Company: FRFXF
Filing Date: 2025-03-26
Form Type: 424B3
Source: 0001104659-25-028272
Chunk: 66

Company: FAIRFAX FINANCIAL HOLDINGS LTD/ CAN
Filing Date: 2025-03-26
Form: 424B3
Chunk 66
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 do not currently anticipate that any regulator would
limit the amount of new business that our operating insurance subsidiaries may write given their current levels of statutory capital
and surplus.

In order to enhance the
regulation of insurer solvency, the National Association of Insurance Commissioners (“NAIC”) established risk based
capital (“RBC”) requirements for property and casualty insurance companies. These RBC requirements, which have been
adopted in all of the states in which our operating insurance subsidiaries are domiciled, are designed to assess capital adequacy and
raise the level of protection that statutory surplus provides for policyholder obligations. The NAIC RBC model law provides that, for
property and casualty insurers, the RBC formula will take into account: (i) underwriting risk; (ii) asset risk; (iii) credit
risk; and (iv) all other business risks and such other relevant risks as are set forth in the NAIC’s Property/Casualty RBC
Instructions. The RBC formula provides a mechanism for the calculation of an insurance company’s Authorized Control Level (“ACL”)
RBC amount by the application of RBC risk factors to individual items reported on an insurer’s statutory financial statements.
The NAIC continuously evaluates these factors to identify and address emerging risks. Changes to risk factors or to statutory accounting
can affect insurers by changing their ACL RBC.

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The NAIC RBC model law stipulates
four levels of regulatory action depending on how an insurer’s statutory surplus compares to its RBC. The initial level, the “Company
Action Level,” requires the insurance company to submit a plan of corrective action to the relevant insurance commissioner if its
surplus falls below 200% of the ACL amount (or below 300% of the ACL amount, when a “trend test” is triggered under
the NAIC’s Property/Casualty RBC Instructions). The next level, the “Regulatory Action Level,” requires the company
to submit a plan of corrective action and also allows the regulator to perform an examination of the company’s business and operations
and issue a corrective order if the surplus falls below 150% of the ACL amount (or other triggering events specified in the RBC
model law occur). The third level, the ACL, permits the regulator to place the company under regulatory control, including rehabilitation
or liquidation, if its surplus falls below 100% of that amount (or other triggering events specified in the R