filings.toolsItem 1A. RISK FACTORS
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Item 1A. RISK FACTORS
RISK FACTORS
In addition to the other information
provided in this report,
the following risk factors
should be considered when
evaluating
an
investment
in
our
securities.
If
the
circumstances
contemplated
by
the
individual
risk
factors
materialize, our business, financial condition
and results of operations could
be materially and adversely affected
and the trading price of our common shares could
decline significantly.
RISKS RELATING TO
OUR BUSINESS
Our results could be adversely affected by catastrophic
events.
We are exposed
to unpredictable catastrophic
events, including weather-related
and other natural
catastrophes,
as well as acts of
terrorism.
The frequency and/or
severity of catastrophic
events may be
impacted in the future
by
the
continued
effects
of
climate
change.
Climate
change
and
resulting
changes
in
global
temperatures,
weather patterns,
and sea
levels may
both increase
the frequency
and severity
of natural
catastrophes
and the
resulting
losses
in
the
future
and
impact
our
risk
modeling
assumptions.
We
cannot
predict
the
impact
that
changing
climate
conditions,
if
any,
may
have
on
our
results
of
operations
or
our
financial
condition.
Additionally,
we cannot
predict how
legal, regulatory
and/or social
responses to
concerns around
global climate
change
and
the
resulting
impact
on
various
sectors
of
the
economy
may
impact
our
business.
Any
material
reduction in our operating
results caused by
the occurrence of one or
more catastrophes
could inhibit our ability
to
pay
dividends
or
to
meet our
interest
and
principal
payment
obligations.
By
way
of illustration,
during
the
past five calendar years, pre
-tax catastrophe
losses, net of reinsurance, were as follows:
Calendar year:
Pre-tax net catastrophe losses
(Dollars in millions)
2022
$
1,055
2021
1,135
2020
2019
2018
1,800
Our losses from future catastrophic events
could exceed our projections.
We
use
projections
of
possible
losses
from
future
catastrophic
events
of
varying
types
and
magnitudes
as
a
strategic underwriting tool.
We use these loss projections
to estimate our potential
catastrophe losses
in certain
geographic areas
and decide
on the placement
of retrocessional
coverage or
other actions
to limit the
extent of
potential
losses
in
a
given
geographic
area.
These
loss
projections
are
approximations,
reliant
on
a
mix
of
quantitative
and
qualitative
processes,
and
actual
losses
may
exceed
the
projections
by
a
material
amount,
resulting in a material adverse effect
on our financial condition and results of operations.
If our loss
reserves are inadequate
to meet our
actual losses, our
net income
would be reduced
or we could
incur
a loss.
We
are
required
to
maintain
reserves
to
cover
our
estimated
ultimate
liability
of
losses
and
LAE
for
both
reported and
unreported claims
incurred.
These reserves
are only
estimates of
what we
believe the
settlement
and administration
of claims will
cost based
on facts and
circumstances known
to us.
In setting
reserves for
our
reinsurance
liabilities,
we
rely
on
claim
data
supplied
by
our
ceding
companies
and
brokers
and
we
employ
actuarial and statistical
projections.
The information received
from our ceding companies
is not always timely or
accurate,
which
can
contribute
to
inaccuracies
in
our
loss
projections.
Because
of
the
uncertainties
that
surround
our estimates
of loss
and LAE
reserves,
we
cannot
be certain
that
ultimate
losses
and LAE
payments
will not exceed our estimates.
If our reserves are deficient, we
would be required to increase
loss reserves in the
period in
which such
deficiencies are
identified which
would cause
a charge
to our
earnings and
a reduction
of
capital.
During the past five
calendar years,
the reserve re-estimation
process resulted in
an increase to our
pre-
tax net income in 2022, 2021 and 2019 and resulted
in a decrease to our pre-tax net income
in 2020 and 2018:
Calendar year:
Effect on pre-tax net income
(Dollars in millions)
2022
$
increase
2021
increase
2020
decrease
2019
increase
2018
decrease
The difficulty
in
estimating
our
reserves
is significantly
more challenging
as
it
relates
to
reserving
for
potential
A&E liabilities.
At year-end 2022,
1.3% of our gross
reserves were comprised
of A&E reserves.
A&E liabilities are
especially hard
to estimate
for many
reasons, including
the long
delays between
exposure and
manifestation
of
any
bodily
injury
or
property
damage,
difficulty
in
identifying
the
source
of
the
asbestos
or
environmental
contamination,
long
reporting
delays
and
difficulty
in
properly
allocating
liability
for
the
asbestos
or
environmental
damage.
Legal
tactics
and judicial
and legislative
developments
affecting
the scope
of insurers’
liability,
which
can
be
difficult
to
predict,
also
contribute
to
uncertainties
in
estimating
reserves
for
A&E
liabilities.
The
failure
to
accurately
assess
underwriting
risk
and
establish
adequate
premium
rates
could
reduce
our
net
income or result in a net loss.
Our success depends on our ability to accurately
assess the risks associated with the businesses
on which the risk
is retained.
If we fail to accurately
assess the risks we retain, we may
fail to establish adequate
premium rates to
cover our losses and LAE.
This could reduce our net income and even result
in a net loss.
In addition,
losses may
arise from
events or
exposures that
are not
anticipated when
the coverage
is priced.
In
addition to unanticipated events,
we also face the unanticipated expansion
of our exposures, particularly in long-
tail liability lines.
An example
of this is the
expansion over time
of the scope
of insurers’
legal liability within
the
mass tort arena, particularly for A&E exposures
discussed above.
Decreases in pricing for property and casualty reinsurance
and insurance could reduce our net income.
The worldwide
reinsurance
and insurance
businesses
are highly
competitive,
as well
as cyclical
by
product
and
market.
These
cycles,
as
well
as
other
factors
that
influence
aggregate
supply
and
demand
for
property
and
casualty insurance
and reinsurance products,
are outside of our
control.
The supply of (re)insurance
is driven by
prevailing
prices
and
levels
of
capacity
that
may
fluctuate
in
response
to
a
number
of
factors
including
large
catastrophic
losses and investment
returns being
realized in
the insurance
industry.
Demand for
(re)insurance is
influenced by
underwriting results
of insurers
and insureds,
including catastrophe
losses, and
prevailing general
economic
conditions.
If
any
of
these
factors
were
to
result
in
a
decline
in
the
demand
for
(re)insurance
or
an
overall increase in (re)insurance
capacity, our
net income could decrease.
If
rating
agencies
downgrade
the
ratings
of
our
insurance
subsidiaries,
future
prospects
for
growth
and
profitability could be significantly and adversely
affected.
