v3.26.1
Fair Value of Financial Instruments
 6 Months Ended
Jun. 30, 2026
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments Fair Value of Financial Instruments
(a) Fair Values of Financial Instruments
Fair Value Measurements — Accounting Standards Codification Topic 820, "Fair Value Measurements and Disclosures" ("ASC 820") defines fair value as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between open market participants at the measurement date. Additionally, ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy is broken down into three levels based on the reliability of inputs:
•Level 1 — Valuations based on unadjusted quoted market prices for identical assets or liabilities that we have the ability to access. Because valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. Examples of assets and liabilities utilizing Level 1 inputs include: U.S. Treasury bonds, U.S. Treasury bills; and publicly traded equity securities;
•Level 2 — Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in inactive markets, or valuations based on models where the significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severity, etc.) or can be corroborated by observable market data. Examples of assets and liabilities utilizing Level 2 inputs include: U.S. government-sponsored agency securities; non-U.S. government and supranational obligations; commercial mortgage-backed securities ("CMBS"); collateralized loan obligations ("CLO"); corporate and municipal bonds; and
•Level 3 — Valuations based on models where significant inputs are not observable. The unobservable inputs reflect the Company's own assumptions about assumptions that market participants would use developed on the basis of the best information available in the particular circumstances. Examples of assets and liabilities utilizing Level 3 inputs include: an investment in preference shares of a start-up insurance producer.
The availability of observable inputs can vary and is affected by a wide variety of factors, including, for example, the type of financial instrument, whether the financial instrument is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized in the Level 3 hierarchy.
The Company uses prices and inputs that are current as at the measurement date. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified between hierarchy levels.
For investments that have quoted market prices in active markets, the Company uses the quoted market prices as fair value and includes these in the Level 1 hierarchy. The Company receives the quoted market prices from a third party nationally recognized provider ("the Pricing Service"). When quoted market prices are unavailable, the Company utilizes the Pricing Service to determine an estimate of fair value. The fair value estimates are included in the Level 2 hierarchy. The Company will challenge any prices for its investments which are considered not to be representative of fair value.
If quoted market prices and an estimate from the Pricing Service are unavailable, the Company produces an estimate of fair value based on dealer quotations for recent activity in positions with the same or similar characteristics to that being valued. The Company determines whether the fair value estimate is in the Level 2 or Level 3 hierarchy depending on the level of observable inputs available when estimating the fair value. The Company bases its estimates of fair values for assets on the bid price as it represents what a third party market participant would be willing to pay in an orderly transaction.
ASC 825, "Disclosure About Fair Value of Financial Instruments", requires all entities to disclose the fair value of their financial instruments for assets and liabilities recognized and not recognized in the balance sheet, for which it is practicable to estimate fair value. The following describes the valuation techniques used by the Company to determine the fair value of financial instruments that are measured at fair value on a recurring basis held at June 30, 2026.
U.S. government and U.S. agency bonds: Bonds issued by the U.S. Treasury, the Federal Home Loan Bank, the Federal Home Loan Mortgage Corporation, Government National Mortgage Association, Federal National Mortgage Association and the Federal Farm Credit Banks Funding Corporation. The fair values of U.S. treasury bonds are based on quoted market prices in active markets, and are included in the Level 1 fair value hierarchy. We believe the market for U.S. treasury bonds is an actively traded market given the high level of daily trading volume. The fair values of U.S. agency bonds are determined using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for these securities are observable market inputs, the fair values of U.S. agency bonds are included in the Level 2 fair value hierarchy.
Non-U.S. government bonds: These securities are generally priced by independent pricing services. The Pricing Service may use current market trades for securities with similar quality, maturity and coupon. If no such trades are available, the Pricing Service typically uses analytical models which may incorporate spreads, interest rate data and market/sector news. As the significant inputs used to price non-U.S. government bonds are observable market inputs, the fair values of non-U.S. government bonds are included in the Level 2 fair value hierarchy.
