be adversely affected.
As a result, the full extent of liability under an insurance or reinsurance contract may not be known for many years after the contract is issued and a loss occurs. 34 If actual claims exceed loss reserves, our financial results could be adversely affected.
Changes in local employment legislation, taxation and the approach of regulatory bodies to compensation practices within our operating jurisdictions may impact our ability to recruit and retain qualified personnel or the cost to us of doing so. In addition, health emergencies or pandemics could impact our ability to attract and retain key personnel.
Moreover, changes in local employment legislation, taxation and the approach of regulatory bodies to compensation practices within our operating jurisdictions may impact our ability to recruit and retain qualified personnel or the cost to us of doing so. In addition, health emergencies or pandemics could impact our ability to attract and retain key personnel.
Claims paying and financial strength ratings are important factors in establishing the competitive position of insurance companies and maintaining customer confidence in us and in our ability to market insurance products. Independent rating agencies analyze the financial performance and condition of insurers on an ongoing basis.
Financial strength, claims paying and credit ratings are important factors in establishing the competitive position of insurance companies and maintaining customer confidence in us and in our ability to market insurance products. Independent rating agencies analyze the financial performance and condition of insurers on an ongoing basis.
Russia’s invasion of Ukraine is having a profound impact on energy markets, particularly in Europe, which is impacting and 34 may continue to impact economic conditions and investment returns. In certain instances, we specifically insure and reinsure risks resulting from acts of terrorism.
Russia’s invasion of Ukraine is having a profound impact on energy markets, particularly in Europe, which is impacting and may continue to impact economic conditions and investment returns. In certain instances, we specifically insure and reinsure risks resulting from acts of terrorism.
The following factors, in addition to those described in other risk factors above, may have a material adverse effect on the market price of our common stock: 47 • actual or anticipated variations in our quarterly results, including as a result of catastrophes or our investment performance; • any share repurchase program; • changes in market valuation of companies in the insurance/reinsurance industry; • changes in expectations of future financial performance or changes in estimates of securities analysts; • fluctuations in stock market processes and volumes; • issuances or sales of common shares or other securities in the future; • the addition or departure of key personnel; • changes in tax law; and • announcements by us or our competitors of acquisitions, investments or strategic alliances.
The following factors, in addition to those described in other risk factors above, may have a material adverse effect on the market price of our common stock: • actual or anticipated variations in our quarterly results, including as a result of catastrophes or our investment performance; • any share repurchase program; • changes in market valuation of companies in the insurance/reinsurance industry; • changes in expectations of future financial performance or changes in estimates of securities analysts; 46 • fluctuations in stock market processes and volumes; • issuances or sales of common shares or other securities in the future; • the addition or departure of key personnel; • changes in tax law; and • announcements by us or our competitors of acquisitions, investments or strategic alliances.
Accordingly, we can offer no assurance that our loss reserves will be adequate to cover losses should they materialize beyond expectation. We have limited terrorism coverage in our own reinsurance program for our exposure to catastrophe losses related to acts of terrorism.
Accordingly, we can offer no assurance that our loss reserves will be adequate to cover losses should they materialize beyond expectation. 32 We have limited terrorism coverage in our own reinsurance program for our exposure to catastrophe losses related to acts of terrorism.
In addition, capital market participants have created alternative products that are intended to compete with insurance and reinsurance products. New and alternative capital inflows in the insurance/reinsurance industry and the retention by insured and cedants of more business may cause an excess supply of insurance and reinsurance capital.
In addition, capital market participants have created alternative products that are intended to compete with insurance and reinsurance products. New and alternative capital inflows in the insurance/reinsurance industry and the retention by 36 insured and cedants of more business may cause an excess supply of insurance and reinsurance capital.
We could be adversely affected if managing general agents, general agents, coverholders, other producers and third-party administrators in our program business exceed their underwriting and/or claims settlement authorities or otherwise breach obligations owed to us.
We could be materially adversely affected if managing general agents, general agents, coverholders, other producers and third-party administrators in our program business exceed their underwriting and/or claims settlement authorities or otherwise breach obligations owed to us.
A downgrade, withdrawal or negative watch/outlook by any independent rating agency could cause our competitive position in the insurance/reinsurance industry to suffer and make it more difficult for us to market our products.
A downgrade, 38 withdrawal or negative watch/outlook by any independent rating agency could cause our competitive position in the insurance/reinsurance industry to suffer and make it more difficult for us to market our products.
The specified levels are 20%, 33% and 50% or such other level of ownership that results in the company becoming the acquirer’s subsidiary within the meaning of article 20 of the European Communities (Non-Life Insurance) Framework Regulations 1994. 49 The CBI has three months from the date of submission of a notification within which to oppose the proposed transaction if the CBI is not satisfied as to the suitability of the acquirer in view of the necessity "to ensure prudent and sound management of the insurance or reinsurance undertaking concerned".
The specified levels are 20%, 33% and 50% or such other level of ownership that results in the company becoming the acquirer’s subsidiary within the meaning of article 20 of the European Communities (Non-Life Insurance) Framework Regulations 1994. 48 The CBI has three months from the date of submission of a notification within which to oppose the proposed transaction if the CBI is not satisfied as to the suitability of the acquirer in view of the necessity "to ensure prudent and sound management of the insurance or reinsurance undertaking concerned".
Even in the absence of an attempt to effect a change in management or a takeover attempt, these provisions may adversely affect the prevailing market price of our shares if they are viewed as discouraging takeover attempts in the future. 50 Risks Related to Taxation Changes in tax laws resulting from the recommendations of the Organization for Economic Corporation and Development ("OECD") could materially adversely affect us.
Even in the absence of an attempt to effect a change in management or a takeover attempt, these provisions may adversely affect the prevailing market price of our shares if they are viewed as discouraging takeover attempts in the future. 49 Risks Related to Taxation Changes in tax laws resulting from the recommendations of the Organization for Economic Corporation and Development ("OECD") could materially adversely affect us.
If we are unable to do so, it may curtail our ability to conduct our business. Any equity or debt financing, if available at all, may be on terms that are not favorable to us. As economic and market volatility continues, it is possible that access to the capital markets may become more constrained and cost of capital may increase.
If we are unable to do so, it may curtail our ability to conduct our business. Any equity or debt financing, if available at all, may be on terms that are not favorable to us. As economic and market uncertainty continues, it is possible that access to the capital markets may become more constrained and cost of capital may increase.
Our business may be adversely affected if third-party outsourced service providers fail to satisfactorily perform certain technology and business process functions. We outsource certain technology and business process functions to third parties.
Our business may be adversely affected if third-party service providers fail to satisfactorily perform certain technology and business process functions. We outsource certain technology and business process functions to third parties.
We may not be able to comply fully with, or obtain appropriate exemptions from, these statutes and regulations, which could result in restrictions on our ability to do business or undertake activities that are regulated in one or more of the jurisdictions in which we conduct business and could subject us to fines and other sanctions.
We may not be able to comply fully with, or obtain appropriate exemptions from, these laws and regulations, which could result in restrictions on our ability to do business or undertake activities that are regulated in one or more of the jurisdictions in which we conduct business and could subject us to fines and other sanctions.
If net income is insufficient to absorb a required increase in loss reserves, we would incur a net loss and could incur a reduction in capital. The failure of our loss limitation strategy could have an adverse effect on our results of operations, financial condition or liquidity. We seek to mitigate loss exposure through multiple methods.
If net income is insufficient to absorb a required increase in loss reserves, we would incur a net loss and could incur a reduction in capital. The failure of our loss limitation strategy could have a material adverse effect on our results of operations, financial condition or liquidity. We seek to mitigate loss exposure through multiple methods.
While we believe that loss reserves at December 31, 2022 are adequate, new information, events or circumstances, unknown at the original valuation date, may lead to future developments in ultimate losses being significantly greater or less than the loss reserves currently provided.
While we believe that loss reserves at December 31, 2023 are adequate, new information, events or circumstances, unknown at the original valuation date, may lead to future developments in ultimate losses being significantly greater or less than the loss reserves currently provided.
We must comply with all applicable economic and financial sanctions, other trade controls and anti-bribery laws and regulations of the U.S. and other foreign jurisdictions where we operate, including Bermuda, the U.K. and the European Community. U.S. laws and regulations applicable to us include the economic trade sanctions laws and regulations administered by the U.S.
We must comply with all applicable economic and financial sanctions, other trade controls and anti-bribery laws and regulations of the U.S. and other foreign jurisdictions where we operate, including Bermuda, the U.K. and the European Union. U.S. laws and regulations applicable to us include the economic trade sanctions laws and regulations administered by the U.S.
Interest rates and credit spreads are highly sensitive to many factors, including governmental and central bank monetary policies, inflation, domestic and international economic and political conditions, corporate profitability and other factors beyond our control. In 2022, the U.S.
Interest rates and credit spreads are highly sensitive to many factors, including governmental and central bank monetary policies, inflation, domestic and international economic and political conditions, corporate profitability and other factors beyond our control. In 2023, the U.S.
When establishing our single point best estimate of loss reserves at December 31, 2022, management considered actuarial estimates and applied informed judgment regarding qualitative factors that may not be fully captured in actuarial estimates.
When establishing our single point best estimate of loss reserves at December 31, 2023, management considered actuarial estimates and applied informed judgment regarding qualitative factors that may not be fully captured in actuarial estimates.
An increase in premium rates is often offset by an increased supply of insurance and reinsurance capacity, via capital provided by new entrants, new capital market instruments and structures and/or the commitment of additional capital by existing insurers and reinsurers.
An increase in premium rates is often offset by an increased supply of insurance and reinsurance capacity, via capital driven by new entrants, new capital market instruments and structures and/or the commitment of additional capital by existing insurers and reinsurers.
Our investment and derivative instrument portfolios are exposed to significant capital markets risk related to changes in interest rates, credit spreads and equity prices, as well as other risks, which may adversely affect our results of operations or financial condition. 41 The performance of our cash and investments portfolio has a significant impact on our financial results.
Our investment portfolios are exposed to significant capital markets risk related to changes in interest rates, credit spreads and equity prices, as well as other risks, which may adversely affect our results of operations or financial condition. The performance of our cash and investments portfolio has a significant impact on our financial results.
To the extent inflation causes costs to increase above loss reserves established for claims, we will be required to increase loss reserves with a corresponding reduction in net income in the period in which the deficiency is identified, which may have a material adverse effect on our results of operations or financial condition.
To the extent economic and social inflation causes costs to increase above loss reserves established for claims, we will be required to increase loss reserves with a corresponding reduction in net income in the period in which the deficiency is identified, which may have a material adverse effect on our results of operations or financial condition.
Successful integration will depend on, among other things, our ability to effectively integrate acquired businesses or new personnel into our existing risk management and financial and operational reporting systems, our ability to effectively manage any regulatory issues created by our entry into new markets and geographic locations, our ability to retain key personnel and other operational and economic factors.
Successful integration may depend on, among other things, our 37 ability to effectively integrate acquired businesses or new personnel into our existing risk management and financial and operational reporting systems, our ability to effectively manage any regulatory issues created by our entry into new markets and geographic locations, our ability to retain key personnel and other operational and economic factors.
In accordance with industry practice, we pay amounts owed on claims under our insurance and reinsurance contracts to brokers, and these brokers pay these amounts over to the clients that have purchased insurance and reinsurance from us.
In accordance with industry practice, we pay amounts owed on claims under our insurance and reinsurance contracts to brokers, and these brokers pay these amounts to clients that have purchased insurance and reinsurance from us.
It is possible that our approach to transfer pricing may become subject to greater scrutiny from the tax authorities in the jurisdictions in which we operate, which may lead to transfer pricing audits in the future. General Risk Factors Future changes in current accounting practices may adversely impact our reported financial results.
It is possible that our approach to transfer pricing may become subject to greater scrutiny from the tax authorities in the jurisdictions in which we operate, which may lead to transfer pricing audits in the future. General Risk Factors Future changes in accounting standards may adversely impact our reported financial results.
Our exposure to liquidity risk stems mainly from the need to pay claims on potential extreme loss events and regulatory constraints that limit the flow of funds within the Group. We maintain cash and cash equivalents and high quality, liquid securities to meet expected outflows, as well as those that could result from a range of potential stress events.
Our exposure to liquidity risk stems mainly from the need to pay claims on potential extreme loss events and regulatory constraints that limit the flow of funds within the Group. We maintain cash and cash equivalents and high quality, liquid securities to meet expected outflows, including outflows that could result from a range of potential stress events.