Our active insurance
company subsidiaries
currently hold financial
strength ratings
assigned by third-party rating
agencies
which
assess
and
rate
the
claims
paying
ability
and
financial
strength
of
insurers
and
reinsurers.
Financial
strength
ratings
are
used
by
cedents,
agents
and
brokers
to
assess
the
financial
strength
and
credit
quality of reinsurers
and insurers.
A downgrade
or withdrawal
of any
of these ratings
could adversely
affect our
ability
to
market
our
reinsurance
and
insurance
products,
our
ability
to
compete
with
other
reinsurers
and
insurers,
and
could
have
a
material
and
adverse
effect
on
our
ability
to
write
new
business
that
in
turn
could
impact our profitability and operating
results.
In December 2021, S&P announced proposed
changes to its rating
methodologies.
The
proposed
changes
have
not
been
finalized,
so
the
impact,
if
any,
that
these
changes
may
have on our financial strength
ratings is unknown.
Consistent
with
market
practice,
much
of
our
treaty
reinsurance
business
allows
the
ceding
company
to
terminate
the
contract
or
seek
collateralization
of our
obligations
in
the
event
of a
rating
downgrade
below
a
certain
threshold.
The termination
provision
would
generally
be triggered
if a
rating
fell
below
A.M. Best’s
A-
rating
level.
To
a
lesser
extent,
Everest
Re
also
has
modest
exposure
to
reinsurance
contracts
that
contain
provisions
for
obligatory
funding
of
outstanding
liabilities
in
the
event
of
a
rating
agency
downgrade.
Those
provisions would also generally
be triggered if Everest Re’s
rating fell below A.M. Best’s
A- rating level.
The
failure
of
our
insureds,
intermediaries
and
reinsurers
to
satisfy
their
obligations
to
us
could
reduce
our
income.
In
accordance
with
industry
practice,
we
have
uncollateralized
receivables
from
insureds,
agents
and
brokers
and/or rely
on agents
and brokers
to process
our payments.
We may
not be
able to
collect amounts
due from
insureds, agents and brokers,
resulting in a reduction to net income.
We are
subject to
credit risk
of reinsurers
in connection
with retrocessional
arrangements
because the
transfer
of risk to a
reinsurer does not
relieve us of
our liability to the insured.
In addition, reinsurers
may be unwilling
to
pay
us
even
though
they
are
able
to
do
so.
The
failure
of
one
or
more
of
our
reinsurers
to
honor
their
obligations
to us
in a
timely fashion
would impact
our cash
flow and
reduce our
net income
and could
cause us
to incur a significant loss.
If
we
are
unable
or
choose
not
to
purchase
reinsurance
and
transfer
risk
to
the
reinsurance
markets,
our
net
income could be reduced or we could incur a net
loss in the event of unusual loss experience.
We
are
generally
less reliant
on the
purchase
of reinsurance
than many
of our
competitors,
in part
because of
our strategic
emphasis on
underwriting discipline
and management
of the
cycles inherent
in our
business.
We
try to
separate
our risk
taking process
from our
risk mitigation
process in
order to
avoid developing
too great
a
reliance on
reinsurance.
With the
expansion
of the
capital
markets
into insurance
linked
financial instruments,
we
increased
our
use
of
capital
market
products
for
catastrophe
reinsurance.
In
addition,
we
have
increased
some of
our quota
share contracts
with larger
retrocessions.
The percentage
of business
that we
reinsure may
vary
considerably
from
year
to
year,
depending
on
our
view
of
the
relationship
between
cost
and
expected
benefit for the contract period.
2022
2021
2020
2019
2018
Percentage of ceded written premiums to gross
written premiums
11.5%
12.3%
13.0%
14.3%
12.5%
Our industry is highly competitive and we may not be able
to compete as successfully in the future.
Our industry
is highly competitive
and subject
to pricing cycles
that can
be pronounced.
We compete
globally in
the
United
States,
Bermuda
and
international
reinsurance
and
insurance
markets
with
numerous
competitors.
Our
competitors
include
independent
reinsurance
and
insurance
companies,
subsidiaries
or
affiliates
of
established
worldwide
insurance
companies,
reinsurance
departments
of
certain
insurance
companies
and
domestic and international underwriting operations,
including underwriting syndicates at
Lloyd’s
of London.
According to
S&P,
Everest
ranks among
the top
ten global
property &
casualty reinsurance
groups,
where more
than two-thirds
of the
market share
is concentrated.
The worldwide
net premium
written by
the Top
40 global
reinsurance groups
for both life and
non-life business was
estimated to be
$292 billion in 2022 according
to data
compiled by
S&P.
In addition to
competitors the
entry of alternative
capital market
products and
new company
formations provide additional sources
of reinsurance and insurance capacity.
We are dependent on our key
personnel.
Our success
has been,
and will
continue to
be, dependent
on our
ability to
retain
the services
of our
Chairman,
Joseph
V.
Taranto
(age
and
existing
key
executive
officers
and
to
attract
and
retain
additional
qualified
personnel
in the
future.
The loss
of the
services of
any
key
executive
officer or
the inability
to hire
and retain
other highly
qualified personnel
in the
future could
adversely
affect
our ability
to conduct
business.
Generally,
we
consider
key
executive
officers
to
be
those
individuals
who
have
the
greatest
influence
in
setting
overall
policy
and
controlling
operations:
President
and
Chief
Executive
Officer,
Juan
C.
Andrade
(age
57);
Executive
Vice
President
and
Chief
Financial
Officer,
Mark
Kociancic
(age
53),
Executive
Vice
President,
Group,
Chief
Operating
Officer and
Head of
Reinsurance
Division,
Jim Williamson
(age 49),
Executive
Vice President,
General
Counsel,
Chief
Compliance
Officer
and
Secretary,
Sanjoy
Mukherjee
(age
and
Executive
Vice
President,
President
and
Chief
Executive
Officer
of
the
Everest
Insurance
®
Division,
Mike
Karmilowicz
(age
54).
We
have
employment contracts
with all
of our
key
officers,
which contain
automatic renewal
provisions
that provide
for
the contracts
to continue
indefinitely unless
sooner terminated
in accordance
with the contract
or as
otherwise
may be agreed.
Special
considerations
apply
to
our
Bermuda
operations.
Under
Bermuda
law,
non-Bermudians,
other
than
spouses of Bermudians
and individuals holding
permanent or working
resident certificates,
are not
permitted to
engage in any gainful occupation
in Bermuda without a work permit issued by the Bermuda
government.