5. Fair Value of Financial Instruments (continued)
Collateralized loan obligations ("CLO"): These asset backed securities are originated by a variety of financial institutions that on acquisition are rated BBB-/Baa3 or higher. These securities are priced by independent pricing services and brokers. The pricing provider applies dealer quotes and other available trade information, prepayment speeds, yield curves and credit spreads to the valuation. As the significant inputs used to price the CLO are observable market inputs, the fair values are included in the Level 2 fair value hierarchy.
Commercial mortgage-backed securities ("CMBS"): These asset backed securities are originated by a variety of financial institutions that on acquisition are rated BBB-/Baa3 or higher. These securities are priced by independent pricing services and brokers. The pricing provider applies dealer quotes and other available trade information, prepayment speeds, yield curves and credit spreads to the valuation. As the significant inputs used to price the CMBS are observable market inputs, the fair values are included in the Level 2 fair value hierarchy.
Corporate and municipal bonds: Bonds issued by corporations, U.S. state and municipality entities or agencies that on acquisition are rated BBB-/Baa3 or higher. These securities are generally priced by independent pricing services. The credit spreads are sourced from broker/dealers, trade prices and new issue market. Where pricing is unavailable from pricing services, custodian pricing or non-binding quotes are obtained from broker-dealers to estimate fair values. As significant inputs used to price corporate and municipal bonds are observable market inputs, fair values are included in the Level 2 fair value hierarchy.
Equity securities: Equity securities can include both publicly traded and privately held common and preferred stocks. The fair value of publicly traded common and preferred stocks is primarily priced by pricing services, reflecting the closing price quoted for the final trading day of the period. These investments are carried at fair value using observable market pricing data and are included in the Level 1 fair value hierarchy. Any unrealized gains or losses on the investment is recorded in net income in the reporting period in which it occurs.
Privately held common and preferred stocks are valued using significant inputs that are either observable using quoted prices for identical or similar assets in markets that are not active, or unobservable where there is little or no market activity. For those investments where significant observable inputs are used in valuation such as unadjusted third party pricing sources, they are classified as Level 2 in the fair value hierarchy. Where management's assumptions and internal valuation models may be used to determine the fair values, these investments are classified as Level 3 in the fair value hierarchy. For investments without a readily determinable fair value, the measurement alternative can be elected to report the qualifying investment at cost, less impairment if any, plus or minus observable price changes in orderly transactions for an identical or similar investment of the same issuer.
Other investments: Includes unquoted investments comprised of the following types of investments:
•Privately held equity investments: These are direct equity investments in common and preferred stock of privately held entities. The fair values are estimated using quarterly financial statements and/or recent private market transactions and thus are included under Level 3 of the fair value hierarchy due to unobservable market data used for valuation.
•Private credit funds: These are privately held equity investments in common stock of entities that lend money valued using the most recently available or quarterly net asset value ("NAV") statements as provided by the external fund manager or third-party administrator and therefore measured using the NAV as a practical expedient.
•Private equity funds: These are comprised of private equity funds, private equity co-investments with sponsoring entities and investments in real estate limited partnerships and joint ventures. The fair value is estimated based on the most recently available NAV as advised by the external fund manager or third-party administrator. The fair values are therefore measured using the NAV as a practical expedient.
•Investments in direct lending entities: These investments are carried at their fair market value with any changes in fair value reported in realized and unrealized gains (losses) during the period. These investments are included in Level 3 of the fair value hierarchy due to unobservable market data used for valuation.
•Due to a lag in the valuations of certain funds reported by the investment managers, the Company may record changes in valuation with up to a three-month lag. The Company regularly reviews and discusses fund performance with the investment managers or sponsors to corroborate the reasonableness of the reported NAV and to assess whether any events have occurred within the lag period that would affect the valuation of the investments.
•Equity method investments: The Company elected the fair value option for certain of its equity method investments, and these investments are reported at their fair values with any changes in fair value reported in realized and unrealized gains (losses) during the period. These are included in Level 3 of the fair value hierarchy due to unobservable market data used for valuation.
Contingent Receivables - The Company holds a contingent receivable related to a prior private equity investment in the insurance distribution industry. Pursuant to the terms of the asset purchase agreement, the Company will receive a series of distributions. The Company uses unobservable inputs to estimate the net present value of these potential distributions and the expected proceeds are classified as a receivable and reported in Other Assets on the Consolidated Balance Sheet. Under ASC 805, the earn out consideration for this receivable is adjusted to fair value at each reporting period with any changes in fair value reported immediately in income through foreign exchange and other gains (losses) on the condensed consolidated statement of operations.
