Company: KG
Filing Date: 2025-08-15
Form Type: 10-Q
Source: 0002055116-25-000018
Chunk: 325

Company: Kestrel Group Ltd
Filing Date: 2025-08-15
Form: 10-Q
Item: Item 8
Chunk 325
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 and foreign insurers that want to access specific U.S. property and casualty insurance business, which are collectively referred to as “capacity providers,” and will generally reinsure on a quota share basis up to 100% of the risk under these policies with these carriers in exchange for ceding fees. Kestrel Group will write business initially through the AmTrust Insurance Companies, all subsidiaries of AmTrust through which Kestrel has been writing its business, and the combined company will have an option to acquire the AmTrust Insurance Companies from AmTrust.

Kestrel Group will reinsure a substantial portion of the underwriting and operating risks in connection with its fronting arrangements to its capacity providers. Kestrel Group will generally select either well capitalized, highly rated authorized capacity providers or will require the capacity providers to post collateral and/or obtain guarantees to secure the reinsured risks. However, if any of the capacity providers becomes insolvent or otherwise refuse to reimburse losses paid to these policyholders in a timely manner, the corresponding impact to the combined company’s ability to continue writing business through the AmTrust Insurance Companies could materially adversely affect Kestrel Group’s financial condition and results of operations.

While Kestrel Group generally will not hold net reserves for losses or loss adjustment expenses (“LAE”) that might arise as a result of claims made under the policies (unless it participates on a quota share basis to a limited extent in certain programs), it may hold collateral from capacity providers who may not be well capitalized, highly rated, or authorized to protect against any such capacity provider’s failure to pay claims. However, collateral may not be sufficient to cover the combined company’s liability for these claims, and Kestrel Group may not be able to cause the capacity providers to deliver additional collateral.

Although the AmTrust Insurance Companies will ultimately take the risk of insolvency or other failure to pay by a capacity provider, any adverse impact to the business, financial condition, results of operations and prospects of the AmTrust Insurance Companies may have an adverse impact on Kestrel Group’s financial condition and results of operations as Kestrel Group is reliant on the AmTrust Insurance Companies to write its business. For example, any risks or difficulties that result in a negative impact on the financial strength ratings, licenses or reputation of any of the AmTrust Insurance Companies may limit or restrict Kestrel Group’s ability to continue to write business on behalf of its capacity providers, which in turn may have a material and adverse impact on Kestrel Group’s ability to generate fee revenues.

If market conditions cause