A work
permit
is
only
granted
or
extended
if
the
employer
can
show
that,
after
a
proper
public
advertisement,
no
Bermudian, spouse
of a Bermudian
or individual holding
a permanent or
working resident
certificate is
available
who meets the minimum standards
reasonably required for
the position.
The Bermuda government places
a six-
year term
limit on individuals
with work
permits, subject
to specified
exemptions
for persons
deemed to be
key
employees
of
businesses
with
a
significant
physical
presence
in
Bermuda.
Currently,
all
our
Bermuda-based
professional
employees who
require work
permits have
been granted
permits by the
Bermuda government
that
expire at various times between
February 2024 and October 2027.
Our
investment
values
and
investment
income
could
decline
because
they
are
exposed
to
interest
rate,
credit,
and market risks.
A significant
portion of
our investment
portfolio consists
of fixed
income securities
and smaller
portions consist
of
equity
securities
and
other
investments.
The
fair
value
of
our
invested
assets
and
associated
investment
income
fluctuate
depending
on
general
economic
and
market
conditions.
For
example,
the
fair
value
of
our
predominant
fixed
income
portfolio
generally
increases
or decreases
inversely
to
fluctuations
in interest
rates.
The fair
value of
our fixed
income securities
could also
decrease as
a result
of a
downturn in
the business
cycle
that causes
the credit quality
of such securities
to deteriorate.
The net investment
income that
we realize
from
future investments in fixed
income securities will generally increase
or decrease with interest
rates.
Interest
rate
fluctuations
also
can
cause
net
investment
income
from
fixed
income
investments
that
carry
prepayment
risk,
such
as
mortgage-backed
and
other
asset-backed
securities,
to
differ
from
the
income
anticipated
from
those
securities
at
the
time
of
purchase.
In
addition,
if
issuers
of
individual
investments
are
unable to meet their obligations, investment
income will be reduced and realized capital
losses may arise.
The majority
of our
fixed income
securities are
classified as
available for
sale and
temporary
changes in
the fair
value
of these
investments
are reflected
as changes
to
our shareholders’
equity.
Our actively
managed
equity
security
portfolios
are
fair
valued
and
any
changes
in
fair
value
are
reflected
as
net
realized
capital
gains
or
losses.
As a result, a decline in the value of our securities reduces
our capital or could cause us to incur a loss.
As a
part of
our ongoing
analysis of
our investment
portfolio, we
are required
to assess
current expected
credit
losses
for
all
held-to-maturity
securities
and
evaluate
expected
credit
losses
for
available-for-sale
securities
when
fair
value
is
below
amortized
cost,
which
considers
reasonable
and
supportable
forecasts
of
future
economic conditions in addition to information
about past events and current
conditions. This analysis requires
a
high degree of
judgment. Financial assets
with similar risk characteristics
and relevant
historical loss
information
are included
in the development
of an estimate
of expected
lifetime losses.
Declines in relevant
stock and
other
financial markets
and other
factors
impacting the
value of
our investments
could result
in an
adverse
effect
on
our net income and
other financial results
We have
invested
a portion of
our investment
portfolio in
equity securities.
The value
of these assets
fluctuates
with changes in the markets.
In times of economic weakness,
the fair value of
these assets may decline,
and may
negatively
impact
net
income.
We
also
invest
in
non-traditional
investments
which
have
different
risk
characteristics
than traditional
fixed income
and equity
securities. These
alternative
investments
are comprised
primarily
of
private
equity
limited
partnerships.
The
changes
in
value
and
investment
income/(loss)
for
these
partnerships may be more volatile
than over-the-counter securities.
Prolonged and
severe disruptions
in the overall
public and
private debt
and equity
markets, such
as occurred
in
early
2020
related
to
the
COVID-19
pandemic,
could
result
in
significant
realized
and
unrealized
losses
in
our
investment portfolio.
There could also
be disruption in individual
market sectors,
such as occurred in the
energy
sector in
recent years.
Such declines
in the
financial markets
could result
in significant
realized
and unrealized
losses
on investments
and could
have
a material
adverse
impact on
our results
of operations,
equity,
business
and insurer financial strength and
debt ratings.
We may experience
foreign currency exchange losses that
reduce our net income and capital levels.
Through
our
Bermuda
and
international
operations,
we
conduct
business
in
a
variety
of
foreign
(non-U.S.)
currencies,
principally
the
Euro,
the
British
pound,
the
Canadian
dollar,
and
the
Singapore
dollar.
Assets,
liabilities,
revenues
and
expenses
denominated
in
foreign
currencies
are
exposed
to
changes
in
currency
exchange
rates.
Our reporting
currency is
the U.S.
dollar,
and exchange
rate
fluctuations,
especially relative
to
the U.S. dollar,
may materially
impact our results and
financial position.
In 2022, we wrote
approximately
25.8%
of our
coverages
in non-U.S.
currencies;
as of
December
31,
2022,
we
maintained
approximately
19.3%
of our
investment portfolio in investments
denominated in non-U.S. currencies.
We are subject to cybersecurity risks
that could negatively impact our business operations.
We
are
dependent
upon
our
information
technology
platform,
including
our
processing
systems,
data
and
electronic transmissions
in our
business operations.
Security breaches
could expose
us to
the loss
or misuse
of
our
information,
litigation
and
potential
liability.
In
addition,
cyber
incidents
that
impact
the
availability,
reliability,
speed, accuracy or
other proper functioning
of these systems
could have a
significant negative
impact
on our
operations and
possibly our
results.
An incident
could also
result in
a violation
of applicable
privacy and
other laws, damage
our reputation,
cause a loss
of customers
or give rise to
monetary fines and
other penalties,
which could be
significant.
Management is not
aware of a
cybersecurity incident
that has had
a material impact
on our operations.
The NAIC
has
adopted
an
Insurance
Data
Security
Model
Law,
which,
when
adopted
by
the
states
will require
insurers,
insurance
producers
and
other
entities
required
to
be licensed
under
state
insurance
laws
to
comply
with certain requirements
under state
insurance laws, such
as developing and
maintaining a written
information
security program,
conducting risk assessments
and overseeing the
data
security practices of
third-party vendors.
In
addition,
certain
state
insurance
regulators
are
developing
or
have
developed
regulations
that
may
impose
regulatory requirements
relating to cybersecurity
on insurance and
reinsurance companies
(potentially including
insurance
and
reinsurance
companies
that
are
not
domiciled,
but
are
licensed,
in
the
relevant
state).
For
example, the New York
State Department of
Financial Services has a
regulation pertaining to
cybersecurity for all
banking and
insurance
entities under
its jurisdiction,
which was
effective
as of
March 1,
2017, which
applies to
us.