5. Fair Value of Financial Instruments (continued)
Derivative Instruments: The Company has a reinsurance contract that is accounted for as a derivative. This reinsurance contract provides indemnification to an insured or cedant as a result of a change in a variable as opposed to an identifiable insurable event. The Company considers this contract to be part of its underwriting operations. This derivative was initially valued at cost which approximates fair value. In subsequent measurement periods, the fair value of this derivative was determined using internally developed discounted cash flow models using appropriate discount rates.
The selection of an appropriate discount rate is judgmental and is the most significant unobservable input used in the valuation of this derivative. The derivative liability on retroactive reinsurance is presented as part of accrued expenses and other liabilities. A significant increase (decrease) in this input in isolation may result in a significantly lower (higher) fair value measurement for the derivative contract. As the significant inputs used to price these derivatives are unobservable, the fair values of this contract is classified as Level 3 in the fair value hierarchy.
5. Fair Value of Financial Instruments (continued)
(b) Fair Value Hierarchy
The Company’s estimates of fair value for financial assets and financial liabilities are based on the framework established in ASC 820. The framework is based on the inputs used in valuation and gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuation methodology whenever available. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active trading markets and the lowest priority to unobservable inputs that reflect significant market assumptions. At June 30, 2026 and December 31, 2025, the Company classified its financial instruments measured at fair value on a recurring basis in the following valuation hierarchy:
June 30, 2026Quoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)Fair Value Based on NAV Practical ExpedientTotal Fair Value
Fixed maturities
U.S. treasury bills$35,026 $— $— $— $35,026 
U.S. agency bonds – mortgage-backed— 20,346 — — 20,346 
Non-U.S. government bonds— 52,827 — — 52,827 
Collateralized loan obligations— 27,518 — — 27,518 
Corporate bonds— 8,907 — — 8,907 
Equity securities— 4,838 6,910 — 11,748 
Contingent Receivable— — 11,923 — 11,923 
Other investments
— — 132,829 40,451 173,280 
Total investments$35,026 $114,436 $151,662 $40,451 $341,575 
As a percentage of total assets3.8%12.4%16.5%4.4%37.1%
Underwriting-related derivative liability$— $— $9,236 $— $9,236 
December 31, 2025Quoted Prices in Active Markets for Identical Assets (Level 1)Significant Other Observable Inputs (Level 2)Significant Unobservable Inputs (Level 3)Fair Value Based on NAV Practical ExpedientTotal Fair Value
Fixed maturities
U.S. treasury bills$43,673 $— $— $— $43,673 
U.S. agency bonds – mortgage-backed— 21,618 — — 21,618 
Non-U.S. government bonds— 30,295 — — 30,295 
Collateralized loan obligations— 62,624 — — 62,624 
Corporate bonds— 11,455 — — 11,455 
Equity securities— 4,838 6,910 — 11,748 
Contingent Receivable— — 9,955 — 9,955 
Other investments
— — 135,018 38,340 173,358 
Total investments$43,673 $130,830 $151,883 $38,340 $364,726 
As a percentage of total assets
4.3%13.0%15.0%3.8%36.1%
Underwriting-related derivative liability$— $— $3,984 $— $3,984 
The Company utilizes the Pricing Service to assist in determining the fair value of its investments; however, management is ultimately responsible for all fair values presented in the Company’s consolidated financial statements. This includes responsibility for monitoring the fair value process, ensuring objective and reliable valuation practices, and pricing of assets and liabilities and use of pricing sources. The Company analyzes and reviews the information and prices received from the Pricing Service to ensure that the prices provided represent a reasonable estimate of fair value.
The Pricing Service was utilized to estimate fair value measurements for 100.0% of our fixed maturities at June 30, 2026 and December 31, 2025, respectively. The Pricing Service utilizes market quotations for fixed maturity securities that have quoted market prices in active markets.