The terms of our contracts may not permit us to cancel our insurance even though we have not received payment. If non-payment becomes widespread, whether as a result of insolvency, lack of liquidity, adverse economic conditions, operational failure or otherwise, it could have a material adverse impact on our revenues and results of operations.
The terms of our contracts may not permit us to cancel our insurance even though we have not received payment. If non-payment becomes widespread, due to insolvency, lack of liquidity, adverse economic conditions, operational failure or otherwise, it could have a material adverse impact on our revenues and results of operations.
Marsh & McLennan Companies, Inc., including its subsidiary Guy Carpenter & Company, Inc., Aon plc and Arthur J. Gallagher & Co., provided 43% of gross premiums written in 2022. Our relationships with these brokers are based on the quality of our underwriting and claims services, as well as our financial strength ratings.
Aon plc, Marsh & McLennan Companies, Inc., including its subsidiary Guy Carpenter & Company, Inc. and Arthur J. Gallagher & Co., provided 38% of gross premiums written in 2023. Our relationships with these brokers are based on the quality of our underwriting and claims services, as well as our financial strength ratings.
While we do not believe that we are systemically important, as defined in Dodd-Frank, Dodd-Frank or additional federal or state regulation that is adopted in the future could impose significant burdens on us, impact the ways in which we conduct our business and govern our subsidiaries, increase compliance costs, increase the levels of capital required to operate our subsidiaries, duplicate state regulation and/or result in a competitive disadvantage. 46 Certain of our European legal entities are subject to local laws that implement the Solvency II Directive.
While we do not believe that we are systemically important, as defined in Dodd-Frank, Dodd-Frank or additional federal or state regulation that is adopted in the future could impose significant burdens on us, impact the ways in which we conduct our business and govern our subsidiaries, increase compliance costs, increase the levels of capital required to operate our subsidiaries, duplicate state regulation and/or result in a competitive disadvantage. 45 Our European insurance and reinsurance entities are subject to local laws that implement the Solvency II Directive.
The insurance/reinsurance business historically has been a cyclical industry characterized by periods of intense price competition due to excess underwriting capacity, as well as periods when shortages of capacity permitted favorable premium levels.
The insurance and reinsurance business historically has been a cyclical industry characterized by periods of intense price competition due to excess underwriting capacity, as well as periods when shortages of capacity permit favorable premium levels.
We cannot be sure that these loss limitation methods will effectively prevent a material loss exposure, which could have a material adverse effect on our results of operations, financial condition or liquidity. If we choose to purchase reinsurance, we may be unable to do so.
We cannot be sure that these loss limitation methods will effectively prevent a material loss exposure, which could have a material adverse effect on our results of operations, financial condition or liquidity. If we choose to purchase reinsurance, we may be unable to do so on favorable terms or at all.
If we do not effectively develop and implement our outsourcing strategy, third-party providers do not perform as anticipated or we experience technological or 44 other problems with a transition, we may not realize productivity improvements or cost efficiencies and may experience operational difficulties, increased costs and a loss of business.
If we do not effectively develop and implement our outsourcing strategy, or if third-party service providers do not perform as anticipated or we experience technological or other problems with a transition to a third-party service provider, we may not realize productivity improvements or cost efficiencies and may experience operational difficulties, increased costs and a loss of business.
We cannot predict whether our business decisions, business strategy and disclosures relating to climate change and other ESG issues will meet the expectations or requirements of relevant stakeholders, including certain key institutional shareholders.
We cannot predict whether our business decisions, business strategy and disclosures relating to ESG issues will meet the expectations or requirements of relevant stakeholders, including certain key institutional shareholders.
In addition to these considerations, changes in the frequency and severity of losses suffered by insureds and insurers may affect the cycles of the insurance/reinsurance business significantly. 32 Results of operations, financial condition or liquidity could be adversely affected by the occurrence of natural and man-made disasters, as well as outbreaks of pandemic or contagious diseases.
In addition to these considerations, changes in the frequency and severity of losses suffered by insureds and insurers may affect the cycles of the insurance and reinsurance business significantly, which in turn could affect our business, results of operations or financial condition. 31 Our results of operations, financial condition or liquidity could be adversely affected by the occurrence of natural and man-made disasters, as well as outbreaks of pandemic or contagious diseases.
On December 22, 2021, the European Commission proposed a third Anti-Tax Avoidance Directive ("ATAD III"), which aims to combat the abuse of investment structures that do not carry out actual economic activities, specifically "shell companies". ATAD III proposes to introduce a minimum substance test and reporting requirements for multinational groups to identify "shell companies".
On December 22, 2021, the European Commission proposed and issued a draft third directive (ATAD III) which aims to combat the abuse of investment structures that do not carry out actual economic activities, specifically "shell companies". ATAD III proposes to introduce a minimum substance test and reporting requirements for multinational groups to identify "shell companies".
In addition, although we purchase limited cyber insurance, we may be required to incur significant costs to mitigate the damage caused by any security breach, to address any interruptions in our business or to protect against future damage, which costs may not be covered by our cyber insurance.
In addition, although we purchase limited cyber insurance, we may incur significant costs not covered by our cyber insurance, including costs to mitigate the damage caused by any security breach, address any interruptions in our business or protect against future damage.
Market Risk Market risk is the risk that our financial instruments may be negatively impacted by movements in financial market prices or rates such as equity prices, interest rates, credit spreads and foreign currency exchange rates.
Market Risk Market risk is the risk that our financial instruments, which include derivatives, may be negatively impacted by movements in financial market prices or rates such as interest rates, credit spreads, equity securities' prices and foreign currency exchange rates.
Expatriate workers can, subject to the above, continue to be employed in Bermuda indefinitely by reapplying for work permits. All executive officers who work in our Bermuda office and who require work permits have obtained them.
Expatriate workers can, subject to the above, continue to be employed in Bermuda indefinitely by reapplying for work permits. All executives who periodically work in our Bermuda office and who require work permits have obtained them.
The impact of catastrophe events in years 2022, 2021 and 2020 included the recognition of the net losses and loss expenses of: • $403 million in the aggregate, primarily related to Hurricane Ian, the Russia-Ukraine war, Winter Storm Elliot, June European Convective Storms, and the COVID-19 pandemic in 2022; • $443 million, in the aggregate, primarily related to Hurricane Ida, U.S.
The impact of catastrophe events in years 2023, 2022 and 2021 included the recognition of the net losses and loss expenses of: • $138 million, in the aggregate, primarily related to Cyclone Gabrielle and other weather-related events in 2023; • $403 million, in the aggregate, primarily related to Hurricane Ian, the Russia-Ukraine war, Winter Storm Elliot, June European Convective Storms, and the COVID-19 pandemic in 2022; and • $443 million, in the aggregate, primarily related to Hurricane Ida, U.S.
Geopolitical uncertainty regarding a variety of domestic and international matters, such as the U.S. political and regulatory environment, the potential for default by one or more European sovereign debt issuers and the United Kingdom’s exit from the European Union, or "Brexit", could have a material adverse effect on our results of operations, financial condition or liquidity.
Geopolitical uncertainty regarding a variety of domestic and international matters, such as the U.S. political and regulatory environment and the potential for default by U.S., Canadian and by one or more European sovereign debt issuers, could have a material adverse effect on our results of operations, financial condition or liquidity.
Such factors included, but were not limited to, the timing of the emergence of claims, volume and complexity of claims, social and judicial trends, potential severity of individual claims and the extent of internal historical loss data versus industry information.
Such factors included, but were not limited to, an examination of trend assumptions, the timing of the emergence of claims, volume and complexity of claims, current social and judicial trends, potential severity of individual claims and the extent of internal historical loss data versus new industry information.
Since we depend on a few brokers for a large portion of our revenues, loss of business provided by any one of them could adversely affect us. We market our insurance and reinsurance products worldwide primarily through insurance and reinsurance brokers and derive a significant portion of our business from a limited number of brokers.
Since we depend on a few brokers for a large portion of our revenues, loss of business provided by any one of them could have a material adverse effect on our business. We market our insurance and reinsurance products worldwide primarily through insurance and reinsurance brokers and derive a significant portion of our business from a limited number of brokers.
Any of these factors could lead to a significant reduction in premium rates, less favorable policy terms and fewer submissions for our underwriting services.
Any of these factors could lead to a significant reduction in premium rates, less favorable policy terms, increased expenses for customer acquisition and retention, and fewer submissions for our underwriting services.
Because the U.S. and certain other jurisdictions do not permit insurance companies to take credit on their statutory financial statements for reinsurance obtained from unlicensed or non-admitted 39 insurers unless appropriate security mechanisms are in place, our reinsurance clients in these jurisdictions typically require AXIS Specialty Bermuda and AXIS Re SE to provide letters of credit or other collateral.
Because the U.S. and certain other jurisdictions do not permit insurance companies to take credit on their statutory financial statements for reinsurance obtained from unlicensed or non-admitted insurers unless appropriate security mechanisms are in place, our reinsurance clients in these jurisdictions typically require AXIS Specialty Bermuda and AXIS Re SE to provide letters of credit or other collateral, unless such reinsures have obtained reciprocal jurisdiction reinsurer status in the reinsured's domiciliary state.
These risks could expose us to data loss and damages. Like other global companies, we are regularly the target of attempted cyber and other security threats and must continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of threats to our data and systems.
Like other global companies, we are regularly the target of attempted cyber and other security threats and must continuously monitor and develop our information technology networks and infrastructure to prevent, detect, address and mitigate the risk of threats to our data and systems.
There can be no assurance that we will not experience a ratings downgrade from one of the independent rating agencies. This could arise from a change in our financial performance, our financial condition or a change in ratings methodology.
We have experienced, and there can be no assurance that we will not experience in the future, a ratings downgrade or other negative action from one of the independent rating agencies. This could arise from a change in our financial performance, our financial condition or a change in ratings methodology.
In addition, our exposure to cyber events potentially includes exposure through 'non-affirmative' coverages, meaning risks and potential losses associated with policies where cyber risk is not explicitly included or excluded in the policy wording.
In addition, our exposure to cybersecurity incidents potentially includes exposure through “non-affirmative” coverages, meaning risks and potential losses associated with policies where cybersecurity risk is not explicitly included or excluded in the policy terms and conditions.
Our Board of Directors may decline to register a transfer of any common shares under some circumstances, including if they have reason to believe that any non-de minimis adverse tax, regulatory or legal consequences to us, any of our subsidiaries or any of our shareholders may occur as a result of such transfer.
Our bye-laws provide that our Board of Directors may decline to register a transfer of any common shares under certain circumstances, including if the Board has reason to believe that any non-de minimis adverse tax, regulatory or legal consequences to us, any of our subsidiaries or any of our shareholders may occur as a result of such transfer.
We have substantial exposure to unexpected losses resulting from war, acts of terrorism, political unrest and geopolitical instability, including, but not limited to, events related to Russia’s invasion of Ukraine and in many regions of the world.
We have exposure to unexpected losses resulting from acts of terrorism, political unrest and geopolitical instability, including, but not limited to, events related to Russia’s invasion of Ukraine, the Israel-Hamas conflict and the associated conflict in the Red Sea and in many regions of the world.
The CPRA may increase our compliance burden. 45 Compliance with the enhanced obligations imposed by data protection and other legislation, including Singapore's amended Personal Data Protection Act and Bermuda’s Personal Information Protection Act, requires investment in appropriate technical or organizational measures to safeguard the rights and freedoms of data subjects.
Compliance with the enhanced obligations imposed by data protection and other legislation, including Singapore's amended Personal Data Protection Act, Bermuda’s Personal Information Protection Act, and Quebec’s Law 25, requires investment in appropriate technical or organizational measures to safeguard the rights and freedoms of data subjects.
Changes in regulations relating to climate change or our own leadership decisions implemented as a result of assessing the impact of climate change on our business may result in an increase in the cost of doing business or a decrease in premiums.
Changes in regulations relating to climate change or our own leadership decisions implemented as a result of assessing the impact of climate change on our business may result in an increase in the cost of doing business or a decrease in premiums. The effects of emerging claim and coverage issues on our business are uncertain.
Moreover, legislative, regulatory, judicial or social influences may impose new obligations on insurers or reinsurers in connection with the COVID-19 pandemic or climate change that extend coverage beyond the intended contractual obligations, or result in an increase in the frequency or severity of claims beyond expected levels, as described in the COVID-19 and the climate change risk factors.
Moreover, legislative, regulatory, judicial or social influences may impose new obligations on insurers or reinsurers that extend coverage beyond the intended contractual obligations, or result in an increase in the frequency or severity of claims beyond expected levels, for example as described in the climate change risk factor.
