Skyward Specialty Insurance Group (SKWD) risk factors, FY2024 10-K

Other

1. 01Summary of Material Risk Factors

Risks Related to Our Business and Industry

1. 02Our financial condition and results of operations could be materially adversely affected if we do not accurately assess our underwriting risk
2. 03Competition for business in our industry is intense
3. 04Because our business depends on insurance retail agents, brokers, wholesalers and program administrators, we are exposed to certain risks arising out of our reliance on these distribution channels that could adversely affect our results
4. 05We may be unable to purchase third-party reinsurance in amounts we desire on commercially acceptable terms or on terms that adequately protect us, and this inability may materially adversely affect our business, financial condition and results of operations
5. 06Our losses and loss expense reserves may be inadequate to cover our actual losses, which could have a material adverse effect on our financial condition, results of operations and cash flows
6. 07Consequently, estimates of loss associated with specified claims can change as new information emerges, which could cause the reserves for the claim to become inadequate
7. 08A decline in our financial strength rating may adversely affect the amount of business we write
8. 09Unexpected changes in the interpretation of our coverage or provisions, including loss limitations and exclusions, in our policies could have a material adverse effect on our financial condition and results of operations
9. 10Our reinsurers may not reimburse us for claims on a timely basis, or at all, which may materially adversely affect our business, financial condition and results of operations
10. 11Our failure to accurately and timely pay claims could materially and adversely affect our business, financial condition, results of operations, and prospects
11. 12Severe weather conditions, including the effects of climate change, catastrophes, pandemic, as well as man-made event events may adversely affect our business, results of operations and financial condition
12. 13Because we provide our program administrators with specific quoting and binding authority, if any of them fail to comply with pre-established guidelines, our results of operations could be adversely affected
13. 14If actual renewals of our existing contracts or new business from repeat insureds do not meet expectations, our written premium in future years and our future results of operations could be materially adversely affected
14. 15Increased public attention to environmental, social and governance matters may expose us to negative public perception, cause reputational harm, impose additional costs on our business or impact our stock price
15. 16Changes in accounting practices and future pronouncements may materially affect our reported financial results

Risks Related to the Market and Economic Conditions

1. 17The insurance business is historically cyclical in nature, which may affect our financial performance and cause our operating results to vary from quarter to quarter and may not be indicative of future performance
2. 18new capital providers and general economic conditions. All of these factors fluctuate and may contribute to price declines generally in the insurance industry
3. 19Performance of our investment portfolio is subject to a variety of investment risks that may adversely affect our financial results
4. 20We also invest in marketable preferred and common equity securities and exchange traded funds. These securities are carried on the balance sheet at fair market value and are subject to potential losses and declines in market value
5. 21We could be forced to sell investments to meet our liquidity requirements

Risks Related to the Regulatory Environment

1. 22We are subject to extensive regulation, which may adversely affect our ability to achieve our business objectives. In addition, if we fail to comply with these regulations, we may be subject to penalties, including fines and suspensions, which may adversely affect our financial condition and results of operations
2. 23We may become subject to additional government or market regulation, which may have a material adverse impact on our business
3. 24Changes to the U.S. tax laws and implementation of new tax policies could have a significant negative impact on the overall economy and our business
4. 25Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited
5. 26Applicable insurance laws may make it difficult to effect a change of control

Risks Related to Our Liquidity and Access to Capital

1. 27We may require additional capital in the future, which may not be available or may only be available on unfavorable terms

Risks Related to Our Operations

1. 28We could be adversely affected by the loss of one or more key personnel or by an inability to attract and retain qualified personnel
2. 29Security breaches, loss of data, cyberattacks, and other information technology failures could disrupt our operations, damage our reputation, and adversely affect our business, operations, and financial results
3. 30We may not be able to manage our growth effectively
4. 31We have experienced rapid growth in recent years, and our recent growth rates may not be indicative of our future growth
5. 32The effects of litigation on our business are uncertain and could have an adverse effect on our business
6. 33Loss of key vendor relationships or failure of a vendor to protect our data, confidential and proprietary information could affect our operations
7. 34We may fail or be unable to protect our intellectual property rights for our proprietary technology platform and brand, or we may be sued by third parties for alleged infringement of their proprietary rights

Risks Related to Ownership of Our Common Stock

1. 35We have identified a material weakness in our internal control over information technology general controls (“ITGCs”). If we fail to remediate the material weakness, or if we fail to establish and maintain effective internal control over ITGCs, the market price of our common stock could be adversely affected
2. 36Our operating results and stock price may be volatile, or may decline regardless of our operating performance, and you could lose all or part of your investment
3. 37We may change our underwriting guidelines or our strategy without stockholder approval
4. 38Anti-takeover provisions in our organizational documents could delay a change in management and limit our share price
5. 39In addition, as a Delaware corporation, we are subject to Section 203 of the Delaware General Corporation Law. These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a period of time