5. Fair Value of Financial Instruments (continued)
Since fixed maturities other than U.S. treasury bonds and U.S. treasury bills generally do not trade actively on a daily basis, the Pricing Service prepares estimates of fair value measurements using relevant market data, benchmark curves, sector groupings and matrix pricing and these have been classified as Level 2 within the fair value hierarchy.
At June 30, 2026 and December 31, 2025, no securities in our fixed maturity investment portfolio were priced using a non-binding quotation from a broker and/or custodian as opposed to the Pricing Service. At June 30, 2026 and December 31, 2025, the Company did not adjust any pricing provided to it based on the review performed by its investment managers. There were no transfers to or from Level 3 during the three and six months ended June 30, 2026.
(c) Level 3 Financial Instruments
At June 30, 2026, the Company holds Level 3 financial assets of $151,662 (December 31, 2025: $151,883); and Level 3 financial liabilities of $9,236 (December 31, 2025: $3,984).
The Level 3 financial assets include collateralized investments in direct lending entities of $53,127 at June 30, 2026 (December 31, 2025: $53,275) which are carried at fair market value using significant unobservable inputs. These direct loans are illiquid and require long-term capital commitments, and so significant judgment was used in its valuation using discounted cash flows. However, collateral is held in excess of the fair value of this investment. Due to significant unobservable inputs required in its valuation, investments in direct lending entities are classified as Level 3 in the fair value hierarchy.
The Level 3 financial assets include privately held equity investments of $9,742 at June 30, 2026 (December 31, 2025: $9,742) and their fair values are estimated using quarterly unaudited capital and financial statements provided by the investee, option pricing models or market comparable transactions where applicable. Any changes to the financial information provided by the investee could result in a significantly higher or lower valuation at the reporting date. Due to significant unobservable inputs in these valuations, the fair values of these assets are classified as Level 3 in the fair value hierarchy.
The Company elected the fair value option for certain of its equity method investments at the acquisition date. The fair values of these equity method investments were $76,870 at June 30, 2026 (December 31, 2025: $78,911) and are presented in other investments and estimated using quarterly unaudited capital and financial statements provided by the investee, discounted cash flows and option pricing models, where applicable. Any changes to the financial information provided by the investee could result in a significantly higher or lower valuation at the reporting date. Due to significant unobservable inputs in valuations, the fair values of these assets are classified as Level 3 in the fair value hierarchy.
The Level 3 financial assets include a contingent receivable related to a prior private equity investment in the insurance distribution industry where the Company will receive a series of distributions under terms of the asset purchase agreement. The net present value of potential distributions is $11,923 at June 30, 2026 (December 31, 2025: $9,955) which was reported in Other Assets on the Condensed Consolidated Balance Sheets. Under ASC 805, the earn out consideration for this receivable is adjusted to fair value using discounted cash flows at each reporting period with any changes in fair value reported immediately in net income. Due to significant unobservable inputs in its valuation, the fair values of these assets are classified as Level 3 in the fair value hierarchy.
The Level 3 financial liability includes an underwriting-related derivative liability of $9,236 at June 30, 2026 (December 31, 2025: $3,984) for a reinsurance contract written by GLS which is included in accrued expenses and other liabilities as discussed in Note 11. Commitments and Contingencies. Its fair value was determined using a discounted cash flow model in which the Company examines current market conditions, historical results as well as contract specific information that may impact future cash flows in order to assess the reasonableness of inputs used in the valuation model. Due to significant unobservable inputs in these valuations, the fair values are classified as Level 3 in the fair value hierarchy.