Attorney’s Offices and certain state attorneys general, occasionally commence investigations into business practices in the insurance industry. In addition, although the U.S. federal government has not historically regulated insurance, there have been proposals from time to time to impose federal regulation on the U.S. insurance industry. In 2010, Dodd-Frank established a Federal Insurance Office ("FIO") within the U.S. Treasury.
Attorneys offices and certain state attorneys general, occasionally commence investigations into business practices in the insurance industry. In addition, although the U.S. federal government has not historically regulated insurance, there have been proposals from time to time to impose federal regulation on the U.S. insurance industry.
Insolvency, liquidity problems, distressed financial condition due to the impact of the COVID-19 pandemic or the general effects of economic recession may increase the risk that policyholders or intermediaries, such as insurance brokers, may not pay a part of or the full amount of premiums owed to us, despite an obligation to do so.
Insolvency, liquidity problems, distressed financial conditions or the general macro-economic conditions may increase the risk that policyholders or intermediaries, such as insurance brokers, may not pay a part of or the full amount of premiums owed to us, despite an obligation to do so.
During 2022, 2021, and 2020 the closing price of our common shares fluctuated from a low of $48.77 to a high of $60.66, a low of $44.93 to a high of $57.93, and a low of $33.29 to a high of $65.80, respectively. The price of our common shares may not remain at or exceed current levels.
During 2023, 2022, and 2021 the closing price of our common shares fluctuated from a low of $51.68 to a high of $63.47, a low of $48.77 to a high of $60.66, and a low of $44.93 to a high of $57.93, respectively. The price of our common shares may not remain at or exceed current levels.
We rely on internal processes to maintain our operations and manage the operational risks inherent to our business, and any errors, omissions or employee misconduct in the execution of these processes may result in financial losses. We rely on the execution of internal processes to maintain and execute our operations.
We rely on our processes, people, and systems to maintain our operations and manage the operational risks inherent to our business. Any errors, omissions or misconduct by our employees or third-party agents in the execution of these processes may result in financial losses. We rely on the execution of our processes, people, and systems to maintain and execute our operations.
Our operations, like those of other insurers and reinsurers, are susceptible to the effects of inflation because premiums are established before actual losses and loss expenses are known.
We may be adversely impacted by economic and social inflation Our operations, like those of other insurers and reinsurers, are susceptible to the effects of economic and social inflation because premiums are established before actual losses and loss expenses are known.
As this is a relatively new peril, even in cases where losses from cyber events are explicitly excluded, there can be no assurance that a court or arbitration panel will interpret policy language in line with the intention of the exclusion. We may be adversely impacted by inflation.
As this is a relatively new risk, even in cases where losses from cybersecurity incidents are explicitly excluded, there can be no assurance that a court or arbitration panel will interpret policy language in line with the intention of the exclusion.
The poor global financial market returns in 2022 adversely impacted, and may continue to adversely impact, the value of our investments portfolio. Our fixed maturities, which represent 84% of our total investments and 77% of total cash and investments at December 31, 2022, may be adversely impacted by changes in interest rates or credit spreads.
An extended period of poor global financial market returns would adversely impact the value of our investment portfolio. 40 Fixed maturities, which represent 85% of our total investments and 77% of total cash and investments at December 31, 2023, may be adversely impacted by changes in interest rates or credit spreads.
The ATAD and the ATAD II require all E.U. member states to apply certain specified anti-avoidance measures, including a controlled foreign companies regime, limitations on interest deduction and anti-hybrid rules.
The E.U. has sought to harmonize the response of member states to the BEPS reports via the Anti-Tax Avoidance Directives ("the ATAD and the ATAD II"). The ATAD and the ATAD II require all E.U. member states to apply certain specified anti-avoidance measures, including a controlled foreign companies regime, limitations on interest deduction and anti-hybrid rules.
The U.K. network of double tax treaties does not offer protection from a DPT charge. In the event that the rules apply to certain arrangements, upfront payment of the U.K. tax authority’s estimate of the deemed tax liability may be required. If any of our non-U.K. companies is liable to DPT, our results could be materially adversely affected.
The U.K. network of double tax treaties does not offer protection from a DPT charge. In the event that the rules apply to certain arrangements, upfront payment of the U.K. tax authority’s estimate of the deemed tax liability may be required.
Although the loss experience of catastrophe insurers and reinsurers has historically been characterized as low frequency, there is a growing concern today that climate change increases the frequency and severity of severe weather events. In recent years, the frequency of severe weather-related events has increased, and this trend may continue in the future.
Although the loss experience of catastrophe insurers and reinsurers has historically been characterized as low frequency, in recent years, the frequency of severe weather-related events has increased, and this trend may continue in the future.
These models may turn out to be inadequate representations of the underlying subject matter and consequently, actual losses from loss events, whether from individual components (for example, wind, flood, earthquake, etc.) or in the aggregate, may differ materially from modeled results.
These models may turn out to be inadequate representations of the underlying subject matter, including as a result of inaccurate inputs or application thereof (whether due to data error, human error or otherwise). Consequently, actual losses from loss events, whether from individual components (for example, wind, flood, earthquake, etc.) or in the aggregate, may differ materially from modeled results.
We could be adversely affected by the loss of one or more key executives or by an inability to attract and retain qualified personnel or by the inability of an executive to obtain a Bermuda work permit.
We could be adversely affected by turnover of senior management, the loss of one or more key executives, an inability to attract and retain qualified personnel or by the inability of an executive to obtain a Bermuda work permit. Our success depends on our ability to retain our existing key executives and to attract, hire and retain additional qualified personnel.
As a result, the occurrence of one or more catastrophe events could have a material adverse effect on our results of operations, financial condition or liquidity. Cyber events are man-made perils and as such the threat landscape is dynamic and evolving. This risk of cyber-attacks could be exacerbated by geopolitical tensions, including hostile actions taken by nation-states and terrorist organizations.
As a result, the occurrence of one or more catastrophe events could have a material adverse effect on our results of operations, financial condition or liquidity. Risks from cybersecurity threats are dynamic and fast evolving, and could be exacerbated by geopolitical tensions, including hostile actions taken by nation-states and terrorist organizations.
In such a case, the BMA may require the shareholder to reduce its holding of common shares or direct, among other things, that voting rights attaching to the common shares shall not be exercisable. A person who does not comply with such a notice or direction from the BMA will be guilty of an offense.
In such a case, the BMA may require the shareholder to reduce its holding of common shares or direct, among other things, that voting rights attaching to the common shares shall not be exercisable.
Although we manage our foreign currency exposure through matching of our major foreign-denominated assets and liabilities, as well as through use of currency derivatives, there is no guarantee that we will successfully mitigate our exposure to foreign exchange losses due to unfavorable currency fluctuations.
We may experience losses or gains resulting from fluctuations in the values of these non-U.S. currencies. Although we manage our foreign currency exposure through matching of our major foreign-denominated assets and liabilities, as well as through use of currency derivatives, there is no guarantee that we will successfully mitigate our exposure to foreign exchange losses due to unfavorable currency fluctuations.
Political unrest, sovereign debt concerns or other economic factors in jurisdictions in which we operate may magnify these risks. Liquidity Risk Liquidity risk is the risk that we may not have sufficient cash to meet our obligations when they are due, or would have to incur excessive costs to do so. Our underwriting activities may expose us to liquidity risks.
Liquidity Risk Liquidity risk is the risk that we may not have sufficient cash to meet our obligations when they are due, or would have to incur excessive costs to do so. Our underwriting activities may expose us to liquidity risks.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES We maintain leased office facilities in Bermuda, the U.S., Europe, Singapore, and Canada. In 2022, we owned the building in which our office in Dublin, Ireland was located. In January 2023, we sold this building. We renew and enter into leases in the ordinary course of business as required.
Biggest changeITEM 2. PROPERTIES We maintain leased office facilities in Bermuda, the U.S., Europe, Singapore, and Canada. In January 2023, we sold the building in which our office in Dublin, Ireland was located. We renew and enter into leases in the ordinary course of business as required.
Our global headquarters is located at 92 Pitts Bay Road, AXIS House, Pembroke HM 08, Bermuda. We believe that our office space is sufficient for us to conduct our operations for the foreseeable future.
Our global headquarters is located at AXIS House, 92 Pitts Bay Road, Pembroke HM 08, Bermuda. We believe that our office space is sufficient for us to conduct our operations for the foreseeable future.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeEstimated amounts payable related to these proceedings are included in reserve for losses and loss expenses in our consolidated financial statements. We are not party to any material legal proceedings arising outside the ordinary course of business.
Biggest changeEstimated amounts payable related to these proceedings are included in reserve for losses and loss expenses in our consolidated balance sheets. We are not party to any material legal proceedings arising outside the ordinary course of business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest change(c) On December 8, 2022, our Board of Directors authorized a new share repurchase program for up to $100 million of our common shares through December 31, 2023. The new share repurchase authorization, effective January 1, 2023, replaced the previous program which had $65 million available until December 31, 2022.
Biggest change(b) Includes shares repurchased from employees to satisfy personal withholding tax liabilities that arise on the vesting of share-settled restricted stock units. (c) On December 8, 2022, our Board of Directors authorized a new share repurchase program for up to $100 million of our common shares, effective January 1, 2023 through December 31, 2023.
While we expect to continue paying comparable cash dividends in the foreseeable future, the declaration and payment of future dividends is at the discretion of our Board of Directors and will depend on many factors including, but not limited to, our net income, financial condition, business needs, capital and surplus requirements of our operating subsidiaries and regulatory and contractual restrictions, including those set forth in our credit facilities.
While we expect to continue paying comparable cash dividends in the foreseeable future, the declaration and payment of future dividends is at the discretion of our Board of Directors and will depend on many factors including, but not limited to, our net income, financial condition, business needs, capital and surplus requirements of our operating subsidiaries and regulatory and contractual restrictions, including those detailed in our credit facilities.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common shares are listed on the New York Stock Exchange under the symbol "AXS". On February 22, 2023, the number of holders of record of our common shares was 20.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common shares are listed on the New York Stock Exchange under the symbol "AXS". On February 23, 2024, the number of holders of record of our common shares was 16.
Issuer Purchases of Equity Securities Common Shares The following table shows information regarding the number of common shares repurchased in the quarter ended December 31, 2022: Period Total number of shares purchased (a) (b) Average price paid per share Total number of shares purchased as part of publicly announced programs Maximum number (or approximate dollar value) of shares that may yet be purchased under the programs (c) October 1-31, 2022 1 $49.15 — $65 million November 1-30, 2022 4 $54.12 — $65 million December 1-31, 2022 1 $56.96 — $65 million Total 6 — $65 million (a) In thousands.
Issuer Purchases of Equity Securities Common Shares The following table shows information regarding the number of common shares repurchased in the quarter ended December 31, 2023: Period Total number of shares purchased (a) (b) Average price paid per share Total number of shares purchased as part of publicly announced programs Maximum number (or approximate dollar value) of shares that may yet be purchased under the programs (c) October 1-31, 2023 14 $57.62 — $100 million November 1-30, 2023 29 $57.92 — $100 million December 1-31, 2023 66 $55.45 — $100 million Total 109 — $100 million (a) In thousands.
Removed
(b) Includes shares repurchased from employees to facilitate the satisfaction of their personal withholding tax liabilities that arise on the vesting of share-settled restricted stock units and shares repurchased as part of our publicly announced program, described below.
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On December 7, 2023, our Board of Directors renewed its authorization for the repurchase of up to $100 million of our common shares, effective January 1, 2024, through December 31, 2024.
Removed
Share repurchases may be effected from time to time in the open market or privately negotiated transactions, depending on market conditions.
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Share repurchases may be effected from time to time in the open market or privately negotiated transactions, depending on market conditions. 56 Performance Graph Set forth below is a line graph comparing the dollar change in the cumulative total shareholder return on the Company's Common Shares from December 31, 2018, through December 31, 2023, as compared to the cumulative total return of the Standard & Poor's 500 Stock Index and the cumulative total return of the Standard & Poor's Property-Casualty Insurance Index.
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The cumulative total shareholder return is a concept used to compare the performance of a company's stock over time and is the ratio of the stock price change plus the cumulative amount of dividends over the specified time period (assuming dividend reinvestment), to the stock price at the beginning of the time period.