We
cannot
predict
the
impact these
laws
and regulations
will have
on our
business,
financial
condition
or
results
of operations,
but our
insurance
and reinsurance
companies
could
incur additional
costs
resulting
from
compliance with such laws and regulations.
RISKS RELATING TO
REGULATION
Insurance
laws
and
regulations
restrict
our
ability
to
operate
and
any
failure
to
comply
with
those
laws
and
regulations could have a material adverse effect on
our business.
We are
subject to
extensive
and increasing
regulation under
U.S., state
and foreign
insurance laws.
These laws
limit the
amount
of dividends
that
can
be paid
to
us
by
our operating
subsidiaries,
impose
restrictions
on
the
amount and type of
investments that
we can hold, prescribe
solvency,
accounting and internal
control standards
that
must
be
met
and
maintained
and
require
us
to
maintain
reserves.
These
laws
also
require
disclosure
of
material
inter-affiliate
transactions
and
require
prior
approval
of
“extraordinary”
transactions.
Such
“extraordinary”
transactions
include
declaring
dividends
from
operating
subsidiaries
that
exceed
statutory
thresholds.
These
laws
also
generally
require
approval
of
changes
of
control
of
insurance
companies.
The
application
of these
laws could
affect our
liquidity and
ability to
pay dividends,
interest
and other
payments on
securities, as
applicable, and
could restrict
our ability to
expand our
business operations
through acquisitions
of
new
insurance
subsidiaries.
We
may
not
have
or
maintain
all
required
licenses
and
approvals
or
fully
comply
with the wide variety of applicable laws and
regulations or the relevant authority’s
interpretation of the laws and
regulations.
If we do
not have
the requisite
licenses and
approvals
or do
not comply
with applicable
regulatory
requirements,
the
insurance
regulatory
authorities
could
preclude
or
temporarily
suspend
us
from
carrying
on
some
or
all
of
our
activities
or
monetarily
penalize
us.
These
types
of
actions
could
have
a
material
adverse
effect
on
our
business.
To
date,
no
material
fine, penalty
or
restriction
has been
imposed
on us
for
failure
to
comply with any insurance law or regulation.
As
a
result
of
the
previous
dislocation
of
the
financial
markets,
Congress
and
the
previous
Presidential
administration
in the United
States implemented
changes in
the way
the financial services
industry is
regulated.
Some of these changes are also impacting the insurance
industry.
For example, the U.S. Treasury
established the
Federal Insurance
Office with
the authority
to monitor all
aspects of the
insurance sector,
monitor the
extent to
which
traditionally
underserved
communities
and
consumers
have
access
to
affordable
non-health
insurance
products, to
represent the
United States
on prudential
aspects of international
insurance matters,
to assist
with
administration
of the
Terrorism
Risk
Insurance
Program
and
to
advise
on
important
national
and
international
insurance
matters.
In
addition,
several
European
regulatory
bodies
are
in
process
of
updating
existing
or
developing new
capital adequacy
directives for
insurers
and reinsurers.
The future
impact of
such initiatives
or
new
initiatives
from
the
current
Government
Administration,
if
any,
on
our
operation,
net
income
(loss)
or
financial condition cannot be determined at this
time.
Regulatory challenges in the United States
could adversely affect the ability of Bermuda Re to
conduct business.
Bermuda Re does
not intend to
be licensed or admitted
as an insurer or
reinsurer in any
U.S. jurisdiction.
Under
current
law,
Bermuda
Re
generally
will
be
permitted
to
reinsure
U.S.
risks
from
its
office
in
Bermuda
without
obtaining
those licenses.
However,
the
insurance
and reinsurance
regulatory
framework
is subject
to
periodic
legislative
review
and
revision.
In
the
past,
there
have
been
congressional
and
other
initiatives
in
the
United
States regarding
increased supervision
and regulation of
the insurance industry,
including proposals to
supervise
and
regulate
reinsurers
domiciled
outside
the
United
States.
If
Bermuda
Re
were
to
become
subject
to
any
insurance
laws
of
the
United
States
or
any
U.S.
state
at
any
time
in
the
future,
it
might
be
required
to
post
deposits or maintain
minimum surplus levels
and might be
prohibited from
engaging in lines
of business or
from
writing some types
of policies.
Complying with those
laws could
have a
material adverse
effect on
our ability to
conduct business in Bermuda and international
markets.
Bermuda Re may need to be licensed or admitted
in additional jurisdictions to develop its business.
As
Bermuda
Re’s
business
develops,
it
will
monitor
the
need
to
obtain
licenses
in
jurisdictions
other
than
Bermuda and the U.K., where
it has an authorized branch,
in order to comply with applicable
law or to be able to
engage in additional
insurance-related activities.
In addition, Bermuda Re
may be at
a competitive disadvantage
in
jurisdictions
where
it
is
not
licensed
or
does
not
enjoy
an
exemption
from
licensing
relative
to
competitors
that
are
so
licensed
or
exempt
from
licensing.
Bermuda
Re
may
not
be able
to
obtain
any
additional
licenses
that
it
determines
are
necessary
or
desirable.
Furthermore,
the
process
of
obtaining
those
licenses
is
often
costly and may take
a long time.
Bermuda Re’s
ability to write
reinsurance may be
severely limited if
it is unable to
arrange for security to
back its
reinsurance.
Many
jurisdictions
do not
permit insurance
companies
to take
credit
for reinsurance
obtained
from unlicensed
or
non-admitted
insurers
on
their
statutory
financial
statements
without
appropriate
security.
Bermuda
Re’s
reinsurance
clients
typically
require
it
to
post
a
letter
of
credit
or
enter
into
other
security
arrangements.
If
Bermuda
Re
is
unable
to
obtain
or
maintain
a
letter
of
credit
facility
on
commercially
acceptable
terms
or
is
unable
to
arrange
for
other
types
of
security,
its
ability
to
operate
its
business
may
be
severely
limited.
If
Bermuda
Re
defaults
on
any
letter
of
credit
that
it
obtains,
it
may
be
required
to
prematurely
liquidate
a
substantial portion of its investment
portfolio and other assets pledged as collateral.
RISKS RELATING TO
GROUP’S SECURITIES
Because of our holding company
structure, our ability to pay
dividends, interest and
principal is dependent on our
receipt of dividends, loan payments and other funds from our subsidiaries.
Group
and
Holdings
are
holding
companies,
each
of
whose
most
significant
asset
consists
of
the
stock
of
its
operating
subsidiaries.
As
a
result,
each
of
Group’s
and
Holdings’
ability
to
pay
dividends,
interest
or
other
payments on
its securities in
the future will
depend on the
earnings and cash
flows of the
operating subsidiaries
and the
ability of
the subsidiaries
to pay
dividends
or to
advance or
repay
funds to
it.