The following table shows the reconciliation of beginning and ending balances for investments measured at fair value on a recurring basis using Level 3 inputs for the three and six months ended June 30, 2026 and 2025. The Company includes any related interest and dividend income in net investment income and thus are excluded from the reconciliation in the table below:

For the Three Months Ended June 30,For the Six Months Ended June 30,
2026202520262025
Balance - beginning of period$152,840 $— $151,883 $— 
Acquired Level 3 investments— 137,188 — 137,188 
Purchases860 1,723 1,886 1,723 
Sales(505)(163)(1,723)(163)
Net realized and unrealized losses during the period
(1,533)171 (384)171 
Total Level 3 investments - end of period$151,662 $138,919 $151,662 $138,919 
5. Fair Value Measurements (continued)
The following table provides a summary of quantitative information regarding the significant unobservable inputs used in determining the fair value of other investments measured at fair value on a recurring basis under the Level 3 classification at June 30, 2026:
Financial InstrumentFair ValueValuation TechniqueSignificant Unobservable Valuation InputsRange of Unobservable Inputs (Low/High/Weighted Average)Impact of Increases in Inputs
Private equity investments - preferred shares$4,578 Market comparable companies & Option Pricing ModelsValue Change - Market/Industry Factors(3.0)%5.0%(0.3)%Higher fair value
Private equity investments - preferred shares2,332 Value Change - Company Performance10.0%10.0%10.0%Higher fair value
Term to Exit3.0 years3.0 years3.0 yearsLower fair value
Equity Volatility40.0%65.0%56.6%Lower fair value
Private equity investments - preferred shares1,559 Market comparable companies & Option Pricing ModelsValue Change - Market/Industry Factors(3.0)%7.5%1.7%Higher fair value
Private equity investments - preferred shares1,273 Value Change - Company Performance10.0%10.0%10.0%Higher fair value
Term to Exit2.5 years3.0 years2.7 yearsLower fair value
Equity Volatility65.0%92.5%80.1%Lower fair value
Investment in direct lending entities53,127 Discounted cash flowsDiscount rate22.0%22.0%22.0%Lower fair value
— Discounted cash flowsDiscount Rate10.0%25.0%18.0%Lower fair value
Silverstone Ventures25,870 Term to Exit3.0 years9.0 years3.6 yearsLower fair value
Extell Hudson Waterfront HoldingsDiscounted cash flows & option pricing modelsDiscount Rate6.8%6.8%6.8%Lower fair value
Exit Cap Rate5.5%5.5%5.5%Lower fair value
51,000 Equity Volatility37.4%37.4%37.4%Lower fair value
Term to Exit5.7 years5.7 years5.7 yearsLower fair value
Discount for Lack of Marketability - OPM15.0%18.0%16.5%Lower fair value
Discount for Lack of Marketability10.0%10.0%10.0%Lower fair value
Total Level 3 Investments$139,739 
Contingent Receivable$11,923 Discounted cash flows & Option pricing modelsEBITDA & Commission Discount Rate9.2 %9.2 %9.2 %Lower fair value
EBITDA & Commission Equity Volatility Rate25.0 %25.0 %25.0 %Lower fair value
Underwriting-related derivative liability$9,236 Discounted cash flowsDuration matched discount rates & arbitration decision5.5%5.5%5.5%Lower fair value
5. Fair Value Measurements (continued)
(d) Financial Instruments Disclosed, But Not Carried, at Fair Value
The fair value of financial instruments accounting guidance also applies to financial instruments disclosed, but not carried, at fair value, except for certain financial instruments related to insurance contracts.
At June 30, 2026, the carrying values of cash equivalents (including restricted amounts), accrued investment income, reinsurance balances receivable and certain other assets and liabilities approximate fair values due to their inherent short duration. As these financial instruments are not actively traded, the fair values of these financial instruments are classified as Level 2 in the fair value hierarchy.
At June 30, 2026, the carrying value of the net loan receivable from related party approximates fair value. The fair value of the net loan receivable is primarily determined by estimating expected future cash flows and discounting them using current interest rates for similar loans with similar credit risk. As the net loan receivable from related party is not actively traded, its fair value is classified as Level 3 in the fair value hierarchy.
The fair values of the Company's outstanding Senior Notes (as defined in Note 7. Long-Term Debt) are based on indicative market pricing obtained from a third-party pricing service which uses observable market inputs, and therefore the fair values of these liabilities are classified as Level 2 in the fair value hierarchy. The following table presents the respective principal amount and fair values for the Senior Notes as at June 30, 2026 and December 31, 2025:

June 30, 2026December 31, 2025
 
Principal AmountFair ValuePrincipal AmountFair Value
Senior Notes - MHLA – 6.625%
$110,000 $49,148 $110,000 $57,200 
Senior Notes - MHNC – 7.75%
152,361 71,610 152,361 96,292 
Total Senior Notes$262,361 $120,758 $262,361 $153,492