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The chart depicts the value on December 31, 2019, 2020, 2021, 2022, and 2023, of a $100 investment made on December 31, 2018, with all dividends reinvested. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/30/2022 12/29/2023 AXIS Capital Holdings Limited $100.00 $118.26 $104.19 $116.49 $119.56 $126.18 S&P 500 P&C Index $100.00 $125.87 $134.63 $160.58 $190.89 $211.53 S&P 500 Index $100.00 $131.49 $155.68 $200.37 $164.08 $207.21

Item 7. Management's Discussion & Analysis

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

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Biggest changePage 2022 Financial Highlights 57 Overview 58 Consolidated Results of Operations 61 Results by Segment: i) Insurance Segment 63 ii) Reinsurance Segment 66 Net Investment Income and Net Investment Gains (Losses) 70 Other Expenses (Revenues), Net 72 Financial Measures 74 Non-GAAP Financial Measures Reconciliation 76 Cash and Investments 79 Liquidity and Capital Resources 86 Critical Accounting Estimates 92 i) Reserve for Losses and Loss Expenses 93 ii) Reinsurance Recoverable on Unpaid Losses and Loss Expenses 100 iii) Gross Premiums Written 101 iv) Net Premiums Earned 103 v) Fair Value Measurements of Financial Assets and Liabilities 103 vi) Impairment Losses and the Allowance for Expected Credit Losses - Fixed Maturities, Available for Sale 105 Recent Accounting Pronouncements 106 56 2022 FINANCIAL HIGHLIGHTS 2022 Consolidated Results of Operations • Net income available to common shareholders of $193 million , or $2.27 per common share, and $2.25 per diluted common share • Operating income (1) of $498 million, or $5.81 per diluted common share (1) • Gross premiums written of $8.2 billion • Net premiums written of $5.3 billion • Net premiums earned of $5.2 billion • Pre-tax catastrophe and weather-related losses, net of reinsurance and reinstatement premiums, of $403 million ($350 million, after-tax), (Insurance: $207 million; Reinsurance: $196 million), or 7.8 points on the current accident year loss ratio, including natural catastrophe and weather-related losses of $338 million, or 6.5 points, primarily attributable to Hurricane Ian, Winter Storm Elliot, June European Convective Storms, and other weather-related events.
Biggest changePage 2023 Financial Highlights 59 Overview 60 Consolidated Results of Operations 62 Results by Segment: i) Insurance Segment 64 ii) Reinsurance Segment 67 Net Investment Income and Net Investment Gains (Losses) 72 Other Expenses (Revenues), Net 75 Financial Measures 77 Non-GAAP Financial Measures Reconciliation 79 Cash and Investments 82 Liquidity and Capital Resources 89 Critical Accounting Estimates 95 i) Reserve for Losses and Loss Expenses 96 ii) Reinsurance Recoverable on Unpaid Losses and Loss Expenses 102 iii) Gross Premiums Written 103 iv) Net Premiums Earned 105 v) Fair Value Measurements of Financial Assets and Liabilities 106 vi) Impairment Losses and the Allowance for Expected Credit Losses - Fixed Maturities, Available for Sale 107 Recent Accounting Pronouncements 108 58 2023 FINANCIAL HIGHLIGHTS 2023 Consolidated Results of Operations • Net income available to common shareholders of $346 million , or $4.06 per common share, and $4.02 per diluted common share • Operating income (1) of $486 million, or $5.65 per diluted common share (1) • Gross premiums written of $8.4 billion • Net premiums written of $5.1 billion • Net premiums earned of $5.1 billion • Pre-tax catastrophe and weather-related losses, net of reinsurance, of $138 million ($116 million, after-tax), (Insurance: $111 million; Reinsurance: $27 million), or 2.7 points primarily attributable to Cyclone Gabrielle and other weather-related events. • Net adverse prior year reserve development of $412 million • Underwriting income (2) of $161 million and combined ratio of 99.9% • Net investment income of $612 million • Net investment losses of $75 million • Foreign exchange losses of $58 million 2023 Consolidated Financial Condition • Total cash and investments of $16.7 billion; fixed maturities, short-term investments, and cash and cash equivalents comprise 86% of total cash and investments and have an average credit rating of AA- • Total assets of $30.3 billion • Reserve for losses and lo ss e xpenses of $16.4 billion and reinsurance recoverable on unpaid and paid losses and loss expenses of $6.9 billion. • Debt of $1.3 billion and a debt to total capital ratio (3) of 20.0% • Common shares r epurchased from employees to satisfy personal withholding tax liabilities that arise on the vesting of share-settled restricted stock units were 398,000 common shares for a total of $24 million • Common shareholders’ equity of $4.7 billion; book value per diluted common share of $54.06 (1) Operating income (loss) and operating income (loss) per diluted common share are non-GAAP financial measures as defined in Item 10(e) of SEC Regulation S-K.
However, we manage our investment portfolio in such a way that unrealized and realized foreign exchange losses (gains) on our investment portfolio, including unrealized foreign exchange losses (gains) on our equity securities, and foreign exchange losses (gains) realized on the sale of our available for sale investments and equity securities recognized in net investment gains (losses), and unrealized foreign exchange losses (gains) on our available for sale investments recognized in other comprehensive income (loss), generally offset a large portion of the foreign exchange losses (gains) arising from our underwriting portfolio, thereby minimizing the impact of foreign exchange rate movements on total shareholders' equity.
However, we manage our investment portfolio in such a way that unrealized and realized foreign exchange losses (gains) on our investment portfolio, including unrealized foreign exchange losses (gains) on our equity securities and foreign exchange losses (gains) realized on the sale of our available for sale investments and equity securities recognized in net investment gains (losses) and unrealized foreign exchange losses (gains) on our available for sale investments in other comprehensive income (loss), generally offset a large portion of the foreign exchange losses (gains) arising from our underwriting portfolio, thereby minimizing the impact of foreign exchange rate movements on total shareholders' equity.
Reorganization expenses are primarily driven by business decisions, the nature and timing of which are not related to the underwriting process. Therefore, these expenses are excluded from consolidated underwriting income (loss). Amortization of intangible assets including value of business acquired ("VOBA") arose from business decisions, the nature and timing of which are not related to the underwriting process.
Reorganization expenses are primarily driven by business decisions, the nature and timing of which are not related to the underwriting process. Therefore, these expenses are excluded from consolidated underwriting income (loss). Amortization of intangible assets including the value of business acquired ("VOBA") arose from business decisions, the nature and timing of which are not related to the underwriting process.
Constant Currency Basis We present gross premiums written, net premiums written and net premiums earned on a constant currency basis in this MD&A. The amounts presented on a constant currency basis are calculated by applying the average foreign exchange rate from the current year to the prior year amounts.
Constant Currency Basis We present gross premiums written and net premiums earned on a constant currency basis in this MD&A. The amounts presented on a constant currency basis are calculated by applying the average foreign exchange rate from the current year to the prior year amounts.
We believe this presentation enables investors and other users of our financial information to analyze growth in gross premiums written, net premiums written and net premiums earned on a constant basis.
We believe this presentation enables investors and other users of our financial information to analyze growth in gross premiums written and net premiums earned on a constant basis.
The reconciliation to gross premiums written, net premiums written and net premiums earned on a GAAP basis is presented in ' Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results by Segment' .
The reconciliation to gross premiums written and net premiums earned on a GAAP basis is presented in ' Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results by Segment' .
Series E Preferred Shares On November 7, 2016, we issued $550 million of 5.50% Series E preferred shares with a liquidation preference of $2,500 per share (equivalent to $25 per depositary share). Dividends on the Series E preferred shares are non-cumulative.
Preferred Shares Series E Preferred Shares On November 7, 2016, we issued $550 million of 5.50% Series E preferred shares with a liquidation preference of $2,500 per share (equivalent to $25 per depositary share). Dividends on the Series E preferred shares are non-cumulative.
The ability to pay such dividends and/or distributions is limited by the applicable laws and regulations of the various countries and states in which AXIS Capital’s subsidiaries operate (refer to Item 8, Note 22 to the Consolidated Financial Statements 'Statutory Financial Information' for 86 further details), as well as the need to maintain capital levels to adequately support insurance and reinsurance operations, and to preserve financial strength ratings issued by independent rating agencies.
The ability to pay such dividends and/or distributions is limited by the applicable laws and regulations of the various countries and states in which AXIS Capital’s subsidiaries operate (refer to Item 8, Note 22 to the Consolidated Financial Statements 'Statutory Financial Information' for further details), as well as the need to maintain capital levels to adequately support insurance and reinsurance operations, and to preserve financial strength ratings issued by independent rating agencies.
Restricted Assets Refer to Item 8, Note 5(j) to the Consolidated Financial Statements 'Investments'. LIQUIDITY AND CAPITAL RESOURCES Liquidity Liquidity is a measure of a company’s ability to generate cash flows sufficient to meet the short-term and long-term cash requirements of its business operations. We manage liquidity at the holding company and operating subsidiary level.
Restricted Assets Refer to Item 8, Note 5(j) to the Consolidated Financial Statements 'Investments'. 88 LIQUIDITY AND CAPITAL RESOURCES Liquidity Liquidity is a measure of a company’s ability to generate cash flows sufficient to meet the short-term and long-term cash requirements of its business operations. We manage liquidity at the holding company and operating subsidiary level.
For the credit and political risk line of business, we write certain policies on a multi-year basis. Premiums in respect of these policies are recorded at the inception of the policy based on management’s best esti mate of premiums to be received, including 101 assumptions relating to prepayments/refinancing.
For the credit and political risk line of business, we write certain policies on a multi-year basis. Premiums in respect of these policies are recorded at the inception of the policy based on management’s best esti mate of premiums to be received, including assumptions relating to prepayments/refinancing.
We consider an accounting estimate to be critical if: (1) it requires that significant assumptions be made in order to deal with uncertainties and (2) changes in the estimate could have a material impact on our results of operations, financial condition or liquidity.
We consider an accounting estimate to be critical if: (1) it requires that significant assumptions be made to deal with uncertainties and (2) changes in the estimate could have a material impact on our results of operations, financial condition, or liquidity.
Interest Expense and Financing Costs Interest expense and financing costs are related to interest due on the 5.150% senior unsecured notes ("5.150% Senior Notes") issued in 2014, the 4.000% senior unsecured notes ("4.000% Senior Notes") issued in 2017, the 3.900% senior unsecured notes ("3.900% Senior Notes"), and the 4.900% fixed-rate reset junior subordinated notes ("Junior Subordinated Notes") issued in 2019, and the Federal Home Loan advances ("FHLB advances") received in 2022.
Interest Expense and Financing Costs Interest expense and financing costs are related to interest due on the 5.150% senior unsecured notes ("5.150% Senior Notes") issued in 2014, the 4.000% senior unsecured notes ("4.000% Senior Notes") issued in 2017, the 3.900% senior unsecured notes ("3.900% Senior Notes"), the 4.900% fixed-rate reset junior subordinated notes ("Junior Subordinated Notes") issued in 2019, and the Federal Home Loan advances ("FHLB advances") received in 2023 and 2022.
The remaining securities were priced by either non-binding broker quotes or internal valuation models. 103 Generally, we obtain quotes directly from broker-dealers who are active in the corresponding markets when prices are unavailable from independent pricing services.
The remaining securities were priced by either non-binding broker quotes or internal valuation models. Generally, we obtain quotes directly from broker-dealers who are active in the corresponding markets when prices are unavailable from independent pricing services.
However, factors such as those described in Item 1A ' Risk Factors' could cause actual events or results to differ materially from the underlying assumptions and estimates which could lead to a material adverse impact on our results of operations, financial condition or liquidity. 92 Reserve for Losses and Loss Expenses Overview We believe the most significant accounting judgment we make is the estimate of reserve for losses and loss expenses ("loss reserves").
However, factors such as those described in Item 1A ' Risk Factors' could cause actual events or results to differ materially from the underlying assumptions and estimates which could lead to a material adverse impact on our results of operations, financial condition, or liquidity. 95 Reserve for Losses and Loss Expenses Overview We believe the most significant accounting judgment we make is the estimate of reserve for losses and loss expenses ("loss reserves").
The tax expense of $22 million in 2022 was principally due to the generation of pre-tax income in our U.K., U.S. and European insurance operations, together with a valuation allowance on certain deferred tax assets, partially offset by the re-estimation of the amount of net deferred tax assets that would be realized at the 25% tax rate in the U.K. that takes effect in 2023.
The tax expense of $22 million in 2022 was principally due to the generation of pre-tax income in our U.K., U.S. and European insurance operations, together with a valuation allowance on certain deferred tax assets, partially offset by the re-estimation of the amount of net deferred tax assets that would be realized at the 25% tax rate in the U.K. that took effect in 2023.