This ability
is subject
to
general economic, financial, competitive,
regulatory and other factors
beyond our control.
Payment of dividends
and advances
and repayments
from some
of the
operating
subsidiaries are
regulated
by U.S.,
state
and foreign
insurance
laws
and
regulatory
restrictions,
including
minimum
solvency
and
liquidity
thresholds.
Accordingly,
the operating
subsidiaries may
not be able to
pay dividends
or advance or
repay funds
to Group and
Holdings in
the future, which could prevent
us from paying dividends, interest
or other payments on our securities.
Provisions in
Group’s
bye-laws could
have an
anti-takeover
effect, which
could diminish
the value
of its
common
shares.
Group’s
bye-laws
contain
provisions
that
could
delay
or
prevent
a
change
of control
that
a
shareholder
might
consider favorable.
The effect
of these
provisions
could be
to prevent
a shareholder
from receiving
the benefit
from
any
premium
over
the
market
price
of
our
common
shares
offered
by
a
bidder
in
a
potential
takeover.
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
common
shares
if
they
are
viewed
as
discouraging
takeover attempts
in the future.
For example, Group’s
bye-laws contain the
following provisions that could have
an anti-takeover effect:
●
the total voting
power of any
shareholder owning more
than 9.9% of the
common shares will
be reduced to
9.9% of the total voting power of the common shares;
●
the board of
directors may
decline to register
any transfer
of common shares
if it has reason
to believe that
the transfer would result
in:
i.)
any person that
is not an investment
company beneficially
owning more than 5.0%
of any class
of the issued and outstanding share capital
of Group,
ii.)
any
person
holding
controlled
shares
in
excess
of
9.9%
of
any
class
of
the
issued
and
outstanding share capital
of Group, or
iii.)
any adverse
tax, regulatory
or legal consequences
to Group, any
of its subsidiaries
or any of
its
shareholders;
●
Group also has the
option to redeem or purchase
all or part of a shareholder’s
common shares to
the extent
the
board
of
directors
determines
it
is
necessary
or
advisable
to
avoid
or
cure
any
adverse
or
potential
adverse consequences if:
i.)
any person that is not an investment
company beneficially owns more than
5.0% of any class of
the issued and outstanding share capital
of Group,
ii.)
any person
holds controlled shares
in excess of
9.9% of any class
of the issued and
outstanding
share capital of Group, or
iii.)
share ownership
by any
person may
result in
adverse tax,
regulatory or
legal consequences
to
Group, any of its subsidiaries or any
other shareholder.
The
Board
of
Directors
has
indicated
that
it
will
apply
these
bye-law
provisions
in
such
manner
that
“passive
institutional investors”
will be treated similarly
to investment
companies.
For this purpose, “passive
institutional
investors”
include all
persons who
are eligible,
pursuant
to Rule
13d-1(b)(1) under
the U.S.
Securities Exchange
Act
of
1934,
(“the
Exchange
Act”)
to
file
a
short-form
statement
on
Schedule
13G,
other
than
an
insurance
company or any parent
holding company or control person
of an insurance company.
Applicable insurance laws may also have an anti-takeover
effect.
Before a
person can
acquire control
of a U.S.
insurance company,
prior written
approval must
be obtained
from
the
insurance
commissioner
of the
state
where
that
insurance
company
is
domiciled
or
deemed
commercially
domiciled.
Prior
to
granting
approval
of an
application
to acquire
control
of a
domestic
insurance
company,
a
state
insurance
commissioner
will consider
such
factors
as the
financial strength
of the
applicant,
the integrity
and competence
of the
applicant’s
board of
directors
and executive
officers,
the acquiror’s
plans for
the future
operations of the insurance
company and any
anti-competitive results
that may arise from
the consummation of
the
acquisition
of control.
Because any
person
who acquired
control
of Group
would
thereby
acquire
indirect
control
of
its
insurance
company
subsidiaries
in
the
U.S.,
the
insurance
change
of
control
laws
of
Delaware,
California
and
Georgia
would
apply
to
such
a
transaction.
This
could
have
the
effect
of
delaying
or
even
preventing such a change of control.
The ownership of common
shares of Group by Everest
Re Advisors, Ltd.,
a direct subsidiary of Group
may have an
impact on securing approval of shareholder proposals that Group’s
management supports.
As
of
December
31,
2022,
Everest
Re
Advisors,
Ltd.
(Bermuda)
owned
9,719,971
or
19.9%
of
the
outstanding
common shares of Group.
Under Group’s
bye-laws, the total voting
power of any shareholder owning more
than
9.9% of the
common shares
is reduced
to 9.9%
of the
total voting
power of
the common
shares.
Nevertheless,
Everest
Re Advisors,
Ltd., which
is controlled
by Group,
has the ability
to vote
9.9% of the
total voting
power of
Group’s common
shares.
Investors in Group may have more difficulty in protecting
their interests than investors in
a U.S. corporation.
The Companies Act 1981 of Bermuda (the “Companies Act”), differs
in material respects from
the laws applicable
to
U.S.
corporations
and
their
shareholders.
The
following
is
a
summary
of
material
differences
between
the
Companies
Act,
as modified
in
some
instances
by
provisions
of Group’s
bye-laws,
and Delaware
corporate
law
that
could
make
it
more
difficult
for
investors
in
Group
to
protect
their
interests
than
investors
in
a
U.S.
corporation.
Because the
following statements
are summaries,
they do
not address
all aspects
of Bermuda
law
that may be relevant to
Group and its shareholders.
Alternate Directors.
Group’s bye
-laws provide,
as permitted by
Bermuda law,
that each director
may appoint
an
alternate
director,
who
shall
have
the
power
to
attend
and
vote
at
any
meeting
of
the
board
of
directors
or
committee at
which that director
is not personally
present and to
sign written consents
in place of that
director.
Delaware
law
permits
a
director
to
appoint
another
director
as
an
alternate
to
attend
any
board
committee
meeting.
However,
Delaware
law does
not provide
for the
designation
of alternate
directors
with authority
to
attend or vote at a meeting of
the board of directors.
Committees of
the Board
of Directors.
Group’s
bye-laws provide,
as permitted
by Bermuda
law,
that the
board
of directors
may delegate
any of
its powers
to committees
that the
board appoints,
and those
committees may
consist
partly
or
entirely
of
non-directors.
Delaware
law
allows
the
board
of
directors
of
a
corporation
to
delegate many of its powers
to committees, but those committees
may consist only of directors.
Interested
Directors.
