Arch Capital Group (ACGL) risk factors, FY2024 10-K

Risks Relating to Our Industry, Business and Operations

1. 01We operate in a highly competitive environment, and we may not be able to compete successfully in our industry
2. 02The insurance and reinsurance industry is highly cyclical, and we may at times experience periods characterized by excess underwriting capacity and unfavorable premium rates
3. 03The effects of inflation, trade and tariff disputes and global recessionary and other economic conditions impact the insurance and reinsurance industry in ways which may negatively impact our business, financial condition and results of operations
4. 04Claims for natural and man-made catastrophic events could cause large losses and substantial volatility in our results of operations and could have a material adverse effect on our financial position and results of operations
5. 05The impact of climate change will affect our loss limitation methods, such as the purchase of third party reinsurance and catastrophe risk modeling and risk selection in ways which may adversely impact our business, financial condition and results of operations
6. 06Our insurance and reinsurance subsidiaries are subject to supervision and regulation. Changes to existing regulation and supervisory standards, or failure to comply with applicable requirements, could adversely affect our business and results of operation
7. 07We are subject to ongoing legal and policy actions around climate change which may result in additional requirements which could prompt us to shift our risk selection and business strategy in ways which may adversely impact our results of operations
8. 08The imposition of sanctions by the U.S., U.K. and EU on Russia and Russia-related businesses has impacted certain sectors in which we write business
9. 09Our customers and policyholders may also be impacted by regulatory, technological, market or other risks relating to climate change in ways which we cannot predict with certainty and adversely impact our results of operations
10. 10We are subject to changes in governmental, investor and societal responses to climate change and sustainability-related issues, which may result in scrutiny of our business, litigation or adverse impacts to our share price and our results of operations
11. 11We could face unanticipated losses from increased geopolitical tensions, hostilities, war, terrorism, cyber attacks, and general political instability, and these or other unanticipated losses could have a material adverse effect on our financial condition and results of operations
12. 12Underwriting risks and reserving for losses are based on probabilities and related modeling, which are subject to inherent uncertainties
13. 13The failure of any of the loss limitation methods we employ could have a material adverse effect on our financial condition or results of operations
14. 14We could be materially adversely affected to the extent that important third parties with whom we do business do not adequately or appropriately manage their risks, commit fraud or otherwise breach obligations owed to us
15. 15Emerging claim and coverage issues may adversely affect our business
16. 16Acquisitions, the addition of new lines of insurance or reinsurance business, expansion into new geographic regions and/or entering into joint ventures or partnerships expose us to risks
17. 17Our information technology systems and our pace of adoption of new technologies, such as generative AI, may not be adequate to meet the demands of our customers or impact negatively our ability to compete with our peers
18. 18Technology failures caused by intentional and unintentional human and non-human actions may cause material disruption in the availability of the information technology systems we use in our business
19. 19We could be materially impacted by a cyber attack, data breach, ransomware, phishing, social engineering or other cybersecurity incident resulting in loss of business data, personal data and other confidential or secret information, a disruption in our business operations, regulatory or other legal action, and fines
20. 20The sophistication of cybersecurity threats, AI-powered cyber attacks such as deep fakes and brute force attacks, continues to increase. We and/or our SaaS or other third-party providers are exposed to these risks and other cybersecurity risks which may arise in the future
21. 21Our ability to execute our business strategy successfully, continue to grow and innovate and offer our employees a dynamic and supportive workplace depends on the recruitment, retention and promotion of talented, agile, and resilient employees at all levels of our organization
22. 22Our success will depend on our ability to maintain and enhance effective operating procedures and internal controls and our ERM program
23. 23We are exposed to credit risk in certain of our business operations
24. 24Our business is subject to laws and regulations relating to economic trade sanctions and foreign bribery laws, the violation of which could adversely affect our operations

Risks Relating to Financial Markets and Investments

1. 25Disruption to the financial markets and weak economic conditions resulting from situations such as supply/demand imbalances, inflation and political unrest may adversely and materially impact our investments, financial condition and results of operation
2. 26Foreign currency exchange rate fluctuation may adversely affect our financial results
3. 27The determination of the amount of current expected CECL allowances taken on our investments is highly subjective and could materially impact our results of operations or financial position
4. 28Our reinsurance subsidiaries may be required to provide collateral to ceding companies, by applicable regulators, their contracts or other commercial considerations. Their ability to conduct business could be significantly and negatively affected if they are unable to do so

Risks Relating to Our Mortgage Operations

1. 29The ultimate performance of our mortgage insurance portfolios remains uncertain
2. 30If the volume of low down payment mortgage originations declines, or if other government housing policies, practices or regulations change, the amount of mortgage insurance we write in the U.S. or Australia could decline, which would reduce our mortgage insurance revenues
3. 31The private mortgage insurers’ principal government competitor is the Federal Housing Administration (“FHA”)
4. 32Changes to the role of the GSEs in the U.S. housing market or to GSE eligibility requirements for mortgage insurers or to the GSEs’ use of CRT could negatively impact our results of operations and financial condition or reduce our operating flexibility
5. 33The implementation of the Basel III Capital Accord and FHFA’s Enterprise Regulator Capital Framework may adversely affect the use of mortgage insurance and CRT opportunities

Risk Relating to Our Company and Our Shares

1. 34representing at least 65% of the total voting power of our shares entitled generally to vote at an election of directors
2. 35There are regulatory limitations on the ownership and transfer of our common shares
3. 36Arch Capital is a holding company and is dependent on dividends and other distributions from its operating subsidiaries
4. 37General market conditions and unpredictable factors could adversely affect market prices for our outstanding preferred shares
5. 38Dividends on our preferred shares are non-cumulative
6. 39Our preferred shares are equity and are subordinate to our existing and future indebtedness
7. 40The voting rights of holders of our preferred shares are limited

Risks Relating to Taxation

1. 41threshold is expected to be reduced to €10 billion following future review of the operation of Amount A. The review of when to reduce the revenue threshold begins beginning seven years after the effective date of Amount A