Our intent and ability to issue securities pursuant to this registration statement will depend on market conditions at the time of any proposed offering. 90 Financial Strength Ratings Our principal insurance and reinsurance operating subsidiaries are assigned financial strength ratings from internationally recognized rating agencies, including Standard & Poor’s, A.M. Best, and Moody’s Investors Service.
Our intent and ability to issue securities pursuant to this registration statement will depend on market conditions at the time of any proposed offering. 93 Financial Strength Ratings Operating subsidiaries Our principal insurance and reinsurance operating subsidiaries are assigned financial strength ratings from internationally recognized rating agencies, including Standard & Poor’s, A.M. Best, and Moody’s Investors Service.
Therefore, it would be inappropriate to take each of the amounts and add them together in an attempt to 99 estimate total volatility. Additionally, it is noted that in some instances, for example the projection of catastrophe estimates or credit and political risks estimates, development patterns are not appropriate as more bespoke techniques are used.
Therefore, it would be inappropriate to take each of the amounts and add them together in an attempt to 101 estimate total volatility. Additionally, it is noted that in some instances, for example the projection of catastrophe estimates or credit and political risks estimates, development patterns are not appropriate as more bespoke techniques are used.
We believe the dividend/distribution capacity of AXIS Capital’s subsidiaries, which was $0.9 billion at December 31, 2022, will provide AXIS Capital with sufficient liquidity for the foreseeable future. Operating Subsidiaries AXIS Capital’s operating subsidiaries primarily derive cash from the net inflow of premiums less claim payments related to underwriting activities and from net investment income.
We believe the dividend/distribution capacity of AXIS Capital’s subsidiaries, which was $0.9 billion at December 31, 2023, will provide AXIS Capital with sufficient liquidity for the foreseeable future. Operating Subsidiaries AXIS Capital’s operating subsidiaries primarily derive cash from the net inflow of premiums less claim payments related to underwriting activities and from net investment income.
At December 31, 2022, the use of different assumptions could have a material effect on the allowance for expected credit losses. To the extent the creditworthiness of our reinsurers deteriorates due to an adverse event affecting the reinsurance industry, such as a large number of catastrophes, uncollectible amounts could be significantly greater than the allowance for expected credit losses.
At December 31, 2023, the use of different assumptions could have a material effect on the allowance for expected credit losses. To the extent the creditworthiness of our reinsurers deteriorates due to an adverse event affecting the reinsurance industry, such as a large number of catastrophes, uncollectible amounts could be significantly greater than the allowance for expected credit losses.
Their pricing methodologies include mapping securities based on trade data, bids or offers, observed spreads and performance on newly issued securities. They may also establish pricing through observing secondary trading of similar securities. At December 31, 2022 and 2021, we did not adjust any pricing provided by independent pricing services.
Their pricing methodologies include mapping securities based on trade data, bids or offers, observed spreads and performance on newly issued securities. They may also establish pricing through observing secondary trading of similar securities. At December 31, 2023 and 2022, we did not adjust any pricing provided by independent pricing services.
(3) The debt to total capital ratio is calculated by dividing debt by total capital. Total capital represents the sum of total shareholders’ equity and debt. 57 OVERVIEW Business Overview AXIS Capital, through its operating subsidiaries, is a global specialty underwriter and provider of insurance and reinsurance solutions with operations in Bermuda, the U.S., Europe, Singapore and Canada.
(3) The debt to total capital ratio is calculated by dividing debt by total capital. Total capital represents the sum of total shareholders’ equity and debt. 59 OVERVIEW Business Overview AXIS Capital, through its operating subsidiaries, is a global specialty underwriter and provider of insurance and reinsurance solutions with operations in Bermuda, the U.S., Europe, Singapore and Canada.
The reconciliation of operating income (loss) to net income (loss) available (attributable) to common shareholders, the most comparable GAAP financial measure, is presented above. 78 We also present operating income (loss) per diluted common share and operating ROACE, which are derived from the operating income (loss) measure and are reconciled above to the most comparable GAAP financial measures, earnings (loss) per diluted common share and return on average common equity ("ROACE"), respectively.
The reconciliation of operating income (loss) to net income (loss) available (attributable) to common shareholders, the most comparable GAAP financial measure, is presented above. 81 We also present operating income (loss) per diluted common share and operating ROACE, which are derived from the operating income (loss) measure and are reconciled above to the most comparable GAAP financial measures, earnings (loss) per diluted common share and return on average common equity ("ROACE"), respectively.
As previously noted, there are many factors that may cause reserves to increase or decrease, particularly those related to catastrophe losses and long-tail lines of business. Expected loss ratios are a key assumption in estimates of ultimate losses for business at an early stage of development.
As previously noted, there are many factors that may cause reserves to increase or decrease, particularly those related to catastrophe losses and longer tail lines of business. Expected loss ratios are a key assumption in estimates of ultimate losses for business at an early stage of development.
Fixed Maturities and Equity Securities At December 31, 2022, the fair values of 93% (2021 : 94%) of total fixed maturities and equity securities were based on prices provided by globally recognized independent pricing services where we have a current and detailed understanding of how their prices were derived.
Fixed Maturities and Equity Securities At December 31, 2023, the fair values of 94% (2022 : 93%) of total fixed maturities and equity securities were based on prices provided by globally recognized independent pricing services where we have a current and detailed understanding of how their prices were derived.
At December 31, 2022, the weighted average estimated subordination percentage of the portfolio was 38% (2021: 37%), which represents the current weighted average estimated percentage of the capital structure subordinated to the investment holding that is available to absorb losses before the security incurs the first dollar loss of principal.
At December 31, 2023, the weighted average estimated subordination percentage of the portfolio was 37% (2022: 38%), which represents the current weighted average estimated percentage of the capital structure subordinated to the investment holding that is available to absorb losses before the security incurs the first dollar loss of principal.
(3) We have $508 million of unfunded investment commitments related to our other investments portfolio, which are callable by our investment managers (refer to Item 8, Note 5(e) to the Consolidated Financial Statements ' Investments ' for further details).
(3) We have $502 million of unfunded investment commitments related to our other investments portfolio, which are callable by our investment managers (refer to Item 8, Note 5(e) to the Consolidated Financial Statements ' Investments ' for further details).
Sensitivity Analysis While we believe that loss reserves at December 31, 2022 are adequate, new information, events or circumstances may result in ultimate losses that are materially greater or less than provided for in our loss reserves.
Sensitivity Analysis While we believe that loss reserves at December 31, 2023 are adequate, new information, events or circumstances may result in ultimate losses that are materially greater or less than provided for in our loss reserves.
While we believe that these are reasonably likely scenarios, we do not believe this sensitivity analysis should be considered an actual reserve range. Reinsurance Recoverable on Unpaid Losses and Loss Expenses In the normal course of business, we purchase facultative and treaty reinsurance protection to limit ultimate losses from catastrophic events and to reduce loss aggregation risk.
While we believe that these are reasonably likely scenarios, we do not believe this sensitivity analysis should be considered an actual reserve range. Reinsurance Recoverable on Unpaid Losses and Loss Expenses In the normal course of business, we purchase facultative and treaty reinsurance protection to limit ultimate losses and to reduce loss aggregation risk.
(5) Debt (interest payments) includes $13 million of unamortized discount and debt issuance expenses. CRITICAL ACCOUNTING ESTIMATES The consolidated financial statements include certain amounts that are inherently uncertain and judgmental in nature. As a result, we are required to make assumptions and best estimates in order to determine the reported values.
(5) Debt (interest payments) includes $11 million of unamortized discount and debt issuance expenses. CRITICAL ACCOUNTING ESTIMATES The consolidated financial statements include certain amounts that are inherently uncertain and judgmental in nature. As a result, we are required to make assumptions and best estimates to determine the reported values.
Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors including the ability to utilize capital losses. (2) Tax expense (benefit) o f $16 million , $3 million and $(4) million for the years ended December 31, 2022, 2021 and 2020, respectively.
Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors including the ability to utilize capital losses. (2) Tax expense (benefit) o f $(3) million , $16 million and $3 million for the years ended December 31, 2023, 2022 and 2021, respectively.
A partial valuation allowance of $2 million was also recorded against U.S. foreign tax credits. At December 31, 2022, the U.S. operations had a deferred tax asset of $71 million for the unrealized losses on its fixed maturity securities that were recorded in other comprehensive income (loss).
A partial valuation allowance of $2 million was also recorded against U.S. foreign tax credits. At December 31, 2022, the U.S. operations had a deferred tax asset of $71 million for the unrealized losses on its fixed maturities that were recorded in other comprehensive income (loss).
Results of operations for 2022 were impacted by natural and man-made catastrophe activity (refer to 'Underwriting Results – Insurance segment – Current Accident Year Loss Ratio' and 'Underwriting Results – Reinsurance segment – Current Accident Year Loss Ratio' for further details).
Results of operations for 2023 were impacted by natural and man-made catastrophe activity (refer to 'Underwriting Results – Insurance segment – Current Accident Year Loss Ratio' and 'Underwriting Results – Reinsurance segment – Current Accident Year Loss Ratio' for further details).
Tax impact is estimated by applying the statutory rates of applicable jurisdictions. (4) Tax expense (benefit) of $nil for the years ended December 31, 2022, 2021 and 2020, respectively, Tax impact is estimated by applying the statutory rates of applicable jurisdictions.
Tax impact is estimated by applying the statutory rates of applicable jurisdictions. (4) Tax expense (benefit) of $nil for the years ended December 31, 2023, 2022 and 2021, respectively, Tax impact is estimated by applying the statutory rates of applicable jurisdictions.
At December 31, 2022, the estimated fair value of our investments in these funds was $856 million (2021: $838 million). Refer to Item 8, Note 6 to the Consolidated Financial Statements 'Fair Value Measurements' for further details. CLO-Equity Securities The fair values of CLO-Equities are estimated using a discounted cash flow model prepared by an external investment manager.
At December 31, 2023, the estimated fair value of our investments in these funds was $836 million (2022: $856 million). Refer to Item 8, Note 6 to the Consolidated Financial Statements 'Fair Value Measurements' for further details. CLO-Equity Securities The fair values of CLO-Equities are estimated using a discounted cash flow model prepared by an external investment manager.
In addition, we have $25 million of unfunded commitments related to our commercial mortgage loans portfolio and $20 million of unfunded commitments related to our corporate debt portfolio. (4) Refer to Item 8, Note 10(a) to the Consolidated Financial Statements ' Debt and Financing Arrangement s' for further details.
In addition, we have $10 million of unfunded commitments related to our commercial mortgage loans portfolio and $16 million of unfunded commitments related to our corporate debt portfolio. (4) Refer to Item 8, Note 10(a) to the Consolidated Financial Statements ' Debt and Financing Arrangement s' for further details.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion and analysis of our results of operations for the years ended December 31, 2022 and 2021, and our financial condition at December 31, 2022 and 2021.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is a discussion and analysis of our results of operations for the years ended December 31, 2023 and 2022, and our financial condition at December 31, 2023 and 2022.
For discussion of our results of operations and changes in financial condition for year ended December 31, 2021, compared to year ended December 31, 2020, refer to Part II, Item 7.
For discussion of our results of operations and changes in financial condition for year ended December 31, 2022, compared to year ended December 31, 2021, refer to Part II, Item 7.
(6) Refer to Item 8, Note 14 to the Consolidated Financial Statements 'Earnings Per Common Share' for further details. 76 Rationale for the Use of Non-GAAP Financial Measures We present our results of operations in a way we believe will be meaningful and useful to investors, analysts, rating agencies and others who use our financial information to evaluate our performance.
(5) Refer to Item 8, Note 14 to the Consolidated Financial Statements 'Earnings Per Common Share' for further details. 79 Rationale for the Use of Non-GAAP Financial Measures We present our results of operations in a way we believe will be meaningful and useful to investors, analysts, rating agencies and others who use our financial information to evaluate our performance.
Refer to Item 8, Note 2 to the Consolidated Financial Statements 'Basis of Presentation and Significant Accounting Policies' for further details. At December 31, 2022, the allowance for expected credit losses was $31 million (2021: $30 million). We have not written off any significant reinsurance recoverable balances in the last three years.
Refer to Item 8, Note 2 to the Consolidated Financial Statements 'Basis of Presentation and Significant Accounting Policies' for further details. At December 31, 2023, the allowance for expected credit losses was $37 million (2022: $31 million). We have not written off any significant reinsurance recoverable balances in the last three years.