Bermuda law
and Group’s
bye-laws
provide
that if
a director
has a
personal
interest
in a
transaction to
which the company
is also a party
and if the director
discloses the nature
of this personal
interest
at the first
opportunity,
either at a
meeting of directors
or in writing
to the directors,
then the company
will not
be able to
declare the transaction
void solely
due to the
existence of
that personal
interest and
the director
will
not be liable
to the company
for any
profit realized
from the
transaction.
In addition,
after a director
has made
the
declaration
of
interest
referred
to
above,
he
or
she
is
allowed
to
be
counted
for
purposes
of determining
whether a quorum
is present and
to vote
on a transaction
in which he
or she has
an interest,
unless disqualified
from doing so by
the chairman of the relevant
board meeting.
Under Delaware law,
an interested
director could
be held liable
for a
transaction in
which that
director derived
an improper
personal benefit.
Additionally,
under
Delaware
law,
a corporation
may be
able to
declare a
transaction
with an
interested
director to
be void
unless
one of the following conditions is fulfilled:
●
the material
facts as
to the
interested
director’s
relationship
or interests
are disclosed
or are
known to
the
board
of
directors
and
the
board
in
good
faith
authorizes
the
transaction
by
the
affirmative
vote
of
a
majority of the disinterested directors;
●
the material facts are
disclosed or are known to
the shareholders entitled to
vote on the transaction
and the
transaction is specifically approved
in good faith by the holders of a majority of the voting
shares; or
●
the transaction is fair to the corporation
as of the time it is authorized, approved or
ratified.
Transactions
with Significant Shareholders.
As a Bermuda company,
Group may
enter into business
transactions
with
its
significant
shareholders,
including
asset
sales,
in
which
a
significant
shareholder
receives,
or
could
receive,
a
financial
benefit
that
is
greater
than
that
received,
or
to
be
received,
by
other
shareholders
with
prior approval
from Group’s
board
of directors
but without
obtaining
prior approval
from the
shareholders.
In
the case of an amalgamation, in which
two or more companies join together
and continue as a single company,
a
resolution of
shareholders approved
by a majority
of at least
75% of the
votes cast
is required in
addition to the
approval
of
the
board
of
directors,
except
in
the
case
of
an
amalgamation
with
and
between
wholly-owned
subsidiaries.
If
Group
was
a
Delaware
corporation,
any
business
combination
with
an
interested
shareholder
(which, for this purpose, would include mergers
and asset sales of greater than
10% of Group’s
assets that would
otherwise be considered
transactions in
the ordinary course
of business) within
a period of three
years from
the
time the
person
became
an
interested
shareholder
would
require
prior
approval
from shareholders
holding
at
least
2/3%
of
Group’s
outstanding
common
shares
not
owned
by
the
interested
shareholder,
unless
the
transaction
qualified
for
one
of
the
exemptions
in
the
relevant
Delaware
statute
or
Group
opted
out
of
the
statute.
For purposes of the
Delaware statute,
an “interested
shareholder” is generally defined
as a person
who
together
with that
person’s
affiliates
and associates
owns, or
within the
previous
three
years
did own,
15% or
more of a corporation’s
outstanding voting shares.
Takeovers.
Under Bermuda law,
if an acquiror
makes an
offer for
shares of
a company
and, within
four months
of the
offer,
the holders
of not less
than 90%
of the
shares that
are the
subject of
the offer
tender their
shares,
the acquiror may
give the nontendering shareholders
notice requiring them to
transfer their shares
on the terms
of the offer.
Within one month
of receiving the notice,
dissenting shareholders
may apply to the
court objecting
to
the
transfer.
The
burden
is
on
the
dissenting
shareholders
to
show
that
the
court
should
exercise
its
discretion
to
enjoin the
transfer.
The court
will be
unlikely
to
do this
unless there
is evidence
of fraud
or bad
faith
or
collusion
between
the
acquiror
and
the
tendering
shareholders
aimed
at
unfairly
forcing
out
minority
shareholders.
Under
another
provision
of
Bermuda
law,
the
holders
of
95%
of
the
shares
of
a
company
(the
“acquiring
shareholders”)
may
give notice
to the
remaining
shareholders
requiring them
to sell
their shares
on
the terms described
in the notice.
Within one month
of receiving the
notice, dissenting
shareholders may
apply
to
the
court
for
an
appraisal
of
their
shares.
Within
one
month
of
the
court’s
appraisal,
the
acquiring
shareholders are
entitled either to
acquire all shares
involved at
the price fixed
by the court
or cancel the notice
given
to
the
remaining
shareholders.
If
shares
were
acquired
under
the
notice
at
a
price
below
the
court’s
appraisal price, the acquiring shareholders
must either pay the difference
in price or cancel the notice and return
the
shares
thus
acquired
to
the
shareholder,
who
must
then
refund
the
purchase
price.
There
are
no
comparable provisions under Delaware
law.
Inspection of Corporate
Records.
Members of the
general public
have the right
to inspect the public
documents
of Group
available
at
the office
of the
Registrar
of Companies
and Group’s
registered
office, both
in Bermuda.
These
documents
include
the
memorandum
of
association,
which
describes
Group’s
permitted
purposes
and
powers,
any
amendments
to
the
memorandum
of
association
and
documents
relating
to
any
increase
or
reduction in Group’s
authorized share capital. Shareholders
of Group have the additional right
to inspect Group’s
bye-laws, minutes
of general meetings
of shareholders
and audited financial
statements that
must be presented
to the annual
general meeting
of shareholders.
The register
of shareholders
of Group
also is open
to inspection
by shareholders and to members
of the public without charge.
Group is required to maintain
its share register at
its registered
office in Bermuda.
Group also maintains
a branch register
in the offices
of its transfer
agent in the
U.S., which
is open
for public
inspection as
required under
the Companies
Act.
Group is
required to
keep at
its
registered
office
a
register
of
its
directors
and
officers
that
is
open
for
inspection
by
members
of
the
public
without charge.
However,
Bermuda law
does not
provide
a general
right for
shareholders
to inspect
or obtain
copies of
any other
corporate
records.
Under Delaware
law,
any shareholder
may inspect
or obtain
copies of
a
corporation’s
shareholder
list
and
its
other
books
and
records
for
any
purpose
reasonably
related
to
that
person’s
interest as a shareholder.
Shareholder’s
Suits.
The
rights
of
shareholders
under
Bermuda
law
are
not
as
extensive
as
the
rights
of
shareholders
under
legislation
or
judicial
precedent
in
many
U.S.
jurisdictions.
Class
actions
and
derivative
actions
are
generally
not available
to
shareholders
under the
laws
of Bermuda.
