v3.26.1
Insurance Contracts
 3 Months Ended
Mar. 31, 2026
Insurance [Abstract]  
Fair Value Measurements
5.    FAIR VALUE MEASUREMENTS
The Fair Value Measurement Topic of the ASC establishes a framework for measuring fair value and disclosures about fair value measurements.
Fair Value Hierarchy
The Fair Value Measurement Topic of the ASC specifies a fair value hierarchy based on whether the inputs to valuation techniques used to measure fair value are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect Company-based assumptions. The fair value hierarchy has three broad levels as follows:
lLevel 1Quoted prices for identical instruments in active markets. Assets and liabilities classified as Level 1 include US Treasury and other foreign government obligations traded in highly liquid and transparent markets, and money market funds.
lLevel 2Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Assets and liabilities classified as Level 2 generally include investments in fixed maturity securities and certain derivatives valued using only market observable data.
lLevel 3
Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. This hierarchy requires the use of observable market data when available. Financial instruments classified as Level 3 includes debt.
The Fair Value Measurement Topic of the ASC permits, as a practical expedient, the estimation of fair value of certain investments in funds using the net asset value per share of the investment or its equivalent (“NAV”). Investments in funds valued using NAV are not categorized as Level 1, 2 or 3 under the fair value hierarchy. The Investments — Equity Securities Topic of the ASC permits the measurement of certain equity securities without a readily determinable fair value at cost, less impairment, and adjusted to fair value when observable price changes in identical or similar investments from the same issuer occur (the "measurement alternative"). The fair values of investments measured under this measurement alternative are not included in the below disclosures of fair value of financial instruments.
The following table sets forth the carrying amount and fair value of Octave's financial assets and liabilities as of March 31, 2026 and December 31, 2025, including the level within the fair value hierarchy at which fair value measurements are categorized. As required by the Fair Value Measurement Topic of the ASC, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
March 31, 2026December 31, 2025
Carrying
Amount		Total Fair
Value		Fair Value Measurements Categorized as:Carrying
Amount		Total Fair
Value		Fair Value Measurements Categorized as:
Level 1Level 2Level 3Level 1Level 2Level 3
Financial assets:
Fixed maturity securities:
Municipal obligations$10,476 $10,476 $— $10,476 $— $11,590 $11,590 $— $11,590 $— 
Corporate obligations76,940 76,940 — 76,940 — 66,573 66,573 — 66,573 — 
U.S. government obligations39,042 39,042 39,042 — — 35,424 35,424 35,424 — — 
Residential mortgage-backed securities2,627 2,627 — 2,627 — 1,597 1,597 — 1,597 — 
Commercial mortgage-backed securities4,985 4,985 — 4,985 — 3,341 3,341 — 3,341 — 
Collateralized debt obligations1,630 1,630 — 1,630 — 1,975 1,975 — 1,975 — 
Other asset-backed securities1,392 1,392 — 1,392 — 1,795 1,795 — 1,795 — 
Short term investments92,295 92,295 92,295 — — 146,442 146,442 146,442 — — 
Other investments (1)
24,971 7,454 — — — 24,971 7,454 — — — 
Cash, cash equivalents and restricted cash93,537 93,537 93,537 — — 68,440 68,440 68,440 — — 
Other assets-loans— — — — — — — — — — 
Derivative assets:
FX forward contracts— — — — — — — — — — 
Total financial assets$347,895 $330,378 $224,874 $98,050 $— $362,148 $344,631 $250,306 $86,871 $— 
Financial liabilities:
Short-term debt, including accrued interest$— $— $— $— $— $— $— $— $— $— 
Long term debt, including accrued interest118,367 118,367 — — 118,367 118,901 121,343 — — 121,343 
Derivative liabilities:
FX forward contracts426 426 — 426 — 8 8 — 8 — 
Total financial liabilities$118,793 $118,793 $— $426 $118,367 $118,909 $121,351 $— $8 $121,343 
(1)Excluded from the fair value measurement categories in the table above are investment funds of $7,454 and $7,454 as of March 31, 2026 and December 31, 2025, respectively, which are measured using NAV as a practical expedient. Also excluded from the fair value amounts in the table above are equity securities with a carrying value of $17,517 and $17,517 as of March 31, 2026 and December 31, 2025, respectively, that do not have readily determinable fair values and have carrying amounts determined using the measurement alternative.
Determination of Fair Value
When available, Octave uses quoted active market prices specific to the financial instrument to determine fair value, and classifies such items within Level 1. The determination of fair value for financial instruments categorized in Level 2 or 3 involves judgment due to the complexity of factors contributing to the valuation. Third-party sources from which we obtain independent market quotes also use assumptions, judgments and estimates in determining financial instrument values and different third parties may use different methodologies or provide different values for financial instruments. In addition, the use of internal valuation models may require assumptions about hypothetical or inactive markets. As a result of these factors, the actual trade value of a financial instrument in the market, or exit value of a financial instrument position by Octave, may be significantly different from its recorded fair value.