As part of our capital management strategy, our Board of Directors authorizes common share repurchase programs. On December 8, 2022, our Board of Directors authorized a new share repurchase program for up to $100 million of our common shares through December 31, 2023.
As part of our capital management strategy, our Board of Directors authorizes common share repurchase programs. On December 8, 2022, our Board of Directors authorized a new share repurchase program for up to $100 million of our common shares, effective January 1, 2023, through December 31, 2023.
These securities are evaluated for intent or requirement to sell at a loss. 105 RECENT ACCOUNTING PRONOUNCEMENTS At December 31, 2022, there were no recently issued accounting pronouncements that we have not yet adopted that we expect could have a material impact on our results of operations, financial condition or liquidity.
These securities are evaluated for intent or requirement to sell at a loss. 107 RECENT ACCOUNTING PRONOUNCEMENTS At December 31, 2023, there were no recently issued accounting pronouncements that we have not yet adopted that we expect could have a material impact on our results of operations, financial condition or liquidity.
Other Investments Hedge Funds, Direct Lending Funds, Private Equity Funds and Real Estate Funds The fair values of hedge funds, direct lending funds, private equity funds and real estate funds are estimated using net asset values (NAVs) as advised by external fund managers or third-party administrators.
Other Investments Multi-strategy Funds, Direct Lending Funds, Private Equity Funds and Real Estate Funds The fair values of multi-strategy funds, direct lending funds, private equity funds and real estate funds are estimated using net asset values (NAVs) as advised by external fund managers or third-party administrators.
We actively monitor underlying insured values, and any adjustments to premiums are recognized in the period in which they are determined. Gross premiums written on a fixed premium basis accounted f or 85% and 87% o f the segment’s gross premiums written for the years ended December 31, 2022 and 2021, respectively.
We actively monitor underlying insured values, and any adjustments to premiums are recognized in the period in which they are determined. Gross premiums written on a fixed premium basis accounted f or 84% and 85% o f the segment’s gross premiums written for the years ended December 31, 2023 and 2022, respectively.
We review these premium estimates on a quarterly basis and any adjustments to premium estimates are recognized in the period in which they are determined. Gross premiums written on a line slip or proportional basis accounted for 15% and 13% of the segment’s gross premiums written for the years ended December 31, 2022 and 2021, respectively.
We review these premium estimates on a quarterly basis and any adjustments to premium estimates are recognized in the period in which they are determined. Gross premiums written on a line slip or proportional basis accounted for 16% and 15% of the segment’s gross premiums written for the years ended December 31, 2023 and 2022, respectively.
Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors including the tax status of specific foreign exchange transactions. (3) Tax expense (benefit) of $(4) million, $nil and $(1) million for the years ended December 31, 2022, 2021 and 2020, respectively.
Tax impact is estimated by applying the statutory rates of applicable jurisdictions, after consideration of other relevant factors including the tax status of specific foreign exchange transactions. (3) Tax expense (benefit) of $(5) million, $(4) million and $nil for the years ended December 31, 2023, 2022 and 2021, respectively.
The reconciliation to general and administrative expenses, the most comparable GAAP financial measure, also included corporate expenses of $130 million, $126 million, and $102 million for 2022, 2021, and 2020, respectively. Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Expenses (Revenues), Net '' for further details on corporate expenses.
The reconciliation to general and administrative expenses, the most comparable GAAP financial measure, also included corporate expenses of $133 million, $130 million, and $126 million for 2023, 2022, and 2021, respectively. Refer to 'Management’s Discussion and Analysis of Financial Condition and Results of Operations – Other Expenses (Revenues), Net '' for further details on corporate expenses.
Any adjustments to minimum or deposit premiums are recognized in the period in which they are determined. Gross premiums written for excess of loss reinsurance contracts accounted for 43% and 49% of the reinsurance segment’s gross premiums written for the years ended December 31, 2022 and 2021, respectively.
Any adjustments to minimum or deposit premiums are recognized in the period in which they are determined. Gross premiums written for excess of loss reinsurance contracts accounted for 39% and 43% of the reinsurance segment’s gross premiums written for the years ended December 31, 2023 and 2022, respectively.
(2) Includes U.S. government-sponsored agencies, residential mortgage-backed securities ("RMBS") and commercial mortgage-backed securities ("CMBS"). (3) Non-investment grade and non-rated securities. At December 31, 2022, fixed maturities had a weighted average credit rating of AA- (2021: AA-), a book yield of 3.5% (2021: 1.9%), and an average duration of 3.0 years (2021: 3.0 years).
(2) Includes U.S. government-sponsored agencies, residential mortgage-backed securities ("RMBS") and commercial mortgage-backed securities ("CMBS"). (3) Non-investment grade and non-rated securities. At December 31, 2023, fixed maturities had a weighted average credit rating of AA- (2022: AA-), a book yield of 4.2% (2022: 3.5%), and an average duration of 3.0 years (2022: 3.0 years).
Prior Year Reserve Development Refer to Item 8, Note 8 to the Consolidated Financial Statements 'Reserve for Losses and Loss Expenses' for details on the lines of business, the expected claim tails, and prior year development.
Prior Year Reserve Development Refer to Item 8, Note 8 to the Consolidated Financial Statements 'Reserve for Losses and Loss Expenses' for details on the lines of business and prior year development.
At December 31, 2022, the average duration of unearned premiums for credit and political risk line of business w as 5.4 years (2021: 5.2 years). Reinsurance Segment The reinsurance segment provides cover to cedants (i.e., insurance companies) on an excess of loss or on a proportional basis.
At December 31, 2023, the average duration of unearned premiums for credit and political risk line of business w as 5.7 years (2022: 5.4 years). 103 Reinsurance Segment The reinsurance segment provides cover to cedants (i.e., insurance companies) on an excess of loss or on a proportional basis.
(2) The average cash and investments is calculated by taking the average of the period end fair value balances. (3) Pre-tax total return on cash and investments excluding foreign exchange rate movements is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K.
(2) The average cash and investments balance is calculated by taking the average of the monthly fair value balances. (3) Pre-tax total return on cash and investments excluding foreign exchange movements is a non-GAAP financial measure as defined in Item 10(e) of SEC Regulation S-K.
As a result, we believe that foreign exchange losses (gains) in our consolidated statements of operations in isolation are not a meaningful contributor to our underwriting performance. Therefore, foreign exchange losses (gains) are excluded from consolidated underwriting income (loss). Interest expense and financing costs primarily relate to interest payable on our debt.
As a result, we believe that foreign exchange losses (gains) in our consolidated statements of operations in isolation are not a meaningful contributor to our underwriting performance. Therefore, foreign exchange losses (gains) are excluded from consolidated underwriting income (loss). Interest expense and financing costs primarily relate to interest payable on our debt and Federal Home Loan Bank advances.
Interest expense and financing costs increased by $1 million in 2022, compared to 2021, due to the FHLB advances in 2022. Income Tax Expense (Benefit) Income tax expense (benefit) primarily results from income (loss) generated by our foreign operations in the U.S. and Europe.
Interest expense and financing costs increased by $5 million in 2023, compared to 2022, due to the FHLB advances in 2023. Income Tax Expense (Benefit) Income tax expense (benefit) primarily results from income (loss) generated by our foreign operations in the U.S. and Europe.
We believe that a reasonably likely change to 2022 initial premium estimates for proportional reinsurance contracts would be 4% in either direction. A change in initial premium estimates of this magnitude would result in a change in gross premiums written of approximately $56 million.
We believe that a reasonably likely change to 2023 initial premium estimates for proportional reinsurance contracts would be 4% in either direction. A change in initial premium estimates of this magnitude would result in a change in gross premiums written of approximately $52 million.
Of this amount, $5.2 billion rel ated to restricted assets, which primarily support our obligations in regulatory jurisdictions where we operate as a non-admitted carrier (refer to Item 8, Note 5(j) to the Consolidated Financial Statements 'Investments' for further details).
Of this amount, $5.3 billion related to restricted assets, which primarily support our obligations in regulatory jurisdictions where we operate as a non-admitted carrier (refer to Item 8, Note 5(j) to the Consolidated Financial Statements 'Investments' for further details).
During 2022, catastrophe and weather-related lo sses, net of reinstatement premiums, were $207 million, or 6.5 points, including natural catastrophe and weather-related losses of $177 million, or 5.6 points, primarily attributable to Hurricane Ian, Winter Storm Elliot, Eastern Australia floods, South Africa floods, and other weather-related events.
Comparatively, in 2022, catastrophe and weather-related losses, net of reinstatement premiums, were $207 million, or 6.5 points, including natural catastrophe and weather-related losses of $177 million, or 5.6 points, primarily attributable to Hurricane Ian, Winter Storm Elliot, Eastern Australia floods, South Africa floods, and other weather-related events.
Securities that are not rated are excluded from weighted average calculations. At December 31, 2022, the fair value of fixed maturities not rated was $31 million (2021: $18 million). 80 In addition to managing credit risk exposure within our fixed maturities portfolio we also monitor the aggregation of country risk exposure on a group-wide basis.
Securities that are not rated are excluded from weighted average calculations. At December 31, 2023, the fair value of fixed maturities not rated was $17 million (2022: $31 million). 83 In addition to managing credit risk exposure within our fixed maturities portfolio we also monitor the aggregation of country risk exposure on a group-wide basis.
During 2022 and 2021, significant gross claims associated with certain credit and political risk contracts were paid in advance of recoveries being received from the corresponding security which resulted in negative case reserves of $(55) million (2021: $(128) million) and related negative reinsurance recoverable on unpaid losses and loss expenses of $(15) million (2021: $(56) million).
During 2023 and 2022, significant gross claims associated with certain credit and political risk contracts were paid in advance of recoveries being received from the corresponding security which resulted in negative case reserves of $(60) million (2022: $(55) million) and related negative reinsurance recoverable on unpaid losses and loss expenses of $(29) million (2022: $(15) million).
We are encouraged by the pricing improvements we are seeing across most markets, which we expect will carry through 2023, and that rate will continue to keep pace with loss cost trends. Where prices deliver adequate profitability, we will look to grow within our risk and volatility guidelines.
We are encouraged by the pricing improvements we are seeing across most markets, which we expect will carry through 2024, and that rate will continue to keep pace with loss cost trends in the majority of our lines. Where prices continue to deliver adequate profitability, we will look to grow within our risk and volatility guidelines.
Our effective tax rate, which is calculated as income tax expense (benefit) divided by income (loss) before tax including interest in income (loss) of equity method investments, was 9.0%, 9.2%, and 9.3% in 2022, 2021, and 2020, respectively.
Our effective tax rate, which is calculated as income tax expense (benefit) divided by income (loss) before tax including interest in income (loss) of equity method investments, was 6.5%, 9.0%, and 9.2% in 2023, 2022, and 2021, respectively.
Net investment losses reported in 2022 mainly reflected net realized losses on the sale of corporate debt, U.S. government and Agency RMBS and net unrealized losses on equity securities. Net investment gains reported in 2021 mainly reflected net realized gains on the sale of corporate debt, non-U.S. government and CMBS and net unrealized gains on equity securities.
Net investment losses reported in 2023 mainly reflected net realized losses on the sale of corporate debt, U.S. government and Non-Agency CMBS, partially offset by net unrealized gains on equity securities. Net investment losses reported in 2022 mainly reflected net realized losses on the sale of corporate debt, U.S. government and Agency RMBS and net unrealized losses on equity securities.
For example, if assumed loss development pattern for insurance property business was three months shorter with no accompanying change in ELR assumption, loss reserves may decrease by approximately $51 million. Each of the impacts set forth in the tables is estimated individually, without consideration for any correlation among key assumptions or among reserve classes.
For example, if assumed loss development pattern for insurance property business was three months shorter with no accompanying change in ELR assumption, loss reserves may decrease by approximately $42 million. Each of the impacts detailed in the tables is estimated individually, without consideration for any correlation among key assumptions or among lines of business.
This amount consists of amounts related to case reserves and amounts related to IBNR. Refer to Item 8, Note 2 to the Consolidated Financial Statements 'Basis of Presentation and Significant Accounting Policies' for further details. • The second estimate is the amount of the reinsurance recoverable balance that we believe ultimately will not be collected from reinsurers.
Refer to Item 8, Note 2 to the Consolidated Financial Statements 'Basis of Presentation and Significant Accounting Policies' for further details. • The second estimate is the amount of the reinsurance recoverable balance that we believe ultimately will not be collected from reinsurers.