However,
the Bermuda
courts
ordinarily would be expected to
follow English case law precedent,
which would permit a shareholder to bring
an
action
in
the
name
of
Group
to
remedy
a
wrong
done
to
Group
where
the
act
complained
of is
alleged
to
be
beyond
the
corporate
power
of
Group
or
illegal
or
would
result
in
the
violation
of
Group’s
memorandum
of
association or bye-laws.
Furthermore, the court would
give consideration
to acts that are
alleged to constitute
a
fraud against the minority shareholders
or where an act requires the approval
of a greater percentage of Group’s
shareholders
than actually
approved
it.
The winning
party in
an action
of this
type generally
would
be able
to
recover
a
portion
of attorneys’
fees
incurred
in
connection
with
the
action.
Under
Delaware
law,
class
actions
and derivative
actions generally
are available
to stockholders
for breach
of fiduciary
duty,
corporate
waste
and
actions not taken
in accordance with applicable
law.
In these types of actions,
the court has discretion
to permit
the winning party to recover its attorneys’
fees.
Limitation of
Liability of Directors
and Officers.
Group’s
bye-laws provide
that Group and
its shareholders
waive
all
claims
or
rights
of
action
that
they
might
have,
individually
or
in
the
right
of
the
Company,
against
any
director or
officer for any
act or failure
to act in
the performance of
that director’s
or officer’s duties.
However,
this waiver
does not
apply
to
claims or
rights
of action
that
arise out
of fraud
or dishonesty.
This waiver
may
have
the
effect
of barring
claims
arising
under U.S.
federal
securities
laws.
Under
Delaware
law,
a
corporation
may
include
in
its
certificate
of
incorporation
provisions
limiting
the
personal
liability
of
its
directors
to
the
corporation
or
its
stockholders
for
monetary
damages
for
many
types
of
breach
of
fiduciary
duty.
However,
these provisions may
not limit liability for any
breach of the duty of loyalty,
acts or omissions not in good
faith or
that involve
intentional misconduct
or a knowing
violation of law,
the authorization
of unlawful dividends,
stock
repurchases
or
stock
redemptions,
or
any
transaction
from
which
a
director
derived
an
improper
personal
benefit.
Moreover,
Delaware
provisions
would
not
be likely
to
bar
claims
arising
under
U.S.
federal
securities
laws.
Indemnification
of Directors
and Officers.
Group’s
bye-laws
provide
that Group
shall indemnify
its directors
or
officers to
the full extent
permitted by
law against
all actions,
costs, charges,
liabilities, loss, damage
or expense
incurred
or
suffered
by
them
by
reason
of
any
act
done,
concurred
in
or
omitted
in
the
conduct
of
Group’s
business
or
in
the
discharge
of
their
duties.
Under
Bermuda
law,
this
indemnification
may
not
extend
to
any
matter
involving
fraud
or dishonesty
of which
a director
or officer
may be
guilty in
relation to
the company,
as
determined
in
a
final
judgment
or
decree
not
subject
to
appeal.
Under
Delaware
law,
a
corporation
may
indemnify a director
or officer who
becomes a party
to an action,
suit or proceeding
because of his
position as a
director or officer if (1) the director or officer
acted in good faith and in a manner he reasonably
believed to be in
or
not
opposed
to
the
best
interests
of the
corporation
and (2)
if the
action
or
proceeding
involves
a criminal
offense, the director or officer had
no reasonable cause to believe his or her conduct
was unlawful.
Enforcement of Civil
Liabilities.
Group is organized
under the laws of Bermuda.
Some of its directors
and officers
may reside outside
the U.S.
A substantial portion
of our assets are
or may be
located in jurisdictions
outside the
U.S.
As a result, a
person may not
be able to affect
service of process within
the U.S. on directors
and officers of
Group and
those experts
who reside outside
the U.S.
A person
also may
not be able
to recover
against them
or
Group
on
judgments
of
U.S.
courts
or
to
obtain
original
judgments
against
them or
Group
in
Bermuda
courts,
including judgments predicated upon
civil liability provisions of the U.S. federal
securities laws.
Dividends.
Bermuda law
does not
allow a
company
to declare
or pay
a dividend,
or make
a distribution
out of
contributed surplus,
if there are
reasonable grounds
for believing that
the company,
after the payment
is made,
would
be unable
to
pay
its liabilities
as they
become due,
or that
the realizable
value
of the
company’s
assets
would
be
less,
as
a
result
of
the
payment,
than
the
aggregate
of
its
liabilities
and
its
issued
share
capital
and
share premium accounts.
The share capital account represents
the aggregate par value
of issued shares, and the
share premium
account represents
the aggregate
amount paid
for issued shares
over and above
their par value.
Under Delaware law,
subject to any restrictions
contained in a company’s
certificate of incorporation,
a company
may pay
dividends out
of the
surplus or,
if there
is no
surplus, out
of net
profits for
the fiscal
year in
which the
dividend
is
declared
and/or
the
preceding
fiscal
year.
Surplus
is
the
amount
by
which
the
net
assets
of
a
corporation
exceed
its
stated
capital.
Delaware
law
also
provides
that
dividends
may
not
be
paid
out
of
net
profits at any
time when stated
capital is less
than the capital represented
by the outstanding
stock of all
classes
having a preference upon
the distribution of assets.
RISKS RELATING TO
TAXATION
If international tax laws change, our net income
may be impacted.
The
Organization
for
Economic
Co-operation
and
Development
(“OECD”)
and
its
member
countries
which
includes the
U.S., have
been focusing
for an
extended
period on
issues related
to the
taxation
of multinational
corporations,
such as the
comprehensive plan
set forth
by the OECD to
create an
agreed set
of international
tax
rules
for
preventing
base
erosion
and
profit
shifting.
Recently
they
agreed
upon
a
broad
framework
for
overhauling
the
taxation
of
multinational
corporations
that
includes,
among
other
things,
profit
reallocation
rules
and
a
15%
global
minimum
corporate
income
tax
rate.
These
proposals,
if
implemented,
could
have
an
impact
our
net
income
and
effective
tax
rate.
Group
and/or
various
Group
companies
may
be
subject
to
additional income taxes, which
would reduce our net income.
If U.S. tax law changes, our net income
may be impacted.
The
2017
TCJA
addressed
what
some
members
of
Congress
had
expressed
concern
about
for
several
years,
which was
U.S. corporations
moving their
place of
incorporation
to low-tax
jurisdictions to
obtain a
competitive
advantage
over
domestic
corporations
that
are
subject
to
the
U.S.
corporate
income
tax
rate
of
21%.