Octave's financial instruments carried at fair value are mainly comprised of investments in fixed maturity securities, short-term investments, an investment in a limited partnership, and derivative instruments. Valuation of financial instruments is performed by Octave's finance group using methods approved by senior financial management with consultation from risk management and third-party portfolio managers as appropriate. Preliminary valuation results are discussed internally and with third-party portfolio managers as necessary quarterly to assess consistency with market transactions and trends as applicable. Market transactions such as trades or negotiated settlements of similar positions, if any, are reviewed to validate fair value model results. However, financial instruments valued using significant unobservable inputs have very little or no observable market activity. Methods and significant inputs and assumptions used to determine fair values across portfolios are reviewed quarterly by senior financial management. Other valuation control procedures specific to particular portfolios are described further below.
Fixed Maturity Securities:
The fair values of fixed maturity investment securities are based primarily on market prices received from independent pricing sources. Because many fixed maturity securities do not trade on a daily basis, pricing sources apply available market information through processes such as matrix pricing to calculate fair value. Such prices generally consider a variety of factors, including recent trades of the same and similar securities. In those cases, the items are classified within Level 2. For those fixed maturity investments where quotes were not available or cannot be reasonably corroborated, fair values are based on internal valuation models. Key inputs to the internal valuation models generally include maturity date, coupon and yield curves for asset-type and credit rating characteristics that closely match those characteristics of the specific investment securities being valued. Items valued using valuation models are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be significant inputs that are readily observable. Longer (shorter) expected maturities or higher (lower) yields used in the valuation model will, in isolation, result in decreases (increases) in fair value. Generally, lower credit ratings or longer expected maturities will be accompanied by higher yields used to value a security.
Octave performs various review and validation procedures to quoted and modeled prices for fixed maturity securities, including price variance analyses, missing and static price reviews, overall valuation analysis by portfolio managers and finance managers and reviews associated with our ongoing impairment analysis. Unusual prices identified through these procedures will be evaluated further against alternative third-party quotes (if available), internally modeled prices and/or other relevant data, and the pricing source values will be challenged as necessary. Price challenges generally result in the use of the pricing source’s quote as originally provided or as revised by the source following their internal diligence process. A price challenge may result in a determination by either the pricing source or Octave management that the pricing source cannot provide a reasonable value for a security or cannot adequately support a quote, in which case Octave would resort to using either other quotes or internal models. Results of price challenges are reviewed by portfolio managers and finance managers.
Other Investments:
Other investments includes an investment in a limited partnership, which holds pooled investment funds, that is carried under the equity method using NAV as a practical expedient as permitted under the Fair Value Measurement Topic of the ASC. Refer to Note 4. Investments for additional information about such investments in pooled funds that are reported at fair value using NAV as a practical expedient.
Derivative Instruments:
At March 31, 2026 and December 31, 2025, Octave has foreign exchange ("FX") forward contracts and holds warrants to purchase preferred stock of a development stage company. The fair value of FX forward contracts are determined using valuation models with observable market inputs. Fair value of the warrants are determined using a standard warrant valuation model with internally developed input assumptions.
Debt:
Debt consists of Secured Overnight Financing Rate ("SOFR")-indexed borrowing. The fair value of debt approximates its carrying value.
Liability for Future Policy Benefits and Unpaid Claims Disclosure
The following is a summary of loss and loss adjustment expense reserves, including certain components, for the Company’s major product lines by reporting segment at March 31, 2026.
March 31, 2026Net Loss and Loss Adjustment Expense Reserves
Reinsurance Recoverables on Unpaid Losses (1)
Loss and Loss Adjustment Reserves (1)
Commercial auto$29,446 $133,407 $162,853 
Excess liability18,764 109,617 128,381 
General liability12,750 49,641 62,391 
Workers compensation19,752 — 19,752 
Non-standard personal auto2,704 191 2,895 
Professional liability3,388 44,831 48,219 
Multi-peril / business owners (BOP)2,328 8,918 11,246 
Surety1,060 9,707 10,767 
Unallocated loss adjustment expense reserves5,546 9,969 15,515 
Other171 25,071 25,242 
Total$95,908 $391,352 $487,261 
(1)Other includes $21,273 related to legacy liabilities obtained from the acquisitions of Providence Washington Insurance Company, Greenwood Insurance Company, and Consolidated Specialty Insurance Company. All legacy liabilities remain obligations of affiliates of the sellers through reinsurance and contractual indemnities.