Company: KG
Filing Date: 2025-11-05
Form Type: 10-Q
Source: 0001628280-25-049606
Chunk: 162

Company: Kestrel Group Ltd
Filing Date: 2025-11-05
Form: 10-Q
Item: Item 8
Chunk 162
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 received are in excess of the estimated undiscounted ultimate losses payable, a deferred gain liability is recorded for the excess, such that we do not record any gain or loss at the inception of these retroactive reinsurance contracts. The premium consideration that we charge the ceding companies under retroactive reinsurance contracts may be lower than the undiscounted estimated ultimate losses payable due to the time value of money. After receiving the premium consideration in full from cedents at the inception of the contract, the premiums received are invested over an extended period of time, thereby generating investment income. 

 14

KESTREL GROUP LTD NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)(in thousands of U.S. dollars, except share and per share data)

2. Significant Accounting Policies (continued)The Company expects to generate profits from these retroactive reinsurance contracts when taking into account the premium received and expected investment income, less contractual obligations and expenses.Deferred charge assets will be recorded in other assets (if and when applicable), and any deferred gain liabilities will be shown separately in the Consolidated Balance Sheets, and amortized over the estimated claim payment period of the related contract with the periodic amortization reflected in income as a component of net loss and LAE. The amortization of deferred charge assets and deferred gain liabilities will be adjusted at each reporting period to reflect new estimates of the amount and timing of remaining loss and LAE payments. Changes in the estimated amount and timing of payments of unpaid losses may have an effect on the unamortized deferred charge assets and deferred gain liabilities and the amount of periodic amortization.Leases — The Company's leases are all classified as operating leases and none of them have non-lease components.  For operating leases that have a lease term of more than twelve months, the Company recognized a lease liability (presented as part of accrued expenses and other liabilities) and a right-of-use asset (presented as part of other assets) in the Consolidated Balance Sheets at the present value of the remaining lease payments until expiration. As the lease contracts generally do not provide an implicit discount rate, the Company uses a weighted-average discount rate of 7.2%, representing its estimated secured incremental borrowing rate, in calculating the present value of the lease liability. The Company has made an accounting policy election not to include renewal, termination, or purchase options that are not reasonably certain of exercise when determining the term of the borrowing. The Company recognizes the related leasing expense on a straight-line basis