Specifically,
it addressed
their concern
over a
perceived
competitive
advantage
that foreign
-controlled
insurers
and
reinsurers
may
have
had
over
U.S.
controlled
insurers
and
reinsurers
resulting
from
the
purchase
of
reinsurance
by
U.S.
insurers
from
affiliates
operating
in
some
foreign
jurisdictions,
including
Bermuda.
Such
affiliated reinsurance
transactions
may subject
the U.S.
ceding companies
to a
Base Erosion
and Anti-abuse
Tax
(“BEAT”)
of 10% from
2019 to
2025 and 12.5%
thereafter which
may exceed
its regular
income tax.
In addition,
new legislation as
well as proposed
and final regulations
may further limit
the ability of the
Company to
execute
alternative
capital balancing
transactions
with unrelated
parties. This
would further
impact our
net income
and
effective tax rate.
On
August
16,
2022,
the
Inflation
Reduction
Act
of
2022
(“IRA”)
was
enacted.
We
have
evaluated
the
tax
provisions
of
the
IRA,
the
most
significant
of
which
are
the
corporate
alternative
minimum
tax
and
the
share
repurchase excise tax
and do not expect the legislation to have
a material impact on our results of operations.
As
the IRS issues additional guidance, we will evaluate
any impact to our consolidated
financial statements.
Group and/or Bermuda Re may be subject to
U.S. corporate income tax, which
would reduce our net income.
Bermuda Re.
The income
of Bermuda Re
is a significant
portion of our
worldwide income
from operations.
We
have
established
guidelines
for
the
conduct
of our
operations
that
are
designed
to
ensure
that
Bermuda
Re
is
not engaged in
the conduct of
a trade or
business in the
U.S.
Based on its
compliance with
those guidelines, we
believe that Bermuda Re
should not be required
to pay U.S. corporate
income tax, other
than withholding tax
on
U.S. source
dividend income.
However,
if the IRS
were to
successfully assert
that Bermuda Re
was engaged
in a
U.S. trade
or business,
Bermuda Re would
be required
to pay
U.S. corporate
income tax
on all of
its income and
possibly
the
U.S.
branch
profits
tax.
However,
if
the
IRS
were
to
successfully
assert
that
Bermuda
Re
was
engaged in
a U.S.
trade or
business, we believe
the U.S.-Bermuda
tax treaty
would preclude
the IRS
from taxing
Bermuda Re’s
income except
to the
extent
that its
income was
attributable
to a
U.S. permanent
establishment
maintained by that
subsidiary.
We do not believe that
Bermuda Re has a permanent
establishment in the U.S.
If
the IRS were
to successfully
assert that
Bermuda Re did
have income attributable
to a permanent
establishment
in the U.S., Bermuda Re would be subject to
U.S. tax only on that income.
This would reduce our net income.
Group.
We
conduct
our
operations
in
a
manner
designed
to
minimize
our
U.S.
tax
exposures.
Based
on
our
compliance with guidelines designed
to ensure that we
generate only
immaterial amounts, if
any,
of income that
is
subject
to
the
taxing
jurisdiction
of
the
U.S.,
we
believe
that
we
should
be
required
to
pay
only
immaterial
amounts,
if
any,
of
U.S.
corporate
income
tax,
other
than
withholding
tax
on
U.S.
source
dividend
income.
However,
if the IRS
successfully asserted
that we had
material amounts
of income that
was subject to
the taxing
jurisdiction of the
U.S., we would
be required to
pay U.S. corporate
income tax on
that income, and
possibly the
U.S. branch profits
tax.
The imposition of such tax
would reduce our net income.
If Bermuda Re became
subject
to U.S. income tax
on its income, or if we became
subject to U.S. income tax,
our income could also be subject
to
the
U.S.
branch
profits
tax.
In
that
event,
Group
and
Bermuda
Re
would
be
subject
to
taxation
at
a
higher
combined effective
rate
than if
they were
organized
as U.S.
corporations.
The combined
effect of
the 21%
U.S.
corporate income tax
rate and the
30% branch profits tax
rate is a net tax
rate of 44.7%.
The imposition of these
taxes would reduce our net
income.
Group and/or Bermuda Re may become
subject to Bermuda tax, which would reduce our net
income.
Group
and
Bermuda
Re
are
not
subject
to
income
or
profits
tax,
withholding
tax
or
capital
gains
taxes
in
Bermuda.
Both
companies
have
received
an
assurance
from
the
Bermuda
Minister
of
Finance
under
The
Exempted Undertakings
Tax
Protection Amendment
Act of 2011
to the effect
that if any
legislation is
enacted in
Bermuda
that
imposes
any
tax
computed
on
profits
or
income,
or
computed
on
any
capital
asset,
gain
or
appreciation,
or any
tax
in the
nature
of estate
duty or
inheritance tax,
then that
tax
will not
apply to
us or
to
any of
our operations
or our shares,
debentures or
other obligations
until March
31, 2035.
This assurance
does
not prevent the application
of any of those taxes
to persons ordinarily resident
in Bermuda and does not prevent
the
imposition
of
any
tax
payable
in
accordance
with
the
provisions
of
The
Land
Tax
Act
1967
of
Bermuda
or
otherwise payable in relation to
any land leased to Group or Bermuda Re.
Our net income will be reduced if U.S. excise
and withholding taxes are increased.
Reinsurance and
insurance premiums
paid to Bermuda
Re with respect
to risks
located in
the U.S. are
subject to
a U.S.
federal excise
tax of
one percent.
In addition,
Bermuda Re
is subject
to federal
excise tax
on reinsurance
and
insurance
premiums
with
respect
to
risks
located
in
the
U.S.
In
addition,
Bermuda
Re
is
subject
to
withholding
tax
on
dividend
income
from
U.S.
sources.
These
taxes
could
increase,
and
other
taxes
could
be
imposed in the future on Bermuda Re’s
business, which would reduce our net income.
If U.S. tax law changes, our U.S. shareholders net
income may be impacted.
U.S.
shareholders.
In
January
2022,
Treasury
and
the
IRS
released
proposed
regulations
regarding
the
determination
and
inclusion
of
related-person
insurance
income
(RPII).
The
regulations,
if
finalized
without
modifications,
could
cause
RPII
to
be
attributable
to
the
Company’s
U.S.
shareholders
prospectively
and
therefore
additional
income
tax.
The
imposition
of
such
tax
could
reduce
our
U.S.
shareholders
return
on
investment
in the
Company.
Our U.S.
shareholders
net income
and tax
liabilities might
be increased,
reducing
their net income.
ITEM 1B.
UNRESOLVED
STAFF COMMENTS
None.
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