At December 31, 2022, fixed maturities together with short-term investments and cash and cash equivalents (i.e., total investments of $13.2 billion) had a weighted average credit rating of AA- (2021: AA-) and an average duration of 2.8 years (2021: 2.8 years).
At December 31, 2023, fixed maturities together with short-term investments and cash and cash equivalents (i.e., total investments of $14.3 billion) had a weighted average credit rating of AA- (2022: AA-) and an average duration of 2.7 years (2022: 2.8 years).
At December 31, 2022, net unrealized losses on non-U.S. government securities were $51 million (2021: net unrealized gains of $0.5 million) which included gross unrealized foreign exchange losses of $24 million (2021: $5 million), mainly related to U.K. government bonds. 81 Corporate Debt Corporate debt securities consist primarily of investment grade debt of a wide variety of corporate issuers and industries.
At December 31, 2023, net unrealized losses on non-U.S. government securities were $6 million (2022: $51 million) which included gross unrealized foreign exchange losses of $6 million (2022: $24 million), mainly related to U.K. government bonds. 84 Corporate Debt Corporate debt securities consist primarily of investment grade debt of a wide variety of corporate issuers and industries.
At December 31, 2022, our corporate debt portfolio, including non-investment grade securities, had a duration of 3.6 years (2021: 3.7 years).
At December 31, 2023, our corporate debt portfolio, including non-investment grade securities, had a duration of 3.4 years (2022: 3.6 years).
At December 31, 2022, agency RMBS had an average duration of 5.7 years (2021: 4.4 years). Non-agency RMBS mainly include investment grade bonds originated by non-agencies. At December 31, 2022, 94% (2021: 91 % ) of our non-agency RMBS were rated AA or better.
At December 31, 2023, agency RMBS had an average duration of 5.2 years (2022: 5.7 years). Non-agency RMBS mainly include investment grade bonds originated by non-agencies. At December 31, 2023, 98% (2022: 94 % ) of our non-agency RMBS were rated AA or better.
Combined Ratio The components of the combined ratio were as follows: Year ended December 31, 2022 % Point Change 2021 % Point Change 2020 Current accident year loss ratio, excluding catastrophe and weather-related losses 55.5 % 0.4 55.1 % (2.6) 57.7 % Catastrophe and weather-related losses ratio 7.8 % (1.7) 9.5 % (8.2) 17.7 % Current accident year loss ratio 63.3 % (1.3) 64.6 % (10.8) 75.4 % Prior year reserve development ratio (0.5 %) 0.2 (0.7 %) (0.4) (0.3 %) Net losses and loss expenses ratio 62.8 % (1.1) 63.9 % (11.2) 75.1 % Acquisition cost ratio 19.8 % 0.2 19.6 % (1.7) 21.3 % General and administrative expense ratio (1) 13.2 % (0.8) 14.0 % 0.8 13.2 % Combined ratio 95.8 % (1.7) 97.5 % (12.1) 109.6 % (1) The general and administration expense ratio included corporate expenses not allocated to underwriting segments of 2.5%, 2.7% and 2.3% for 2022, 2021 and 2020, respectively.
Combined Ratio The components of the combined ratio were as follows: Year ended December 31, 2023 % Point Change 2022 % Point Change 2021 Current accident year loss ratio, excluding catastrophe and weather-related losses 55.9 % 0.4 55.5 % 0.4 55.1 % Catastrophe and weather-related losses ratio 2.7 % (5.1) 7.8 % (1.7) 9.5 % Current accident year loss ratio 58.6 % (4.7) 63.3 % (1.3) 64.6 % Prior year reserve development ratio 8.1 % 8.6 (0.5 %) 0.2 (0.7 %) Net losses and loss expenses ratio 66.7 % 3.9 62.8 % (1.1) 63.9 % Acquisition cost ratio 19.7 % (0.1) 19.8 % 0.2 19.6 % General and administrative expense ratio (1) 13.5 % 0.3 13.2 % (0.8) 14.0 % Combined ratio 99.9 % 4.1 95.8 % (1.7) 97.5 % (1) The general and administration expense ratio included corporate expenses not allocated to underwriting segments of 2.6%, 2.5% and 2.7% for 2023, 2022 and 2021, respectively.
At December 31, 2022, the companies had admitted assets of approximately $3 billion which provides borrowing capacity of up to approximately $750 million.
At December 31, 2023, the companies had admitted assets of approximately $3 billion which provides borrowing capacity of up to approximately $759 million.
During 2022, AXIS Capital received $225 million (2021: $300 million) of distributions from its subsidiaries. AXIS Capital’s primary uses of funds are dividend payments to common and preferred shareholders, interest and principal payments on debt, capital investments in subsidiaries, and payment of corporate operating expenses.
During 2023, AXIS Capital received $375 million (2022: $225 million) of distributions from its subsidiaries. AXIS Capital’s primary uses of funds are di vidend payments to common and preferred shareholders, interest and principal payments on debt, capital investments in subsidiaries, and payment of corporate operating expenses.
At December 31, 2022, non-agency RMBS had an average duration of 4.6 years (2021: 2.1 years) and weighted average life of 6.7 years (2021: 4.8 years). Commercial MBS CMBS mainly include investment grade bonds originated by non-agencies. At December 31, 2022, 99% (2021: 99%) of our CMBS were rated AA or better.
At December 31, 2023, non-agency RMBS had an average duration of 4.0 years (2022: 4.6 years) and weighted average life of 5.6 years (2022: 6.7 years). Commercial MBS CMBS mainly include investment grade bonds originated by non-agencies. At December 31, 2023, 98% (2022: 99%) of our CMBS were rated AA or better.
Refer to Item 8, Note 8 to the Consolidated Financial Statements 'Reserve for Losses and Loss Expenses – Reserving Methodology – Actuarial Analysis' for a description of the reserve estimation methods, Expected Loss Ratio Method ("ELR Method"), Loss Development Method (also referred to as the "Chain Ladder Method" or "Link Ratio Method") and Bornhuetter-Ferguson Method ("BF Method") which are commonly employed by our actuaries together with a discussion of their strengths and weaknesses. 93 Refer to Item 8, Note 8 to the Consolidated Financial Statements 'Reserve for Losses and Loss Expenses – Reserving Methodology – Key Actuarial Assumptions', which notes that the most significant assumptions used in our quarterly loss reserving process are expected loss ratios ("ELRs) and loss development patterns and that the weight given to our experience differs for each of the three claim tail classes (refer to 'Claim Tail Analysis' below for further details).
Refer to Item 8, Note 8 to the Consolidated Financial Statements 'Reserve for Losses and Loss Expenses – Reserving Methodology – Actuarial Analysis' for a description of the reserve estimation methods, Expected Loss Ratio Method ("ELR Method"), Loss Development Method (also referred to as the "Chain Ladder Method" or "Link Ratio Method") and Bornhuetter-Ferguson Method ("BF Method") which are commonly employed by our actuaries together with a discussion of their strengths and weaknesses. 96 Refer to Item 8, Note 8 to the Consolidated Financial Statements 'Reserve for Losses and Loss Expenses – Reserving Methodology – Key Actuarial Assumptions', which notes that the most significant assumptions used in our quarterly loss reserving process are expected loss ratios ("ELRs) and loss development patterns.
Factors that contribute additional uncertainty to estimates for long-tail business include, but are not limited to: • potential volatility of actuarial estimates, given the number of years of development it takes to produce a significant incurred loss as a percentage of ultimate losses; • inherent uncertainties about loss trends, claims inflation (e.g., medical, judicial, social) and general economic conditions; and • the possibility of future litigation, legislative or judicial change that may impact future loss experience relative to prior industry loss experience relied on in reserve estimation.
We expect the majority of development for an accident year or underwriting year to be recognized in the subsequent one to three years. 97 Factors that contribute additional uncertainty to estimates for longer tail business include, but are not limited to: • potential volatility of actuarial estimates, given the number of years of development it takes to produce a significant incurred loss as a percentage of ultimate losses; • inherent uncertainties about loss trends, claims inflation (e.g., medical, judicial, social) and general economic conditions; and • the possibility of future litigation, legislative or judicial change that may impact future loss experience relative to prior industry loss experience relied on in reserve estimation.
The decrease was primarily attributable to lower returns from hedge, direct lending and private equity funds and other privately held investments. 70 Net Investment Gains (Losses) Fixed maturities classified as available for sale are reported at fair value. Realized gains (losses) on fixed maturities are reported in net investment gains (losses) when these securities are sold or impaired.
The decrease was primarily attributable to lower returns from real estate funds and other privately held investments. 72 Net Investment Gains (Losses) Fixed maturities classified as available for sale are reported at fair value. Realized gains (losses) on fixed maturities are reported in net investment gains (losses) when these securities are sold or impaired.
Reserving for Catastrophic Events Refer to Item 8, Note 8 to the Consolidated Financial Statements 'Reserve for Losses and Loss Expenses – Reserving Methodology – Reserving for Catastrophic Events' for further details.
Refer to Item 8, Note 8 to the Consolidated Financial Statements 'Reserve for Losses and Loss Expenses – Reserve for Losses and Loss Expenses – Prior Year Reserve Development' for further details. 98 Reserving for Catastrophic Events Refer to Item 8, Note 8 to the Consolidated Financial Statements 'Reserve for Losses and Loss Expenses – Reserving Methodology – Reserving for Catastrophic Events' for further details.
During 2022, catastrophe and weather-related losses, net of reinstatement premiums, were $196 million , or 9.7 points, including natural catastrophe and weather-related losses of $160 million, or 8.0 points, primarily attributable to Hurricane Ian, June European Convective Storms, Eastern Australia floods, South Africa floods, Winter Storm Elliot, and other weather-related events.
During 2023, catastrophe and weather-related losses, net of reinsurance, were $27 million , or 1.6 points, primarily attributable to Cyclone Gabrielle and other weather-related events. 70 Comparatively, in 2022, catastrophe and weather-related losses, net of reinstatement premiums, were $196 million , or 9.7 points, including natural catastrophe and weather-related losses of $160 million, or 8.0 points, primarily attributable to Hurricane Ian, June European Convective Storms, Eastern Australia floods, South Africa floods, Winter Storm Elliot, and other weather-related events.
As a result, we believe that foreign exchange losses (gains) in our consolidated statements of operations in isolation are not a meaningful contributor to the performance of our business.
As a result, we believe that foreign exchange losses (gains) in our consolidated statements of operations in isolation are not a meaningful contributor to the performance of our business. Therefore, foreign exchange losses (gains) are excluded from operating income (loss).
Fixed Maturities 2022 versus 2021 : Net investment income in 2022 incr eased by $68 million or 26%, co mpared to 2021 due to an increase in yields. Other Investments Other investments include hedge funds, direct lending funds, private equity funds, real estate funds, other privately held investments and an indirect investment in CLO-Equities.
Fixed Maturities 2023 versus 2022 : Net investment income in 2023 incr eased by $185 million or 56%, co mpared to 2022 due to an increase in yields. Other Investments Other investments include multi-strategy funds, direct lending funds, private equity funds, real estate funds, other privately held investments and an indirect investment in CLO-Equities.
Impairment Losses The impairment losses (refer to ' Critical Accounting Estimates – Impairment losses' for further details) recognized in net income were as follows: 2022 versus 2021 : Impairment losses in 2022 were $13 million compared to impairment losses of $nil in 2021.
Impairment Losses The impairment losses (refer to ' Critical Accounting Estimates – Impairment losses' for further details) recognized in net income were as follows: 2023 versus 2022 : Impairment losses in 2023 and 2022 were $13 million .
We expect that, if necessary, approximately $12.3 billion of cash and invested assets at December 31, 2022 could be available in one to three business days under normal market conditions.
