Company: KG
Filing Date: 2025-08-15
Form Type: 10-Q
Source: 0002055116-25-000018
Chunk: 444

Company: Kestrel Group Ltd
Filing Date: 2025-08-15
Form: 10-Q
Item: Item 4
Chunk 444
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 licenses. This could have a material and adverse effect on Kestrel Group’s business, financial condition, results of operations and prospects.

 85

While it is expected that the fronting business will be ceded to a number of unaffiliated reinsurers, Maiden Reinsurance may be ceded a small percentage of the reinsurance, subject to prior approval from the Vermont Department of Financial Regulation ("Vermont DFR") of Kestrel Group’s ability to reinsure the business that it expects to underwrite. If the Vermont DFR fails to provide this approval, or places certain limitations on such approval, Kestrel Group may not be able to operate its fronting business efficiently, which could reduce Kestrel Group’s effectiveness in the marketplace. 

In addition, the Vermont DFR may place certain restrictions on Kestrel Group’s fronting business, such as requiring Maiden Reinsurance to no longer be licensed as a captive or affiliated reinsurer. Such limitations could further impact the combined company’s ability to operate its fronting business, which could have a material and adverse effect on Kestrel Group’s business, financial condition, results of operations and prospects.

Notwithstanding these state law restrictions on ceding insurers, the Nonadmitted and Reinsurance Reform Act (“NRRA”) contained in the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) provides that all laws of a ceding insurer’s nondomestic state (except those with respect to taxes and assessments on insurers or insurance income) are preempted to the extent that they otherwise apply the laws of the state to reinsurance agreements of nondomestic ceding insurers. The NRRA places the power to regulate reinsurer financial solvency primarily with the reinsurer’s domiciliary state and requires credit for reinsurance to be recognized for a nondomestic ceding company if it is allowed by the ceding company’s domiciliary state. A state insurance regulator might not view the NRRA as preempting a state regulator’s determination that an unauthorized reinsurer must obtain a license or that any statute prohibits the combined company from doing a fronting business. However, such a determination or a conflict between state law and the NRRA could cause regulatory uncertainty about its fronting business, which could have a material and adverse effect on its business, financial condition, results of operations and prospects.

State insurance regulation could materially adversely affect Kestrel Group’s business.

Some states have adopted changes to their insurance laws and regulations that permit insurers to obtain credit for reinsurance