We expect that, if necessary, approximately $13.6 billion of cash and invested assets at December 31, 2023 could be available in one to three 90 business days under normal market conditions.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeForeign Currency Risk The following table presents a sensitivity analysis of total net foreign currency exposures: AUD NZD CAD EUR GBP JPY Other Total At December 31, 2022 Net managed assets (liabilities), excluding derivatives $ 11,331 $ 4,776 $ 302,679 $ (538,845) $ (411,773) $ (36,346) $ 44,183 $ (623,995) Foreign currency derivatives, net 7,160 — (312,269) 505,623 271,022 32,097 (74,438) 429,195 Net managed foreign currency exposure 18,491 4,776 (9,590) (33,222) (140,751) (4,249) (30,255) (194,800) Other net foreign currency exposure — — 102 (1,199) (924) — 995 (1,026) Total net foreign currency exposure $ 18,491 $ 4,776 $ (9,488) $ (34,421) $ (141,675) $ (4,249) $ (29,260) $ (195,826) Net foreign currency exposure as a percentage of total shareholders’ equity 0.4 % 0.1 % (0.2 %) (0.7 %) (3.1 %) (0.1 %) (0.6 %) (4.2 %) Pre-tax impact of net foreign currency exposure on shareholders’ equity given a hypothetical 10% rate movement (1) $ 1,849 $ 478 $ (949) $ (3,442) $ (14,168) $ (425) $ (2,926) $ (19,583) At December 31, 2021 Net managed assets (liabilities), excluding derivatives $ 34,315 $ 8,565 $ 270,300 $ (528,430) $ (333,144) $ (72,230) $ (14,221) $ (634,845) Foreign currency derivatives, net (6,549) (1,713) (260,890) 476,603 332,251 83,152 524 623,378 Net managed foreign currency exposure 27,766 6,852 9,410 (51,827) (893) 10,922 (13,697) (11,467) Other net foreign currency exposure 1 — 141 (699) (1,374) — 33,867 31,936 Total net foreign currency exposure $ 27,767 $ 6,852 $ 9,551 $ (52,526) $ (2,267) $ 10,922 $ 20,170 $ 20,469 Net foreign currency exposure as a percentage of total shareholders’ equity 0.5 % 0.1 % 0.2 % (1.0 %) — % 0.2 % 0.4 % 0.4 % Pre-tax impact of net foreign currency exposure on shareholders’ equity given a hypothetical 10% rate movement (1) $ 2,777 $ 685 $ 955 $ (5,253) $ (227) $ 1,092 $ 2,017 $ 2,047 (1) Assumes 10% appreciation in underlying currencies relative to the U.S. dollar.
Biggest changeForeign Currency Risk The following table presents a sensitivity analysis of total net foreign currency exposures: AUD CAD EUR GBP JPY Other Total At December 31, 2023 Net managed assets (liabilities), excluding derivatives $ 38,348 $ 430,256 $ (452,726) $ (145,992) $ (43,047) $ 56,012 $ (117,149) Foreign currency derivatives, net (23,240) (403,952) 401,195 127,122 24,317 (114,294) 11,148 Net managed foreign currency exposure 15,108 26,304 (51,531) (18,870) (18,730) (58,282) (106,001) Other net foreign currency exposure — 175 (555) (59) — — (439) Total net foreign currency exposure $ 15,108 $ 26,479 $ (52,086) $ (18,929) $ (18,730) $ (58,282) $ (106,440) Net foreign currency exposure as a percentage of total shareholders’ equity 0.3 % 0.5 % (1.0 %) (0.4 %) (0.4 %) (1.1 %) (2.0 %) Pre-tax impact of net foreign currency exposure on shareholders’ equity given a hypothetical 10% rate movement (1) $ 1,511 $ 2,648 $ (5,209) $ (1,893) $ (1,873) $ (5,828) $ (10,644) At December 31, 2022 Net managed assets (liabilities), excluding derivatives $ 11,331 $ 302,679 $ (538,845) $ (411,773) $ (36,346) $ 48,959 $ (623,995) Foreign currency derivatives, net 7,160 (312,269) 505,623 271,022 32,097 (74,438) 429,195 Net managed foreign currency exposure 18,491 (9,590) (33,222) (140,751) (4,249) (25,479) (194,800) Other net foreign currency exposure — 102 (1,199) (924) — 995 (1,026) Total net foreign currency exposure $ 18,491 $ (9,488) $ (34,421) $ (141,675) $ (4,249) $ (24,484) $ (195,826) Net foreign currency exposure as a percentage of total shareholders’ equity 0.4 % (0.2 %) (0.7 %) (3.1 %) (0.1 %) (0.5 %) (4.2 %) Pre-tax impact of net foreign currency exposure on shareholders’ equity given a hypothetical 10% rate movement (1) $ 1,849 $ (949) $ (3,442) $ (14,168) $ (425) $ (2,448) $ (19,583) (1) Assumes 10% appreciation in underlying currencies relative to the U.S. dollar.
For significant foreign currency exposures, defined as those where net asset/liability position exceeds the greater of 1% of total shareholders' equity or $46 million, the value of assets denominated in those currencies should fall within a range of 90 - 110% of liabilities denominated in the same currency.
For significant foreign currency exposures, defined as those where net asset/liability position exceeds the greater of 1% of total shareholders' equity or $50 million, the value of assets denominated in those currencies should fall within a range of 90 - 110% of liabilities denominated in the same currency.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Market risk is the risk that our financial instruments may be negatively impacted by movements in financial market prices or rates such as interest rates, credit spreads, equity securities' prices, and foreign currency exchange rates (refer to Item 1 'Risk and Capital Management' for further details).
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Market risk is the risk that our financial instruments, which include derivatives, may be negatively impacted by movements in financial market prices or rates such as interest rates, credit spreads, equity securities' prices, and foreign currency exchange rates (refer to Item 1 'Risk and Capital Management' for further details).
Sensitivity Analysis The following is a sensitivity analysis of our primary market risk exposures at December 31, 2022 and 2021. Our policies to address these risks in 2022 were not materially different from 2021.
Sensitivity Analysis The following is a sensitivity analysis of our primary market risk exposures at December 31, 2023 and 2022. Our policies to address these risks in 2023 were not materially different from 2022.
At December 31, 2022, 94% (2021: 97%) of fixed maturities are classified as available for sale, therefore changes in fair values caused by changes in interest rates and foreign currency exchange rates have an immediate impact on other comprehensive income (loss), total shareholders’ equity and book value per common share but do not have an immediate impact on net income (loss).
At December 31, 2023, 95% (2022: 94%) of fixed maturities are classified as available for sale, therefore changes in fair values caused by changes in interest rates and foreign currency exchange rates have an immediate impact on other comprehensive income (loss), total shareholders’ equity and book value per common share but do not have an immediate impact on net income (loss).
At December 31, 2022 and 2021, we also invested in alternative investments including hedge funds, direct lending funds, private equity funds, real estate funds, CLO-Equities and other privately held investments. These investments are also exposed to market risks, with the changes in fair values immediately reported in net income (loss).
At December 31, 2023 and 2022, we also invested in alternative investments including multi-strategy funds, direct lending funds, private equity funds, real estate funds, CLO-Equities and other privately held investments. These investments are also exposed to market risks, with the changes in fair values immediately reported in net income (loss).
The global equity portfolio is managed to a benchmark composite index, which consists of a blend of the S&P 500 and MSCI World indices. Changes in the underlying indices have a corresponding impact on the overall portfolio. At December 31, 2022, the fair value of equity securities was 107 $277 million (2021: $338 million).
The global equity portfolio is managed to a benchmark composite index, which consists of a blend of the S&P 500 and MSCI World indices. Changes in the underlying indices have a corresponding impact on the overall portfolio. At December 31, 2023, the fair value of equity securities was 109 $295 million (2022: $277 million).
At December 31, 2022, the impact of a 20% decline in the overall market prices of our equity exposures would be $55 million (2021: $68 million), on a pre-tax basis. Our investment in hedge funds has significant exposure to equity strategies with net long positions.
At December 31, 2023, the impact of a 20% decline in the overall market prices of our equity exposures would be $59 million (2022: $55 million), on a pre-tax basis. Our investment in multi-strategy funds has significant exposure to equity strategies with net long positions.
At December 31, 2022, the fair value of hedge funds was $33 million (2021: $59 million ). At December 31, 2022, the impact of an instantaneous 15% decline in the fair value of our investment in hedge funds would be $5 million (2021 : $9 million ), on a pre-tax basis.
At December 31, 2023, the fair value of multi-strategy funds was $25 million (2022: $33 million). At December 31, 2023, the impact of an instantaneous 15% decline in the fair value of our investment in multi-strategy funds woul d be $4 million (2022 : $5 million ), on a pre-tax basis.
In addition, aggregate foreign currency exposure is subject to the same tolerance range. We may use derivative instruments to maintain net managed foreign currency exposures within our risk tolerance levels. Other Net Foreign Currency Exposure During 2022, our emerging market debt securities portfolio which was included in other net foreign currency exposure, was liquidated.
In addition, aggregate foreign currency exposure is subject to the same tolerance range. We may use derivative instruments to maintain net managed foreign currency exposures within our risk tolerance levels.
The analysis is performed at the security level and aggregated to the asset category levels. 106 The following table presents the estimated pre-tax impact on the fair value of fixed maturities classified as available for sale due to an instantaneous increase in the U.S. yield curve of 100 basis points and an additional 100 basis point credit spread widening for corporate debt, non-agency residential MBS and commercial MBS, ABS and municipal bond securities: Fair value Potential adverse change in fair value Increase in interest rate by 100 basis points Widening of credit spreads by 100 basis points Total At December 31, 2022 U.S. government and agency $ 2,639,330 $ (78,870) $ — $ (78,870) Non-U.S. government 562,029 (15,428) — (15,428) Agency RMBS 1,202,785 (68,760) — (68,760) Securities exposed to credit spreads: Corporate debt 4,255,556 (149,860) (160,439) (310,299) CMBS 947,778 (23,016) (29,792) (52,808) Non-agency RMBS 133,534 (6,086) (5,779) (11,865) ABS 1,429,527 (9,673) (47,191) (56,864) Municipals 156,355 (6,814) (7,197) (14,011) $ 11,326,894 $ (358,507) $ (250,398) $ (608,905) At December 31, 2021 U.S. government and agency $ 2,682,448 $ (85,129) $ — $ (85,129) Non-U.S. government 795,178 (22,607) — (22,607) Agency RMBS 1,074,589 (47,406) — (47,406) Securities exposed to credit spreads: Corporate debt 4,495,312 (163,656) (172,830) (336,486) CMBS 1,248,191 (38,536) (49,568) (88,104) Non-agency RMBS 186,164 (3,927) (5,036) (8,963) ABS 1,622,480 (14,552) (62,633) (77,185) Municipals 208,838 (8,941) (9,593) (18,534) $ 12,313,200 $ (384,754) $ (299,660) $ (684,414) U.S. government agencies have a limited range of spread widening.
The analysis is performed at the security level and aggregated to the asset category levels. 108 The following table presents the estimated pre-tax impact on the fair value of fixed maturities classified as available for sale due to an instantaneous increase in the U.S. yield curve of 100 basis points and an additional 100 basis point credit spread widening for corporate debt, non-agency commercial MBS and residential MBS, ABS and municipal bond securities: Fair value Potential adverse change in fair value Increase in interest rate by 100 basis points Widening of credit spreads by 100 basis points Total At December 31, 2023 U.S. government and agency $ 3,007,528 $ (81,945) $ — $ (81,945) Non-U.S. government 723,959 (22,534) — (22,534) Agency RMBS 1,634,661 (84,719) — (84,719) Securities exposed to credit spreads: Corporate debt 4,474,172 (151,894) (158,759) (310,653) CMBS 839,696 (18,120) (21,917) (40,037) Non-agency RMBS 153,396 (6,158) (5,849) (12,007) ABS 1,242,971 (10,436) (36,132) (46,568) Municipals 158,359 (6,234) (6,336) (12,570) $ 12,234,742 $ (382,040) $ (228,993) $ (611,033) At December 31, 2022 U.S. government and agency $ 2,639,330 $ (78,870) $ — $ (78,870) Non-U.S. government 562,029 (15,428) — (15,428) Agency RMBS 1,202,785 (68,760) — (68,760) Securities exposed to credit spreads: Corporate debt 4,255,556 (149,860) (160,439) (310,299) CMBS 947,778 (23,016) (29,792) (52,808) Non-agency RMBS 133,534 (6,086) (5,779) (11,865) ABS 1,429,527 (9,673) (47,191) (56,864) Municipals 156,355 (6,814) (7,197) (14,011) $ 11,326,894 $ (358,507) $ (250,398) $ (608,905) U.S. government agencies have a limited range of spread widening.
In 2021, other net foreign currency exposure primarily consisted of our emerging market debt securities portfolio, which included those assets managed by specific investment managers who have the discretion to hold foreign currency exposures as part of their total return strategy. 108
Other Net Foreign Currency Exposure In 2023, other net foreign currency exposure primarily consisted of residual foreign currency exposure from externally managed portfolios where the external manager hedges the foreign currency exposure. During 2022, our emerging market debt securities portfolio which was included in other net foreign currency exposure, was liquidated. 110

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